The High-Speed Rail Connecting LA to Vegas & Express Goes Bankrupt

0:26Race the rudders! Good morning, Brew Daily Show. I'm Neil Freiman. And I'm Toby Howell. Today, LA to Vegas in just two hours? That could become a reality thanks to a new high-speed rail line. Then, should you be able to trade stocks 24 hours a day, seven days a week? The New York Stock Exchange is exploring that very question. It's Tuesday, April 23rd. Let's ride.

0:56Today is National Shakespeare Day because while we don't know exactly when Billy was born in April 1564, the 23rd seems like a pretty good bet. And you can honor the baddest bard in the land by infusing your conversation with a little Shakespearean flair today. Here are a few tips. Instead of saying it, simply use the letter T like tis or twood. Make your verbs sing by adding ith to the end. And when you're mad, yell, I bite my thumb at you. Toby, are you going to use any of these? So I should have said, Tuesday, April 23rd, let's ride it. Is that the way to do it? That's the way to do it, at least today.

1:33But it is crazy going through Shakespeare's works and looking at all the phrases that he coined that we just take for granted today. I mean, in a pickle, wear your heart on your sleeve, wild goose chase, all that glitters is not gold, love is blind, and riz. Wow. No, I'm just joking. I was going to say, Netflix has stolen a few of those. The only person to coin more phrases might be Jerry Seinfeld. But for now, let's hear a word from our friends over at Robin Hood. We've said it before, but it's never too early and never too late to start thinking about retirement. Yeah, retirement doesn't always sound like the most fun topic, but it should be.

2:10It's about the future and anticipation and all that fun stuff. Right, Toby? Exactly. Exactly. It's something you live with, like a stray cat that was out in the rain one day, and you just had to let it in. You had to. Okay. Or like a plant, you keep an eye on it and feed it all year with contributions. And if you open an IRA with Robinhood, they'll match your contributions. Grow, plant, grow. Or if you're feeling like an overachiever, you can set it up in addition to your existing employer-sponsored retirement accounts. There are a plethora of ETFs to choose from. Or again, if you're feeling like an overachiever, customize your own plan.

2:44Learn more about the Robinhood app in the App Store or Google Play Store. Disclosures investing is risky. Limitations apply to both IRAs and 401ks. Refer to the IRS for more information. More info in the description of this podcast. This episode is brought to you by State Farm. Checking 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.

3:19Like a good neighbor, State Farm is there. Well, here's a headline that may sound like an April Fool's joke, but it is in fact very real. High-speed rail is coming to the United States. Yesterday, construction broke ground in Las Vegas on a rail line that leaders called America's first true high-speed rail system, the$12 billion 218-mile project, will connect Vegas and the L.A. suburb of Rancho Cucamonga, which also happens to be the best name for a city ever, with a target date of 2028 before L.A. hosts the Summer Olympics. This rail line won't be run by Amtrak. It's from a private company called Brightline West, whose sister firm already operates a rail line in Florida between Miami and Orlando.

4:03So far, that Florida route has been successful and it wants to take that model and apply it to the Mojave Desert. What does this high speed rail mean actually? Well, Brightline's trains will travel between Vegas and LA at max speeds of 186 miles per hour, completing the journey in just over two hours. Currently, it'll take you at least four to drive between the cities and it's bound to be longer with traffic. I've done it. It's not fun. So Toby, is this the project that finally kicks off the high-speed rail boom in the U.S.? I think so. I don't want to jinx it, though, because we've just been burned so many times in the past.

4:40I mean, if you just look at how California has done when they tried to build high-speed rail, remember there was one from L.A. to San Francisco that was approved by voters all the way back in 2008. But now, due to rising costs and a bunch of other issues, a 2022 business plan forecasted that it would now cost, the project would cost$105 billion dollars so anytime you hear the words high-speed rail America and California you're not very bullish on it but this project seems to have crossed all of its dotted its eyes crossed its t's and it looks like it's underway yeah this is why I'm bullish on this project because there is very little red tape they have the right of way already because I-15 goes from LA to Vegas and what they're doing is just building the rail line right in the middle on the median of this of this interstate.

5:29So they're not going to have to deal with a lot of the red tape, the land use regulations, the legal headaches that come with that LA to San Francisco route. They're already going on a piece of land that they can build on. So that's why this project costs$12 billion as opposed to$105 billion. It's just the so-called train tracks are already existing for this to be successful. Whether people will use it, I mean, California, Vegas, We know people love to drive there. So whether they'll pay up, and at least in Florida, this costs a one-way ticket,$80. So I don't know if they have a price point yet, but it's going to be probably cheaper than a plane flight.

6:07But it might be the right amount of distance for this rail line to exist, just over 218 miles, a little too short for a flight, a little too long for a four-hour drive. Right. That's Brightline's whole business plan in a nutshell there is that they do look for cities that are too near for air travel. But then, yeah, it's a very annoying drive. And they also it's going to be a nice experience. They're going to have snacks coming down the aisle, your high speed Wi-Fi on the train, all the good stuff that you would expect out of a train and at around airline prices. So I hope this happens, though, because just oh, my gosh, America's high speed rail game is so weak.

6:43But the Palm Beach one has done very well. And I think Brightline has kind of gotten this down to a bit of a science at this point. Yeah, I mean, people on the northeast are probably wondering, wait, isn't the Acela that goes from D.C. to Boston high-speed rail? And actually, not technically. It maxes out at 150 miles per hour, and it only goes that fast on 41 miles of the entire route because the Acela needs to share with commuter rail and freight at the same time. So it's not really technically a high-speed rail, which, according to international standards, is 160 miles per hour and above. this LA to Vegas rail is going to be as fast as the bullet chains in Japan, but a little slower than the expansive high-speed rail network they have in China.

7:26It's not easy being a mall-based retailer these days, and the once-trendy fashion brand Express is the latest casualty. Yesterday, the company, which also includes Bonobos and UpWest brands, announced it is filing for Chapter 11 bankruptcy, closing 115 locations in the process. As it tries to dig itself out of a hole, that was created by a good old-fashioned decline in sales. Revenue has fallen 10 % since 2019, which doesn't sound too bad on the surface, but it is bad when you compare it to the broader red-hot apparel industry. Express just found itself on the wrong side of too many trends. The formal and smart casual market that Express serves hasn't really caught consumers' eyes in recent years as clothing becomes more casual.

8:08And if you're a clothing outlet with a bunch of locations in malls, you're going to struggle these days. Neil, this is a story I feel like we've heard before. Yeah, Express is Siri in a chat GPT world. It's just not representative of the current era we're in in the apparel industry. I think Morning Brew's writer Molly Liebergall put it best. She wrote, it's clothes just kind of look like clothes. There's nothing exceptional about them. And yeah, Express is getting hit from all sides. Athleisure, Lululemon, Fast Fashion, Sheen and H &M and Zara. and whatever Old Navy is, they're all putting pressure on Express, and it just was in this messy middle where none of its clothes stood out to anybody, and they didn't get with the trends of what people are wearing to work these days.

8:52Yeah, it's been a fall from grace for Express, because if you go back to 2010, it went public as the sixth largest specialty retail apparel brand in the U.S., and then even in 2015, its quarterly sales hit$765 million. Compare that to the second quarter of last year. They sank to$435 million. So it's just been a long, slow decline for them. This isn't a pure bankruptcy, though, because they are trying to do a court-approved sale to a group of mall owners led by Simon Property Group and Brookfield Properties. This is a trend that we've seen in the past, these kind of shopping center staples being bailed out by the very companies that have stakes in their success.

9:36So we've seen Simon Brookfield do things like involve the bailing out of Forever 21, Brooks Brothers, JCPenney's. All these struggling mall retailers are being kind of supported by their landlords, essentially. So it's this weird symbiotic arrangement that hasn't been working too well, but it's better than just letting them fade off into oblivion. Little vertical integration. And so if you want to, Express is starting all these closing sales at the 95 stores that it's closing. So if you want to score some cheap close, I would definitely look up which express stores are closing in your local area and get to those stores.

10:13Moving on, of all the businesses in the world, the New York Stock Exchange may have the most well-known hours. It opens at 9.30 Eastern with the ringing of the bell, and it closes at 4 p.m. with another ringing of the bell. But that could change. The exchange is thinking about going full diner mode and operating 24-7, allowing you to buy and sell stocks at all hours of the day. According to the Financial Times, the New York Stock Exchange's data analytics team polled market participants about the pros and cons of going 24 hours, and it'll take that feedback into making a decision. Currently, investors can trade equities on the exchange between 9.30 and 4, and there are some windows pre-open and post-close where you can also place trades.

10:55But this is 2024 after all. And well, something called the computer exists, making these strict hours seem like something out of the Cretaceous period or at the very least 1890. A bunch of assets, including cryptocurrencies, U.S. Treasury bonds and stock futures can be bought and sold at any time. Toby, good idea, bad idea for the New York Stock Exchange to go 24 hours. I think it's just inevitable idea at this point, because as you said, a lot of trends have been forcing the industry this way. cryptocurrency is probably the biggest one where that market stays open all the time. And retail traders have become extremely accustomed to having access to liquidity at all hours of the day.

11:35So I do think this is driven by retail investing activity, though, because if you actually look at institutional investors, they're not going to be placing big trades at 4 a.m. in the middle of the night because there's just not enough liquidity being traded at that point. So this is very much a retail trader spurred kind of trend right here. Yeah. Speaking of retail traders, just look at Robinhood. Robinhood in its recent earnings report said that 25 % of total trading volume took place outside of traditional market hours. Robinhood was just one of several retail brokerages that do allow trading in some securities across all hours of the day.

12:13And it said investors traded more than$10 billion in volume since it launched that. So Robinhood's seeing a huge, I mean, 25 % of its total trading outside of market hours. That's a huge chunk of its business, not in between 9.30 and 4. So it obviously sees a huge growth market here. And its CEO, Vlad Tenev, said, if you were designing the market from scratch, you would never, like today, you would never have it at 9.30 to 4. You would have it open 24-7, kind of like how crypto, which was created in 2008 and 2009, is operating 24-7. Imagine if Elon Musk tweets something on Saturday or Sunday, and you're like, oh, I'm very bearish or bullish on Tesla right now.

12:55I want a place to trade, and now you can't. Yeah, and there's certainly interest beyond just the New York Stock Exchange in this area as well. There's this startup called 24 Exchange, backed by Steve Cohen's venture fund, and it's seeking SEC approval to launch the first round-the-clock exchange. So if the New York Stock Exchange doesn't do this, I do think another company will come along. And that's the biggest thing here is the SEC still has to look into these proposals and see if they want to pass them. But people are just saying, let the market decide if this is something that they want. We'll see if there is actually a business model.

13:26The SEC is not there to decide whether there is a viable commercial path forward for these companies. So I do think we're going to see it within the next few years or so, if not at the New York Stock Exchange with someone else. Up next, my favorite segment of the week, Toby's Trends.

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15:13well if it isn't our old friend Toby's trends the segment where I tell you about a cool little trend I have my eye on so you can look cool in front of your colleague or your crush if those two are the same for you I do wish you the best but today's trend is bubble tea or boba tea or the tea that has those slimy balls of tapioca in it that slither up your straw and down your throat. Whatever name you know it by, it's creating billionaires over in China. China's third largest bubble tea chain, Baichai Baidao, went public today, raising$330 million in the process, good for Hong Kong's biggest listing since November of last year.

15:50It's also big enough to give the company's husband and wife founders a combined net worth of around$2.5 billion. and it's far from the only big bubble chain out there. Another company that opened in 2008 now has 8 ,000 shops across China that did$787 million in sales last year. Mixu Group, another big bubble tea purveyor, calls itself the world's second largest drink chain behind Starbucks by number of stores. It's got more than 32 ,000 locations across China and 4 ,000 locations in 11 other countries. Neil, the Chinese market is full of bubble tea chains that are minting billionaires that we've never even heard of.

16:28No, but we're going to hear them soon because the reason they're IPO-ing, they're going public, is to raise all this money to plot global expansion. They're setting up locations across Korea, Vietnam, all over East Asia, and now they're definitely going to set their eyes on the U.S. market. This is such an interesting type of product, type of beverage, because in this mold that Starbucks has been going in, very customizable, very personalized. You can go in and get an infinite number of customizations. You can choose between different types of teas. You can choose between different types of fruit.

17:01You can get various bubbles in there. You can get special editions in there. And then also some chains are offering a little alcohol in there. So if you're getting in after 5 p.m., you want to say, OK, I'll have a little fun. But no, it does seem like this is the general trend of you going into this shop and feeling like the world is your oyster. I wonder if Shakespeare coined that. But this whole personalization trend of like I go into Chipotle, all these things, I can really make this beverage what I want. There's no set thing for me. What's interesting too is that Baicha, Baidow, which is the company that went public today, they sell a half liter of bubble tea for a little over$2.

17:39So it's very much on the cheap side. The industry average is closer to$5. So it's always been this very cheap product. So that's why even though China has experienced this period of economic slowdown, Baidao's sales have grown more than 56 % from 2021 to 2023. So it's kind of bucking the trend there as well. It's interesting to me, too, that bubble tea hasn't been around that long. It's only originated in Taiwan during the 1980s. So it is still relatively like a new-ish entrance into the drink scene. And you're right. I do think that over in China, massive, massive company creating billionaires.

18:16And I think they're only going to get bigger once they. Yeah, but we'll see because the U.S. really loves its coffee. A new survey just came out yesterday saying that 67 percent of adults in the U.S. said they had drunk coffee in the past day, which is a more than 20 year high. And back in 2004, it was less than half. And now it's 67 percent. So it's going up against a lot of competition because in China, they don't have this attachment to coffee as much as they do tea. And here we really love our coffee. So I think it'll be interesting to watch what happens in the U.S. market as all of these bubble tea and cheese, you know, come and compete against the Starbucks and the coffee and the Dunkins of the world.

18:54Should we put some balls in tea or in coffee, little tapioca balls in coffee? Do you like bubble tea, though? I love bubble tea. It's like my guilty pleasure. I don't know. I think it's very fun to eat. Yeah, it adds a little something something to your drink. Let me know if this experience sounds familiar. You keep seeing thirst traps of Jeremy Allen White on TikTok. So you finally decide to bite the bullet and subscribe to Hulu so you can watch The Bear. But after you finish the show and start to dream of opening your own restaurant, you slowly forget about that Hulu subscription. Allow me to blow your mind.

19:25You can just cancel your subscription after you've watched the one show you like. And more and more people are doing just that. There's a big shift in consumer behavior that shows we're ditching the monogamous relationships cable providers lock you into and embracing the polyamorous life streamers open up. So-called serial churners, those who subscribe to a platform, then cancel once they've watched a show they like, accounted for about 40 % of all new subscriptions and cancellations across the streaming industry last year. That means nearly 30 million people canceled three or more streaming subscriptions in the last two years, but a third resubscribed within six months.

20:02These serial churners are a force to be reckoned with, Neil. They are. This is absolutely crazy. And it's frustrating to as frustrating as it is to cancel any other subscription you have. It seems to be relatively simple to do it for a streaming service. So we're seeing very high rates of people canceling and it's only growing. I've definitely talked to friends who say, yeah, I'm getting Apple for severance and then I'm going to cancel it. I'm going to get Max for White Lotus and then I'm going to cancel it. And it's very a la carte with the way people are treating their television picks these days.

20:31Right. And it's reshaping the entire entertainment industry, too, because traditional media like Paramount, Warner Bros. Discovery, Disney, they're also trying to navigate this new paradigm where they're shifting from the cable bundle, which was intensely profitable, very profitable for these companies, to streaming, which is not very profitable, which the downstream effect is that these companies are cutting investment in new shows. The number of scripted shows in the U.S. suffered its steepest drop in 2023 in the last 15 years. Because, again, if you're having so much churn and you're having such uneven revenues, it's very hard to invest into new shows.

21:04But paradoxically, that's exactly what you need in order to keep customers around. Because you do need this almost steady stream of coming soon on the platform in order to keep people locked in. Because you're right. If you subscribe for severance and then severance runs out and then there's nothing new on the horizon, you're probably going to cancel this subscription. So it's this weird paradoxical relationship. Yeah, I think one reason why people are canceling is the lack of robust content on all of these platforms. And then another one is just the price. I mean, there's been, what is it called?

21:35Streamflation? I don't think Shakespeare coined that one either. But prices have gone up across the board. Disney Plus and Hulu both raised the price of their commercial-free tiers by$3 a month last year. Netflix, the standard plan, is now over$15 a month. And then the average American with a streaming subscription pays an average of$61 a month for four services, which is an increase from$48 a year ago. I think if prices weren't as skyrocketing as they were, we wouldn't see the mass cancellations that we are now. So price has a lot to do with it. And streamers are trying to figure out different ways to keep subscribers on their platforms from canceling.

22:15You know what makes the most sense, by the way, to keep subscribers on is to bundle multiple platforms together. So you have new content from a variety of sources, which is literally just cable. Once again, we've joked about this a lot, but we are seeing this like Disney's bundling, Disney Plus, Hulu, ESPN. They also have this Fox Sports, Warner Bros. sports streaming service that are scheduled on. So I think we're going to reinvent cable this time in 10 years. Well, that is a good point because Netflix, as we talked about, has the most robust type of content on its platform from reality TV show to more highly produced dramas.

22:49And its rates of cancellation are much lower than anybody else in the industry. So maybe that's a model that others are going to replicate if they can't on their own platforms by bundling with others as well. Okay, a survey of the world's best airports was just released. and the top spot for baggage delivery went to Kansai International Airport outside of Osaka, Japan. You're probably thinking, okay, I guess that's somewhat interesting, Neil. But wait till you hear why it won the award. Since its opening three decades ago in 1994, Kansai has never lost a single piece of luggage, according to Nikkei.

23:26Not one. Not a single piece of luggage. And this is a super busy airport. It receives approximately 30 million passengers every year. So what's the secret sauce? Well, anyone who's been to Japan knows they put a premium on customer service, but Kansai goes above and beyond with carefully constructed baggage handling protocols that prioritize traceability. And from its inception, it designed workspaces that optimize ground services. And this perfect luggage record isn't the only remarkable thing about Kansai. Search it on Google Images and you'll see that it sits on a floating island in the middle of Osaka Bay.

24:00In fact, it is considered to be the world's first airport built entirely on water. Toby, they say that Joe DiMaggio's 56-game hit streak is the only record that will never be broken. I'd also suggest 30 years without losing a single piece of luggage should be in the same conversation. American consumers literally cannot wrap their mind around never losing a piece of luggage. We've all had some sort of luggage horror story. But you're right, Kansai is just incredibly impressive no matter which stat you look like. That artificial land stat is crazy. The island is two and a half miles long, one and a half miles away.

24:32It took 21 million cubic meters of earth that was extracted from three mountains nearby to build the island. More than 10 million working hours were dedicated to construction. And you're right. That's the reason why they've been able to design these perfect systems because they got to build it from scratch. There was no existing geographical formations or restrictions that they had to build around. They literally created this from nothing with the express purpose of having the best baggage system in mind, and they achieved it. There is just one problem, though. If you build something in the middle of the ocean, which they did, well, it might sink.