Roaring Kitty's $116M Stake Sends GameStop Soaring & Spotify is Hiking Prices... AGAIN

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0:28Good Morning Brew Daily Show, I'm Neil Freiman. And I'm Toby Howell. Today, the 0 % down mortgage is making a comeback, but is anyone else getting 2008 vibes? Then check your subscription bill because Spotify is hiking prices yet again. It's Tuesday, June 4th. Let's ride.

0:51Yesterday was a weird day in the stock market, which we'll get into in just a minute. But outside another bout of GameStop madness, there was also a major New York Stock Exchange glitch that made a bunch of stocks appear to drop 99 % in a matter of seconds. The most notable company to get hit by the glitch were A-class shares of Warren Buffett's Berkshire Hathaway. For a good chunk of the morning, its stock chart looked like a sheer cliff face. The glitch stemmed from a software update by a company the exchange uses to provide real-time stock quotes, and they halted trading activity and eventually got it fixed.

1:24But for a minute there, it looked like you could get the deal of the century. It was a weird day, Neil. Yeah, the Berkshire Hathaway stock was down from$620 ,700, which is a good reminder of just how expensive this stock is because he does not split his stock. And it plunged 99.97 % to$185. So I was looking to buy the dip, but it wouldn't let me. Yeah, there are actually a lot of people posting satirical screenshots of them trying to get market order fulfilled when it was at a fraction of its price. One person said that they did actually get one fulfilled and they accidentally bought$631 ,000 worth of the shares on margin.

2:02So that person had a very bad day. But yeah, eventually they got everything settled. But the stock charts were funny because it really did populate as a 99 % drop. So weird day, especially on stock Twitter as well. Now let's hear a word from our Purple Prince, Yahoo Finance. Yahoo Finance offers a suite of tools to help investors like you navigate the financial landscape at their own pace. What that means is you can dive deep into GameStop's earnings report, check out their P.E. ratio, and dive into their financial statements all in one platform. Or you can just look at a chart and see GreenLine go up.

2:38The point is, the choice is 100 % yours. It's like a run club. Go up and sprint with the sickos up front, or take a load off and jog with some friends in the back of the pack. You choose your own pace. And whatever your investment sophistication is or whatever your financial objectives are, Yahoo Finance is there for you. No running required either. You're scaring the people, Toby. If you're a finance pro or you're newer to the game, download the Yahoo Finance app on the Play or App Store for real-time alerts on news and insights tailored to your portfolio and stock watch lists. This episode is brought to you by State Farm.

3:11Checking off the boxes on your to-do list is a great feeling. And when it comes to checking off coverage, a State Farm agent can help you choose an option that's right for you. Whether you prefer talking in person, on the phone, or using the award-winning app, it's nice knowing you have help finding coverage that best fits your needs. Like a good neighbor, State Farm is there. Roaring Kitty has picked a time to reveal just how much money he has, and that time is meow. The investing folk hero Keith Gill, better known as Roaring Kitty, sent meme stocks like GameStop and AMC skyrocketing again yesterday with just a few posts on social media.

3:50Remember, just three weeks ago, Roaring Kitty returned to Twitter with posts about GameStop, but it's one of his messages on Reddit he posted this Sunday night that's got everyone purring. This post is an unverified screenshot of his stock portfolio, and it shows that Keith Gill, who was at the center of meme stock mania in 2021, has an absurd amount of money. Gill has built a position in GameStop worth about$260 million. That includes 5 million shares as well as 120 ,000 call options with a strike price of$20. GameStop stock spiked yesterday to the point where Gill, at one point, was up more than$300 million in his GameStop position.

4:32From the portfolio screenshot, Bloomberg calculated his net worth at as much as$485 million. Toby, this man has a superpower. He takes a position in GameStop. He posts on social media. The shares go up. He makes hundreds of millions. We've never seen anything like this in the history of the stock market, but is this guy flying too close to the sun? Yeah, the big question is, is what he's doing legal? And it is such a gray area because you look at what his actions are. He's amassing a very large position in a publicly traded stock. He posts screenshots with zero commentary on that position, by the way.

5:06It's literally just a screenshot of his position. He posts these cryptic memes and photos like the Univeriverse card that you mentioned on social media. Doesn't seem like there should be any issues with that flow. But on the other hand, he is clearly manipulating the market in some way. He knows he has an audience. He owns the stock. Every time he posts something, the stock seems to go up. He amasses these positions before he posts something. So it is a very interesting case from a legal perspective because everything he's doing can fall into a gray area. And it really depends on which camp and how optimistic or pessimistic you want to be when you see the actions that he's taking.

5:43And some brokerages are getting cold feet. They're getting nervous about what he's doing. E-Trade, which is owed by Morgan Stanley, which is where Keith Gill trades on, is reportedly considering kicking him off the platform over potentially illegal behavior. The Wall Street Journal reported yesterday. That's because they found that he bought all of these call options three weeks ago before he posted and the stock went up. and they said, we really don't know if this is kosher. So they are considering booting him. But on the other hand, they're getting pushback internally because there is concern that if they kick Keith Gill off the platform, then they are going to be in a lot of hot water with his legions of followers who are very powerful and can basically drive this business into the ground.

6:26If they say, you kicked Roaring Kitty off, we don't want to be on your platform anymore. Everyone, you know, boycott E-Trade. That is a very real concern that they're considering right now. I think each fade would not be wise to do that because, yeah, unless you can prove that he is doing something illegal, you're right. You incur the wrath of this GameStop army. What I want to know is where did he get the money to amass this position? Bloomberg estimates he paid around$174 million for the position. That is a lot of money. Even if you go back to the absolute peak of the GameStop days back in 2020, 2021, it is hard to amass$174 million.

7:07I've tried. We're all trying out there. So some people are asking, Matt Levine was like, did someone finance this trade? Like, where did this money come from? Maybe he used the run-up that he made happen three weeks ago and started amassing options, trades before that run-up, used that to finance this next round of plays. But there's a lot going on behind the scenes here because this is serious money we're talking about. Yeah, if GameStop shares continue to rise, it's not out of the possibility that Roaring Kitty will soon be a GameStop billionaire. Meanwhile, this company itself is still doing badly.

7:46It's going to report earnings next week. It's expected to say that sales dropped 25 % year over year. So this is just still a struggling company that's riding high on vibes alone. It truly is just vibes. Only Ryan Cohen was supposed to come in and turn the company around, but that did not happen. And right now it is truly just kept afloat by the power of friendship and the power of memes. But Roaring Kitty is now potentially its fourth largest shareholder, so he could potentially launch an activist bid and change this company around if he has any ideas for how to get a brick-and-mortar video game retailer going again.

8:22As Smash Mouth once said, the price hikes keep coming and they don't stop coming. When the songbird of our generation wrote that lyric, I think they were talking about Spotify because Spotify is hiking rates for its streaming service in the U.S. for a second time within the year. Your premium individual plan is going up by$1 to$11.99 a month, while a family plan is jumping$3 to$19.99 a month. But here's the thing. Spotify is like the anti-fed. The market loves it when it hikes its rates. Spotify finished the day up 5.7%, and the stock is now up 67 % for the year. Anytime you raise prices, the thought immediately goes to competition, and Spotify does have boatloads.

9:03Its family plan is now 18 % more expensive than Apple and Amazon's, while its individual plan is 9 % more than Apple's and 20 % more than Amazon's. But clearly, it is feeling itself, and it thinks its subscribers are sticky enough to withstand yet another price increase. Their subscribers are incredibly sticky. Spotify listeners are the least likely to cancel of any major video or audio streaming service in the entire United States. Fewer than 1.5 % of Spotify users canceled in the month of April. They've built up these playlists. They've built up these profiles. I have all my starred songs. I have all my running songs.

9:40I've built up this ecosystem within Spotify that I don't want to leave. And you would think that Apple Music, Amazon Music, YouTube Music, Spotify, they all offer the same thing. They all offer I can listen to any music. I can listen to any song that I want at any point. But under the surface, there is a lot of sticking power to what Spotify has built. And that's been very impressive. And that's why they can raise prices like this. It's incredibly impressive because they do seem to be operating from a disadvantaged position because they're competing on an uneven playing field, to put it frankly, because you look at these streaming or these tech giants like Apple, like Amazon.

10:14Music is a very tiny portion of their overall business, so they can use music streaming as a loss leader to just get people into their ecosystems. They can price it much more competitively than Spotify can, which is an audio-only company. That's their entire product. But there's also magic in the fact that they are an audio-only company. People like the fact that Spotify is built around this one particular experience, and it's not part of a larger ecosystem of a big tech company. So it is interesting. It seems to defy reality in a way. But once you dig into the surface, you do see why Spotify is just so sticky.

10:48Netflix is similar, where it is the only pure play streaming service among those major video players. It's competing against Amazon. It's competing against Max, who is owned by Warner Brothers Discovery, who has movie studios and TV channels and a lot of other stuff going on. So maybe this is a lesson in that stick to your lane, do it really, really well, and you will not get any cancellation. You will not get as much cancellation as the broader market because Netflix in the video space is the lowest cancellation rates of any streaming service as well. Yeah, I like this. This is a Babe Ruth moment.

11:18You like this, though. I like it from Spotify because it's essentially calling its shot, saying we feel so good about our product. We feel so good about the value prop that we're providing consumers that we do think that you'll stick around even as we're bumping up prices. Yeah, I don't like it from a consumer perspective, but I like it from Spotify business perspective. It does fly in the face of what we're seeing in the broader market, though, because a bunch of other companies across various sectors, including grocery that we've talked about, but not just grocery, they're offering discounts.

11:46It's hot discount summer, as we said, but Spotify is continuing to raise prices. We've seen this from every streaming company, every subscription company over the past year or two is they're jacking up prices. So we'll see whether we'll see whether customers balk at this. But investors do like the move. You know, the phrase desperate times call for desperate measures. It's happening in the U.S. housing market with home sales frozen over due to high prices and even higher interest rates. Some mortgage companies are launching creative and controversial strategies to entice buyers off of the sidelines.

12:21And one of those is a down payment of zero dollars. Yes, this is a thing. United Wholesale Mortgage, which is run by the billionaire owner of the Phoenix Suns, Matt Ishbia, unveiled a new program that lets qualified homebuyers purchase a house without an upfront down payment. Here's how it works. Homebuyers take out two mortgages. The first one is for 97 % of the home's value. That's the standard one. And then the second is a loan for 3 % of the home's value or up to$15 ,000. That's essentially a stand-in for the down payment, and it does not accrue interest. but you will need to pay it back at some point.

12:58The program is currently open to first-time homebuyers or those making less than 80 % of the local area's median income, and United Wholesale Mortgage said demand is off the charts. Toby, this sounds amazing in theory, but it is being met with a lot of skepticism. Many people are seeing shades of 2008 here. Let's take the sunny side first, because that's usually what I do. These loans can be good for some people, because if you look at a lot of homebuyers, the biggest obstacle to buying a home is usually the down payment. So the chance to get a 0 % interest loan on$6 ,000,$10 ,000,$15 ,000 can free people up to enter the housing market for the first time.

13:41They also are, there's lending standards in place here. You have to pass a series of checks. You gotta have the appropriate debt to income ratio. You must, lenders must consider the consumer's ability to repay the home. So they're not just extending this to like those ninja loans from 2008, where it's just no income, no job, these crazy, crazy loans. So they're trying to paint a picture that this is not 2008 again. But now I'll let you paint the other side and show how maybe these loans are frowned upon. Your blonde hair does really represent the sunny side you take of things. But there is a downside to this.

14:16And this is because without an upfront down payment, you are not building any equity in the home. So should you fall into financial disaster immediately? You know, something happens to you. Things happen that are bad. You have to sell the house and you have not built any equity in it. And then eventually you still owe that$15 ,000. You owe more than the house is worth. And then all of a sudden you're underwater. You owe money. So that's how this thing could go wrong as well. It also relies on home appreciation. It also relies on house values going up. And of course that has happened for the past decade or so.

14:51and it's going up all too much for anybody's liking right now. But that's not a guarantee. That's not a case. There is a possibility, there is a world out there, as we saw in 2006 or 2008, that home prices crash or fall. And in that scenario, this is also a bad decision. A final thing that makes this a little more tenuous than it might appear is that some people are doing something that they call marrying the house and dating the rate. Mortgage rates are at 7 % right now. They're very high, and a lot of people do foresee them dropping in the future so they can say, all right, I'll get this house now and hopefully the rates will go down in the future and I'll refinance then.

15:28But when you refinance these 0 % loans, the entire loan comes due. So you have to pay that chunk of change back that you took out for 0 % earlier. So if you're marrying the house, dating the rate, you might be hit with like this extra bill, this extra fee that you weren't really taking into consideration. So a lot of things here, a lot of pieces of the puzzle. These aren't right for everyone, but they are right for some. I think it's just a sign of how frozen over the housing market is and mortgage companies and anybody in this industry is just throwing everything at the wall and getting creative to try to kickstart momentum with rates at 7%.

16:03Up next, it's Tuesday, which means it's time for Toby's Trends. Eczema isn't always obvious, but it's real. And so is the relief from EPCLIS. After an initial dosing phase, about 4 in 10 people taking EBCLIS achieved itch relief and clear or almost clear skin at 16 weeks. And most of those people maintained skin that's still more clear at one year with monthly dosing. EBCLIS, LibriKizumab, LBKZ, a 250 milligram per two milliliter injection, is a prescription medicine used to treat adults and children 12 years of age and older who weigh at least 88 pounds or 40 kilograms with moderate to severe eczema.

16:39Also called atopic dermatitis that is not well controlled with prescription therapies used on the skin or topicals or who cannot use topical therapies. EPCLIS can be used with or without topical corticosteroids. Don't use if you're allergic to EPCLIS. Allergic reactions can occur that can be severe. Eye problems can occur. Tell your doctor if you have new or worsening eye problems. You should not receive a live vaccine when treated with EPCLIS. Before starting EPCLIS, tell your doctor if you have a parasitic infection. Searching for real relief? Ask your doctor about EPCLIS and visit ePCLIS.lily.com or call 1-800-LILY-RX or 1-800-545-5979.

17:10Tonight on NBC, Jimmy Fallon and Bozema St. John hosts a highly anticipated new competition show. I hired 10 creatives from all walks of life. They will be battling it out to see who can impress the world's biggest brands. This is a huge opportunity. This is the battle for the next big idea. This is not play play. We're spending millions of dollars. I'm so excited to embark on this adventure with all of you. Make the best I do win! On brand with Jimmy Fallon. Series premiere tonight on NBC. There is something so perfect about a dad shoe. Practical, comfortable, and slightly ugly all in one package.

17:48A package that I want to talk about on today's edition of Toby's Trends, where I spelunk into the caves of the internet to emerge with a trend you should keep an eye on. And today's trend is about the surprise resurgence of the Asics shoe brand. Asics is a 75-year-old Japanese running shoe company that is perhaps best known for its innovation of adding silicone cushioning gel to its shoes back in the 80s. It may be 75 years old, but its stock price has quadrupled in the past two years as it's ridden a wave of popularity in both running and fashion circles. First, it has capitalized on the pandemic running boom quite well.

18:24All your friends who joined run clubs recently have to buy their shoes somewhere. But it's also seen success on the backs of its dad sneakers, which are shoes built more for practicality than performance or aesthetics. Some of its more classic silhouettes, like the Jelka I know, have become fashion symbols in certain circles as the quote-unquote ugly shoe wave continues to rip. Neil, Asics might be a little bit slept on when it comes to the broader running shoe market. Just like we talked about with Spotify, I think Asics is a great example of find your lane and just absolutely dominate it. Their lane is running, and they are the kings.

18:59Around a quarter of all of everyone who ran the Paris Marathon were wearing Asics. They've just dominated this category. And you said they have an interesting connection to Nike as well. Yeah. For any of you who have read Shoe Dog, which is the origin story of Nike written by Phil Knight, the book talks about how Nike started. And it began by importing these shoes called Onusuka, which would go on to become Asics. They actually, Asics still says Onusiku Tiger shoes to this day. They kind of look like the Nike Cortez, if you know that classic silhouette. So it has a very deep connection. And without ASICS and without Onesiku, there wouldn't be Nike either.

19:38So it is very much steeped in the running tradition and running history. All right. Well, I'll pick two areas where I think ASICS can expand based on my research here. One of them is trail running. So trail running is one of the fastest growing performance segments of any in the shoe category. And ASICS is rolling out a ton of stuff, putting a ton of investment into trail running. And for anyone who doesn't know, trail running is running on a trail. I don't know how else to describe it. But that's also experiencing a huge surge in interest. And the other is tennis, which I didn't know Asics was huge in.

20:10But they're the number one brand for tennis in North America. Novak Djokovic sports Asics. And, you know, I think they could really expand their market into tennis, which is also growing in popularity. I don't know about pickleball. Yeah, pickleball, they need to be a little cooler to get into pickleball. But I do think that what they've done well, if we go to the fashion front too, They've done the collab playbook, which New Balance has kind of pioneered here in the sense of we take these older silhouettes. Like the Gel Cayano has been around for literally 40 years at this point, but they're collabing with younger designers.

20:42You put a fresh coat of paint on them, and I have seen them around. They are not pretty to the eye if you are just looking at it from a purely aesthetic standpoint, but that is the wave that we are in. You see the popular shoes like Crocs has a resurgence. You see hokas are very popular right now. These big, chunky shoes with very distinct silhouettes are what people like right now. And Asics is definitely keying into that market as well. All right, Toby, you've been doing Toby's Trends for a year now, and you're very good at it. But it's only fair if sometimes I get to highlight a trend our audience would enjoy.

21:16So welcome to the first ever edition of Neil's Narratives. Yeah, we really scraped the bottom of thesaurus.com for that one. And the narrative I want to share with you today is more of a sound, a loud thump echoing across a restaurant as you throw down your platinum card to collect points. Young people with money are flocking to American Express cards as the latest status symbol. Amex cards have always been associated with the wealthy, jet-setting type, but young people are fueling its business now. More than three-quarters of its new accounts for consumer gold or platinum cards last year were Gen Z or millennials, the company said.

21:53and the use have sent Amex shares soaring. They're up over 25 % this year. And since 2020, they've beaten the S &P's annualized return by nearly four percentage points. Toby, this is kind of wild considering the platinum card costs$700 a year and the gold card costs$250 a year. Gen Z is not dipping a toe in with those free introductory cards. They're going straight to the premium plastic. Does their love affair with Amex surprise you? They want that clang. I think you nailed it. I do think part of the reason why we are seeing them go for these higher fee cards immediately is that Gen Z just entered the workforce at a more favorable time.

22:31If we go, TransUnion did this study that found that 84 % of Gen Z consumers in a study had at least one credit card at the end of 2023 when they were aged between 22 and 2024. That is significantly higher than millennials at the same age, which only 61 % had a credit card a decade ago. If you go back a decade ago, clearly we were in a more economically unstable time. I do think people are just feeling a little bit better about their finances, which is why we're seeing a much higher credit card ownership rate. I also do think that young people are a lot more fee immune these days and that they're a lot more savvy when it comes to subscriptions.

23:12We live in a subscription world. We talked about Spotify. We talked about Netflix. Tons of people have these annual fees. And it's very easy to do the math on Amex. Like if I spend X amount, I will recoup my fees. And I think people are just a lot more savvy when it comes to credit card fees these days. So those are two things that I think support this trend of younger people loving Amex. And Amex has been doing a good job of expanding their rewards offerings to give you money back for when you buy these really expensive cards. It used to be associated with just travel. And you can still get into the Centurion Lounge and other places in various airports.