Trump Found Guilty of Falsifying Biz Records & Concerns Over OpenAI’s Media Deals?

0:00This 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. Like a good neighbor, State Farm is there.

0:27Good Morning Brew Daily Show. I'm Neil Freiman. And I'm Toby Howell. Today, from rock bottom to retail royalty, the story of Abercrombie & Fitch. The Japanese researchers found a new material to build satellites out of, and I promise you're going to be surprised when you hear it. It's Friday, May 31st. Let's ride.

0:50Not sure if you caught this, but the finals of the Scripps National Spelling Bee last night was electric. For just the second time, a tiebreaker known as a spell-off determined the winner. And here's how the spell off works. The two kid geniuses left standing had to spell the most words correctly in 90 seconds, rapid fire style. And with 29 correctly spelled words, 12 year old Brujot Soma of Tampa, Florida, hoisted the trophy. Toby, first of all, congrats on another trophy for Tampa. Second of all, are you game to try to spell some words that Soma got correctly from the spell off? No, I thought we agreed not to do it.

1:24Let's just do a couple. Do it quickly. Rapid fire style. Everyone else can play too. The first word is mcteric. Mcteric? Yep, of or relating to the nasal cavities. Oh, easy. M-Y-C-T-E-R-I-C. Yeah. Was that right? Yeah, I wish I had a bell. You did it right. Okay, here's another one. G-C-L-E. Say that again? G-C-L-E. Oh, my gosh. G-C-L-E-Y. J-I-C-L-E-Y. G-I-C-L-E-E. I should have known. Final one, Kaishinia. Oh, my gosh. K-A-I-S. Already gone. Caixinha is Brazilian. You watch enough soccer to know how the Brazilians spell their names. It's C-A-I-X-I-N-H-A. Okay, I'm just going to ride high on my first one.

2:11Yeah, that was pretty good. Thank you. Yeah, but Brujatsoma was absolutely in his bag. The controversy, though, came from the finals where last year's champions, Dev Shah, said that the broadcast was clearly trying to fill extra air time, so they kept inserting commercial breaks where there shouldn't have been. And he also didn't like that they went immediately to the spell off. He wanted a little more drama between the two finalists. So I love me some good spelling bee drama. Now let's hear a word from our sponsor, Sage. Not the herb, but a tool that saves finance professionals time and money.

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3:51Get started today at linkedin.com slash campaign. Terms and conditions apply. Am I allowed to use the word unprecedented? Okay, I'm going to roll with it. In an unprecedented situation, Donald Trump became the first former president ever convicted of a crime. Yesterday, a 12-person Manhattan jury found the GOP presidential candidate guilty of 34 felonies for falsifying business records to cover up hush money paid to adult film star Stormy Daniels and in doing so influenced the 2016 election in his favor. Is Trump going to jail? We'll find out July 11th when the judge will announce the sentence.

4:29The charges carry up to four years behind bars, but experts say prison time is unlikely given the low-level felonies. Instead, the judge could impose other penalties ranging from a fine to probation. Whatever happens, Trump, as a convicted felon, can continue running for president, and he's almost guaranteed to appeal the conviction, which could take months or years to resolve. It is very unclear how all this will play out with a convicted felon now gunning for the White House. Trump, who has denied all the charges, has used his legal troubles to his advantage before, selling mugshot merch, and it seems as though a major Republican donation website crashed following yesterday's verdict.

5:04expect him to raise a lot of money off of this from his base. But Biden also immediately launched a fundraising campaign, hoping to sway those undecided voters to opt for the candidate who hasn't been convicted of a crime. Toby, we are in uncharted territory. Yeah, you are totally allowed to use the word unprecedented here because it is not every day a former president is convicted of nearly three dozen felonies. He's the first former president ever to be convicted of a felony. So it's very hard to predict what the fallout will be. But I think that data point you mentioned is something that we do know is that there is going to be an influx of donations on both sides here.

5:38That website did crash. And I do think both candidates can spin this in whatever way they want in order to kind of boost their fundraising hauls here. Because, yeah, it's something that both sides can seize on depending on which way you want to spin it. Right. And it's just those in the middle that may be swayed. They might not want to vote for a convicted felon, but we'll see how that all plays out. If you want to take a look at, use something as maybe a proxy of Trump's chances in the election here, maybe just look at DJT stock. That is his truth social social media platform. And that has risen and falled based on his election prospects.

6:15Yesterday after the verdict, it fell 7%, which is obviously a little dip, but not nothing crazy. So if we want to use that as an election proxy, it does seem like his chances did take a hit. Another thing to look at if you want to try to figure out how it's going to affect the election is just the polling numbers around this. And it's not easy to to kind of extrapolate polling numbers from this, because basically what polling services have been doing is asking, is this going to sway your vote if Trump is convicted? And historically, pulling around hypotheticals is not very good data. But right now, some people said around a fifth of Trump's current supporters said that they would reconsider their support if he was convicted of a crime.

6:56That just happened. So we'll see if that one fifth number actually plays out to be anything. Again, take it with a grain of salt because people don't even know what they want for breakfast the next day. And you're asking them to consider this hypothetical. So that's another data point we have when it comes to the election. Another thing that's been big to watch, that's been a trend over the past few weeks and months, is that Wall Street billionaires and billionaires in general have started to throw their weight behind Trump a little bit more. They distanced themselves after January 6th, but now they're coming back.

7:25There was this big Wall Street Journal article about Elon Musk, who's calling Trump a couple times every single month. Nelson Peltz, who is this investor, is this activist investor who tried to take on Disney a few months ago, has been arranging meetings between himself, Elon Musk and Trump. And Elon Musk is reportedly potentially becoming an advisor to Trump. And that follows other Wall Street billionaires like Stephen Schwartzman of Blackstone. It was reported yesterday that Bill Ackman, the hedge fund manager, is starting to potentially think about endorsing Trump. So the Wall Street money is is slowly flowing back to Trump.

8:02and we'll see if this verdict makes any difference in that. And it's not just Wall Street, too. It's Silicon Valley as well. I mean, David Sachs from the All In podcast and then also Sean McGuire, who's a partner at Sequoia. So it's not just Wall Street. It is also Silicon Valley as well. Turns out the only thing news organizations needed to get on board with AI eating the world was a little bit of cash. Publications including Vox, The Atlantic, and Wall Street Journal parent company News Corp have all reached deals with OpenAI in the past week to sell their journalism as training for the company's models.

8:35Remember, AI companies are thirstier than a frat boy on spring break for high-quality data to feed their algos. These new agreements allow OpenAI to tap into deep news content archives to serve as grade A trading fodder. It's a bit of a 180 for the publishing industry, though, who had accused AI giants of hoovering up their data without permission in the past. The New York Times is still pursuing a lawsuit against OpenAI for copyright infringement, while News Corp also had copyright registrations that it could use to claim damages. But now the two industries are setting aside their differences to become, albeit reluctant, bedfellows.

9:11The Financial Times, Axel Springer and the Associated Press have similar deals in place as well, bringing the total number of newspapers, news websites, and magazines OpenAI has struck deals with to over 70. Is this just the norm for the industry now? Is it smart for publishers to invite the fox into the hen house? An absolutely raging debate right now in our industry, the media industry. It does seem like there are two potential paths you can take. You can go the New York Times route and go litigation. This is scorched earth. This is saying, you've been stealing our data for so long to train chat GPT.

9:43We're not going to let you get away with it. We're going to take this to court. That's what New York Times has done. It's sued OpenAI and Microsoft. And then what it seems has been happening recently is publishers are going the other route and getting money for licensing their data. And in exchange, they also get tech from OpenAI to leverage AI in whatever they want. Some are using it for various audience-facing situations or other things in the back end. So those are two potential routes. There has been a lot of backlash to publishers signing these deals, including from writers at their own publications.

10:19The Atlantic did this deal with OpenAI recently, and there have been a slew of articles in The Atlantic saying like, I don't think this is a good idea. The Wall Street Journal who just inked this deal had almost a revolt yesterday because they cut a lot of newsroom jobs and they all protested in front of the editor-in-chief for making this deal with OpenAI. So there's a lot of chaos and backlash to this. Yeah, it's a very bad look. If you just look at the Wall Street Journal, they signed a 250 million, a reported$250 million deal and then turn around a few days later and start laying off journalists.

10:50That's the exact thing that the media industry is so afraid of AI replacing the work that journalists do. But you said it correctly that there is definitely something to gain here from these organizations. If you just look at how Vox is using it, they're using it to help boost their backend ad targeting ability. So they are leveraging opening eyes tech, but then externally, they're also bringing it into play on one of their recommendation websites called the Strategist to Help Match Gifts to Consumer. So you're right. it's not just that they're getting fully taken advantage of like we shouldn't say that it's just they're passively signing up for this deal and they're they're getting nothing out of it they're getting cash they're getting albeit they think it's they're getting underpaid a little bit but there are ways you can leverage this technology hopefully that makes the news product better yes toby you are you are a media noob if you've been in this industry for 10 years then the the concern is that you've been burned by tech giants before facebook told you to make videos for Facebook and then cut you off an algorithm.

11:49Google told you to do all of these articles to boost SEO, to be optimized for search engine, and then they cut off that algorithm. There have been so many times where media companies have gone into bed with tech companies, and it has been an absolute disaster. I think that's the concern here, that this is happening again where media companies are like, oh, look at the shiny new thing. Tech companies are coming to save us, and let's get this quick cash. But over the long term, it's a terrible idea. Right, because I mean, I'm going to agree with you as this final point here. Is any AI product built by any AI tech company going to meaningfully create new revenue or new distribution for news companies?

12:25Probably not. That's probably the main takeaway here. All right, let's head to Stock of the Week, Dog of the Week, where Toby and I tell you one stock that soared like Shrek 2 and one that flopped like Paul Blart, Mob Cop 2. Toby, you won the pre-show spell off after your impressive performance there. So you got to go first. My stock of the week is Abercrombie and Fitch. I'm officially calling it the Abercrombie-sance is upon us. It's probably been upon us for a while now, but after the week the stock had, I'm calling it again. It's trading up 25 % over the last four days and shows no sign of slowing down.

13:00Sales across Abercrombie and Fitch brands, which include Hollister, jumped 22 % year over year in the first quarter, topping$1 billion for the first time ever and beating estimates by$40 million. But it was the profits that hit you like a whiff of Abercrombie cologne. It brought in$114 million, 23 % more than expectations, and almost seven times more than the net income it reported over the same period last year. Back to the stock for a second too. Abercrombie is up 475 % over the last year. That's more than double what NVIDIA is up. The Abercrombie-sance, Neil, it's here. It's here. I mean, in 2016, Abercrombie was named the most hated retailer by the American Customer Satisfaction Index.

13:44And now it's here. It's up over 400 percent in the last year. It's an amazing reinvention that I think no one saw coming. They shed their image of hypersexualized models and the perfume that you were talking about and catering towards young people with particular aesthetic. And they've changed it to become really just a all encompassing brand for the working millennial. One unit that I want to highlight that's been doing so well is the A &F Wedding Shop. So we all know how expensive weddings are, and they've targeted bridal parties with a collection of apparel that ranges from like$80 to$150. So this is affordable stuff you can get, and you know how much people complain about how much they have to spend for weddings.

14:25This has been a huge bright spot for them. The bridal market is going to be$83.5 billion in a few years, and the CEO said this has exceeded their expectations wildly. we're not even at wedding season yet. Yeah. And so what this really shows too, is that it paints a roadmap for other struggling, maybe mid 2010s brands to stage a comeback. I mean, Gap also posted a good quarter right on the heels of Abercrombie's great quarter. It said that brands, there's some buzz around Old Navy in particular. So there is this playbook to reinventing yourself and analysts are calling it a customer focused strategy.

15:01Basically what it means to just make good clothes that people actually want to wear and that's really what it boils down to abrakami just went back to the drawing board made stuff that looks good i was browsing their site once i saw their stock price i was like that's looking good let me go check it out and it does it appeals to you it looks very trendy it's kind of hits that solid price point as well it's not too cheap it's not on the sheen fast fashion end of the range but it also just is trendy so call it whatever you want call it a customer focused strategy i call it just good old-fashioned fashion design.

15:30Up next, Neil bums us all out with our dog of the week. Womp womp. Change is always happening. But no matter what changes in five years, there's one thing that will stay the same. The price of your internet. With the Xfinity five-year price guarantee, you get five years of the most reliable Wi-Fi with our best equipment included for a price that stays exactly the same. Restrictions apply. New residential customers only. Taxes and fees extra and subject to change. Most reliable Wi-Fi based on OpenSignal Awards USA. Fixed broadband experience report, August 2024. Eczema isn't always obvious, but it's real.

16:11And so is the relief from EBCLIS. 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 maintain skin that's still more clear at one year with monthly dosing. EbGliss, 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. Also called atopic dermatitis that is not well controlled with prescription therapies used on the skin or topicals or who cannot use topical therapies.

16:43EbGliss can be used with or without topical corticosteroids. Don't use if you're allergic to EbGliss. 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 Epglis. Before starting Epglis, tell your doctor if you have a parasitic infection. Searching for real relief? Ask your doctor about Epglis and visit epglis.lily.com or call 1-800-LILY-RX or 1-800-545-5979. My dog of the week is Salesforce, which plummeted 20 % yesterday for its biggest daily drop since 2004.

17:17This kind of debacle is what happens to companies that are considered losers in the AI revolution. Salesforce is a business software giant, though I can't really tell you exactly what it does. And right now, companies are spending more on AI-integrated hardware, like what Dell sells, and less on traditional software, what Salesforce sells. It's why many software stocks, not just Salesforce, have lagged the broader market this year. That said, Salesforce is infusing its products with AI, but Wall Street doesn't expect that to boost revenue until next year earliest. Until then, the company projected sales would rise just 8 % next quarter, the slowest growth in its two decades as a publicly traded company.

17:57AI giveth and AI taketh away. Yeah, AI can either float your boat or sink it. Companies are allocating a lot more of their budgets towards AI hardware and AI software. On the hardware side of things, obviously, NVIDIA is the big winner. You mentioned Dell as well. Even data center cooling companies like Vertiv, obviously big winners in the hardware department. And then on the software side of things, you have the startups, OpenAI, you have Anthropic, Microsoft, who has that deal with OpenAI, they're winning in the software department. And then that comes at the expense of traditional software companies, though, because you only have so much budget to allocate towards your software stack.

18:32And if you are taking some of that and moving it towards AI companies, then someone has to be the loser here. And it looks like that loser right now is Salesforce. Salesforce and a couple of other software names got smacked this week. Workday, UiPath, companies like that are just doing SAP ServiceNow, Oracle. all got dented when this Salesforce report came out. But Salesforce earnings are an interesting look into how businesses spend money and how they allocate capital. Seems like they are much more focused right now on getting those servers up and running, that AI hardware, rather than changing their software stack, as you mentioned.

19:09But yeah, just, you know, sometimes enterprise B2B sales, SaaS companies, you don't think about them, but they make a lot of money and it is a pretty cutthroat business about how a CIO sitting at a large company is going to spend their money. Right, and then also, I mean, just look at Salesforce's last 20 years or so. This is the first time that it missed Wall Street estimates for revenue since 2006. Like, this has been a juggernaut. I mean, you made the joke of no one knows what it does, but there was a tweet that went insanely viral this past week when they reported this bad earnings, saying like Salesforce dropped 20 % on reports that no one knows what it actually does because it is just so widely expansive.

19:46It does so many things. Luckily, we don't work in an industry that requires us to interact. I think our sales team. Our sales team definitely does. Yeah, we should bring them in. But yeah, it just goes to show you that this is what software runs the world in Salesforce that obviously captures a big portion of that. Let's take a minute to think about what a good material to build a satellite out of is. This isn't a trick question. Rugged components like aluminum alloy, stainless steel, and titanium probably come to mind. Probably not wood. But researchers in Japan have dared to think outside the box and have constructed the world's first satellite made of durable magnolia wood.

20:23Now, if you're thinking to yourself, wouldn't that burn up pretty easily? That's pretty much the whole point. Satellites don't stay in orbit forever. And when they reenter the atmosphere, they often burn up and release toxic metal particulates that scientists fear is depleting our atmospheric ozone. But the wooden lignosat burns a whole lot cleaner and thus leaves less of an impact. I like this line of thinking, Neil. Yeah, I mean, it seems a little counterintuitive that we'd send a wooden satellite to space, especially one as small as this. It's literally the size of this coffee mug. It's four by four inches.

20:55But this, and it seems like not a big deal. Oh, they're just making a small satellite out of wood. But it actually is a huge deal for space sustainability. The amount of satellites we're about to send up per year is insane. It's going to increase exponentially. They're saying they're going to send up 2 ,000 satellites a year very soon. And so think about all of those satellites. they have a shelf life. They don't stay up there forever. They come crashing back down to Earth. And if you make it out of aluminum, it disintegrates into these hazardous particles that can deplete the ozone layer. If you get wood going, it just burns up into ash, and that's fine.

21:26So this is kind of a huge deal. And I think the broader space community and those who are interested in sustainability are really focused on whether this is going to work or not. It's also not just satellites that this company is working on. It's also just broader space exploration in general. They said that they are potentially making plans to build structures on the moon out of wood as well. So we're in the early stages of testing how wood performs under the harsh environment that is space. In 2022, these researchers brought up multiple types of wood, exposed them to space outside the International Space Station.

22:00They said that it could just be a goaded space material, specifically magnolia wood. That was the big winner amongst the wood that they tested. And just due to its overall strength, its durability, the fact that it is sustainable, turns out wood is just great no matter which environment you put it in. What if we go to the moon and it's all just mid-century modern everywhere? That's what I thought about as well. Because, yeah, seriously, if you're building out of wood, it's going to look something like what it looks like here on Earth. Finally, not sure if any of you have been watching the French Open, but the first week of matches has been as raucous as the Challengers' bedroom scene.

22:36The fans have been super rowdy, booing the players, shouting during points, so much so that the French Open has now banned fans from drinking alcohol in the stands. Tournament director Amelie Maresmo, who's a great player, said that while she's happy people are very enthusiastic about watching tennis and being a part of the matches, the fan participation has gone too far. Alcohol has been allowed up until now in the stands, but that's over, she said. The policy may have been sparked by comments from number one women's player Iga Sviatek after she won in this epic nearly three-hour match against American Naomi Osaka.

23:10She took the mic and made an unusual plea to fans who were being disruptive. She said, I have huge respect for you guys, and I know that we are playing basically for you. But sometimes under a lot of pressure, when you scream stuff during the rally or right before the return, it's really, really hard to be focused. Toby, not the best look for Paris just a few months before it's supposed to host the Olympics. Yeah, it's not a good look at all. The umpire at one point during this match had to say, please don't call the ball out during rallies. We have line judges for that. It just goes to show that how rowdy these especially Grand Slam events can get.