Warsh Plans to Overhaul the Fed & Carvana ‘Playground’ Disrupts Dealership Model

0:01Marketers, tell us if this sounds familiar. You invest in something that seems incredible like millions of views, but then don't see any revenue. Instead, invest in what looks good to your CFO. LinkedIn Ads generates the highest ROAS of all major ad networks. Spend$250 on your first campaign on LinkedIn Ads and get a$250 credit. Just go to linkedin.com slash mbd. That's linkedin.com slash mbd. Terms and conditions apply. Good morning, Brew Daily Show. I'm Neil Freiman. And I'm Kyle Hagee. Today, Kevin Warsh is shaking things up at the Fed. And would you go on a 21-hour flight? It's Thursday, June 18th.

0:41Let's ride.

0:47Good morning. A few housekeeping notes I got to let you know about. Kyle Hagee is running it back with me for one more day this week, filling in for Toby, who's at more weddings than Vince Vaughn and Owen Wilson. And yes, that one more day was intentional. The brew office is closed tomorrow for Juneteenth, but the content machine don't stop. We are dropping a special interview episode tomorrow that I know you'll enjoy, so definitely check that out. Not giving any spoilers about the guest. And one more thing, if you like the show, leave a review wherever you listen. It's super helpful as we try to grow Morning Brew Daily.

1:19And let's be real, you've got plenty of times on your hands during a three-day weekend. We'd really appreciate it. That's right, we would really appreciate it. I'll even give you an example text you put as the review. Kyle, sixth man of the year. My mom would love that. And make sure it's a five-star review. And now a word from our sponsor, ServiceNow. Neil, it seems like AI is everywhere lately. Yeah, but is it getting us anywhere? I mean, it was supposed to handle the parts of the work I hate, but it just describes the problems back to me. I can't fix that. But ServiceNow's AI specialists can.

1:48They aren't a tool. Think of them as digital teammates who can actually do the work. They can resolve cases, process requests, closed loops without generating extra work for you. When you can truly delegate to AI, you can get back to the work only you can do, the work that requires a person with ideas and judgment and, you know, a pulse. To put AI to work for people, visit servicenow.com. That's servicenow.com. Kevin Warsh is wasting no time shaking things up at the Federal Reserve. The new chairman who took over for Jerome Powell last month previewed sweeping changes coming to the central bank after his first meeting as the boss.

2:23One thing that hasn't changed, interest rates. The Fed, as expected, kept rates steady, extending its long-running holding pattern as the U.S. economy doesn't force its hand one way or the other. But that might not last much longer. A rate hike may well be coming. In the Fed's surprisingly hawkish projections, nine policymakers saw at least one rate increase this year. That's up from none as recently as March. And that's because the war in Iran has caused inflation to reaccelerate and the job market has been much more resilient than expected. A rate hike isn't a lock, though. The other nine policymakers predicted rates to hold steady or decline by the end of 2026.

3:00As Kevin Warsh put it, the discussion was a good family fight over monetary policy, which is definitely what my family fights over. After the rate decision was released, Warsh stepped up to the podium and detailed how he planned to overhaul the Fed. He's launching task forces. He wants to modernize data collection. He's curbing communications. He's scaling back forward guidance taken together. It amounts to a new look Fed that's going to be much more tight lipped about its decisions. Kyle Warsh is going full monk mode. He is. Monk mode has been activated. I mean, this guy must have watched too much Parks and Rec.

3:31He loves a task force. He just wants committees after committees after committing. And it's interesting. This is like maybe like a soft regime change when it comes to what the Fed is going to do. I think a lot of people maybe thought it was going to be about substance and what they did with the interest rates, but he's kind of keeping a normal theme there, but it's a lot more about style. He wants to have his communications be a lot more tight-lipped. They're way shorter than what Jerome Powell, the former Fed chair, would say. He's also, as we mentioned, doing a lot of these task force to identify where the Fed can improve and kind of pull back maybe what it's projecting future states will be.

4:13There's maybe nothing more factor of this than the dot plot that the Fed normally does. Wors does not like that. The dot plot is where you anonymously kind of predict where interest rates will go in the future. He thinks that the Fed shouldn't be projecting that far in advance. I think bankers like him because he's sticking to the facts, but also bankers don't like him because they like that extra color and commentary when they're making predictions. So we'll see how the Fed changes under him, but he's already signaling in a lot of ways at will. A lot of changes are coming out. Let's talk about the dot blocks.

4:45I thought that was sort of exemplified the new look fed under Kevin Warsh. I said that nine policymakers projected a rate, a rate hike by the end of the year and nine projected them to say steady or decline. So add that up. That's 18. Typically, you get 19 projections on the dot plot. So there was one person missing here. Who was that one person, that was Kevin Warsh. He went up to the podium afterwards and said, yeah, I was the guy who didn't make a dot plot projection. I am the missing piece because on principle, I don't really believe in future projections. Now, for some people that this is great, it's removing jargon.

5:24After the Fed makes a decision, it always releases a policy statement that's run longer than 300 words. Well, the one yesterday was just over 100 words. It was much more concise, which I think a A lot of people appreciate, got rid of a lot of the jargon. But at the same time, bankers, Wall Street is used to knowing what the Fed is going to do ahead of time. Whenever we preview a Fed meeting on the show, we're like, well, the Fed is a lock to hold interest rates steady or the Fed is a lock to raise interest rates because they telegraph it way in advance. Kevin Warsh said he's probably not going to do that as much.

5:58And in his press conference, he was also like, I don't even know how many press conferences I'm going to do. This has been a staple of the Jerome Powell Fed where he goes up and talks about his decision-making process and the systems that the Fed is working under. And, you know, if I'm going to lower interest rates and I need to see X happen, and if I'm going to raise interest rates, I need to see Y happen. This is not going to happen under Kevin Warsh. So, well, it is a new look Fed. But one thing that I think Wall Street did appreciate was that he reaffirmed the 2 percent inflation target. The concern was that he was going to artificially lower interest rates because that's what President Donald Trump wants.

6:34But he was pretty firm in saying we want two percent. That's the Fed's target inflation. And it looks like perhaps we're getting a rate hike instead of a rate cut. They asked President Trump, who's over at the G7 in France, what he thought about that. And he goes, it's all right, whatever. Yeah, that's what he said. I saw another quote from Trump. He said, it's hard to believe it just keeps the country down and so unusual. but we have a very good guy over there right now. So I'm guided by what he wants. Clearly a much more amicable relationship with Trump and Warsh as opposed to Trump and Powell.

7:03For now. Which will also be a change in the Fed exactly for now. As you said, Warsh wants to maybe increase interest rates, which Donald Trump has famously been against. And so we'll see how long that relationship stays friendly. Final note on the Fed, the markets did not like what Kevin Warsh had to say overall. The S &P 500 dropped 1.2 % yesterday, which was the worst stock market performance on a Fed day for a first Fed chair since, or for a new Fed chair since 1994. They are a little spooked about that high rate rates could be coming. Well, he'll have to get a task committee onto that one.

7:37Carvana, the company who pioneered the online purchase and home delivery of used cars, is back with another innovation, a car dealership where you can't actually buy the cars. That's right. Carvana has spent nearly$200 million acquiring seven Stellantis dealerships to build a network for new cars. The Dallas location specifically doesn't feel like a normal franchise dealership, however, but rather a cool car playground where potential customers are met with lounge areas, themed zones that show off individual cars, the ability to test drive and likely everyone's favorite part. No commission based salespeople telling you you're definitely going to need heated seats.

8:16Now, there's only one catch. Even if you love a specific new car on premise, you'll still need to order it online. Tom Tyra, Carvana president of Special Projects said, when we got into new cars, we said the only way we're going to make this happen is to ensure that it goes the Carvana way, that we actually sell cars exactly the same way we do to used car customers. Now, why might Carvana be interested in new when their business model is so used to used? Well, despite the fact that millions more used cars are sold each year than new ones, a majority of the money to be made is in the new car market, where, obviously, prices tend to be higher.

8:55U.S. consumers spent about$655 billion on new cars in 2025, compared with$524 billion for used cars, according to an analysis by Cox Automotive. And for now, the strategy seems to be working. One of the dealerships Carvana acquired on the outskirts of Phoenix has grown into the top selling Chrysler, Jeep, Ram and Dodge dealer in the U.S., nearly 10Xing the previous amount of cars sold per month from between 30 and 50 to 350. Neil, you trying to post up and hang out at the Carvana car playground with me? It seems like they're Apple storifying the traditional car dealership, but it seems like a fun place to play around.

9:34I mean, it is called a playground. Tom Tyra, who you mentioned from Carvana said, we're not trying to sell cars here. We're trying to present cars. And if I'm a traditional dealership, I mean, I'm looking at Carvana and I'm saying, look what they're doing. Should I copy some of these tactics? What is going to mean for my business? This industry is seriously ripe for disruption. There's 17 ,000 retailers out there selling new cars. They topped$1.3 trillion in sales last year. I think everyone would acknowledge this is a bit of a dinosaur of an industry. It's protected by a lot of state laws. There's a ton of regulation around it.

10:09There hasn't been a lot of change. There are a few companies trying to disrupt this model. You have Amazon now selling a few cars online. You have electric vehicle makers, pioneered by Tesla, that have just issued dealerships completely. Rivian and other EV makers have followed Tesla and saying, we're not going to have dealerships. We're just going to try to sell you online. And now Carvana comes in here and John Murphy, Wall Street analyst and automotive consultant told CMBC Carvana entering the new vehicle franchise business, maybe one of the most disrupted forces that auto retailing has seen in the U S market in decades.

10:43Yeah. I feel like they are re-imagining what a car dealership looks like in the digital age and Carvana from its founding in 2012 has always been a disruptor. And so it, it makes sense. I think it was actually a really smart move to move into the space. The other kind of Trojan horse element of this is now that they have physical locations, they can also do car servicing. And when you look at how dealerships, automotive makers make money, a lot of it is through the servicing and they're going to do that. It will be still traditional servicing, but they're going to still have this kind of laid back non-salesy approach that opens up a whole new line of business for them, as well as financing the purchase of new cars, which is another way companies make money.

11:24And so they're expanding the ways to generate revenue for the business. And I think this is a really, really good idea. Here's the problem. You know, when you go to a traditional dealership is it's a huge parking lot, right? There's just cars everywhere. It's a sea of park. It's not a playground. It's not supposed to be a playground. It's like a Costco. It's a Costco for cars. There's tons of cars of every different type. Every single model has all of the different options because when you want to test drive what you want to buy. You want the exact model. Now, Carvana doesn't have this kind of inventory.

11:55It has just 3 ,000 new vehicles for sale nationwide. So if you want to go take a test drive of the new Ram truck that you want to buy or a new Chrysler minivan, they might not have the model or the type that you are seeking. So you're going to test drive something that you eventually won't want to buy. So this is a huge problem, I think, for Carvana as it gets into the space. They're not willing to hold as much inventory as a traditional dealership. They want a playground instead of a parking lot. And that could be a problem for people who want to experience what car they are going to spend 20, 30, 40,$50 ,000.

12:27That's right. I think Carvana is betting that while that experience isn't perfect, the flip side of that is going to a traditional dealership and kind of having to deal with the sales process. And one of the examples listed in the Wall Street Journal article was someone spent about thousands of dollars more, like one or$2 ,000 more to buy a car on Carvana just so he didn't have to deal with salespeople. And he said, I probably could have gone to a dealership, negotiated their price down to what I paid Carvana, but like, what's the point? I can just get this and make it more seamless. So I think they're betting that the NPS of this industry is so bad that they can disrupt it in this way.

13:02Let's move on. New longest flight just dropped and will take you from Australia to London in 21 hours, which is great news for people who hate layovers and terrible news for those who get stuck next to two seatmates who just won't stop talking. This route will be part of Qantas Airlines, the flag carrier of Australia and one of the oldest airlines still in operation after being founded in 1920. Qantas has stated these flights will begin in October of 2027 and will be powered by a specialized wide body long haul A350 aircraft from Airbus. Now, the aircraft's configuration includes six first-class seats, 52 business suites, 40 premium economy seats, and a well-being zone where passengers can stretch their legs or walk around, which will definitely be necessary after your fifth episode of Big Bang Theory on the airplane's small screen.

13:50This initiative, known as Project Sunrise, was launched by former CEO Alan Joyce in 2017 and represents a major gamble for Qantas, involving billions of dollars in aircraft, cabin upgrades, and research into passenger health on ultra-long flights. But if there is consistent demand, the airline has estimated the project could add more than$400 million a year to earnings. Neil, this is all very impressive, but I'm more interested in the world's shortest flight. Give me one for like eight minutes. That's what I want. I'll tell you what the world's shortest flight is. I knew you would have it. I might have mentioned in the podcast not too long ago.

14:24It operates between the islands of Westray and Papa Westray in Orkney, Scotland. It is 1.7 miles long, and it's officially scheduled for one and a half minutes. If you're delayed, it's not that huge. It typically takes about 60 to 80 seconds to go from Westray to Papa Westray. Qantas is doing something obviously very different from its very founding. You went back to the founding. I mean, Australia is just so far away from literally everything. So the CEO said was built, Qantas was built on the belief that Australia's distance from the rest of the world should never stand in the way. So both Qantas and Air New Zealand have been pioneers in the space of ultra long haul travel just because even if you want to go to any other country, it's going to take five to six hours.

15:08And if you want to go to other population centers in Asia and Europe, it's going to be much longer. Very interesting story about how the former CEO kind of laid down the gauntlet in 2017. He said, Boeing and Airbus, give me a specialized plane that I can take my passengers on for 21, 22 hours to London. And Airbus beat Boeing with this A350-1000ULR, which stands for Ultra Long Range. It actually has an extra fuel tank. And what's interesting is that most of that fuel is used just to carry the weight of the rest of the fuel because this thing is going over such a long distance. It's kind of disappointing for New York City, though, because this was the announcement yesterday.

15:48They announced the route, whether it's going to be the there's basically a two horse race between Sydney and London and Sydney and New York. London got the first one. Come on. Well, there is this the route between Sydney and London is kind of more fable. It's called the kangaroo route and that Qantas actually coined that phrase. It's interesting if you go back in time just to look at how far commercial aviation has gone. In 1935, this route took 12 and a half days. Now we're down to 21 hours. That is incredible speed at which you can get between these two places that, to your point, are very far away.

16:20I hope New York is next. Tell the people why it's the kangaroo rule, or maybe they can fill in the gaps themselves. It's because you've got to stop so many times. That's right. You're hopping all over the place. Qantas' logo is the red kangaroo. So they're big on kangaroos down in Australia. Would you take a 21-hour flight? Absolutely not. I would rather have a layover at that point. I'd make three or four stops out of it. I'd go to Scotland and get on this one-minute flight. that's too long to be on an airplane for me. Okay. I mean, are you taking it? Sure. If I don't have to stop over, I mean, you just rip through movies.

16:52So that's what I'm thinking. And they did do one of these flights in 2019 and they did a bunch of testing on passengers to see how they reacted to being in an airplane for 21 hours. There is a business case for this though, because the war in Iran has disrupted air travel in the middle East at those huge air hubs in Dubai and Qatar, because that's usually where you stop over. if you're going from Australia to London or, you know, from the West to the East. It was always in the Middle East, but that disrupted air travel there. So Qantas is making a very, you know, ambitious business bet on that.

17:22People won't want to have to deal with potentially any more conflicts or disruptions coming in the Middle East on those stopovers and just kind of skipping everything and going all the way from Sydney to London or Sydney to New York. Up next, it's Neil's numbers.

17:37Toby, let's do some free word association. financially stressed toby what about unexpected one thousand dollar medical expense crying stress lots of stress duck aflac smart man aflac pays claims fast accurately and fairly their plans can even help businesses and employees save tax dollars when payroll deductions are pre-taxed while coming at no direct cost to businesses to learn more just head to aflac.com slash morning Brew Daily. That's AFLAC.com slash Morning Brew Daily. Toby, do you have any strong assets? Yes, I have great legs. Toby, I mean the investment kind, the ones that make up a multi-asset portfolio, like what you can build on public with stocks, bonds, options, crypto, and more.

18:26With public, you can now create agents that can monitor the market, manage your cash, and execute your trades. Just enter a prompt, approve the workflow, and put your agent to work. Head to public.com slash morning brew. That's public.com slash morning brew. Paid for by public investing, full disclosure, and podcast description. Neil, it feels like every week there's a new AI model making headlines. And somehow I'm expected to keep up with all of them. Fair, but Minimax's new M3 is one worth paying attention to. Their open-weight model combines frontier-level coding and AI agent capabilities, a massive 1 million token context window, and native multimodal understanding.

19:08M3 is built for coding, agent, and visual understanding, helping developers and businesses build more capable AI products and automate complex tests. It's available today through APIs and leading AI platforms. To learn more and start building with M3, visit minimax.io. That's minimax.io. Welcome to Neil's Numbers, the segment where I share three stats in the week's news that will give you a degree in useless information. My first number highlights how colonization and immigration have shaped World Cup rosters. Because this is wild. 7.9 % of all players in the World Cup were born in France. 98 out of the 1 ,248 players.

19:51So that means 76 of them are representing other countries than France, The Athletic reported. When France played Senegal on Tuesday, it was basically France versus France because Senegal, a French colony until 1960, has 10 French-born players on their team. Algeria, another former French colony, has 13 players born in France and Haiti has 12. And this applies to other countries as well. During the second half of the Morocco-Brazil game, every single Moroccan player on the pitch, all 11 of them, were born outside of Morocco. The boys who play for Curacao, a Caribbean island that's part of the Netherlands, are all Dutch-born except one.

20:28Overall, nearly one-quarter of players at the World Cup represent a country they weren't born in. It can happen because of FIFA's rules around team eligibility, which is based on nationality. If you hold citizenship in a country, you can play for them. If you are a dual national, you have to prove a genuine connection to the country you want to play for, either by being born there, having one of your parents or grandparents being born there, or living there for a period of time. Kyle, pretty incredible that you can still see the effects of 19th century empires in World Cup squads today. That's right.

20:58And there's some good news and some bad news for me. The good news is I could play for England because my grandma was born there. The bad news is I'm god-awful at soccer, so I would never in a million years make the team. But it sounds like no matter what the outcome of the World Cup will be, France will have something to celebrate. Absolutely. For my next number, are adults the new iPad babies? A new study published in JAMA Pediatrics found that 70 % of kids were on electronic devices during dinner. That's actually less than the 75 % of parents who were using their phones or other media. The family dinner, as depicted in 1950 sitcoms, has been dead for a while now that everyone's on their phones.

21:35Mom's reading an article, dad's watching highlights from the game, your brother's playing chess.com. You're contemplating your life decisions after seeing your Instagram Explore page. And according to researchers, that's bad, obviously. It's damaging to a family's connection with each other. The co-author of the study, Sada Garibay, said, If you have your device and you're constantly checking out at the table, it can affect a valuable moment parents have with their children in the day, and it can have some effect on the relationship they have with their children. Kyle, are you surprised that more parents are on their phone than kids during meals?

22:05I'm not surprised just because I think it takes them longer to do anything on their phone. Like font size 72, they're clicking the wrong button. Like I bet 75 % of my mom's screen time is on settings. Like just trying to figure out what the phone does. So that's not surprising. It's a little bit disheartening. And I do think finding phone-free spaces in your home is very important. So my family dinners, I'm remembering back to when I was a kid. This was before the smartphone era. So we didn't really have or even like sophisticated cell phones. I always wanted, we would sit down there. I would always want to watch the baseball game because it'd be like after seven, the Red Sox would be on or something.

22:39But my mom said we could only turn on the dinner for one thing, and that was Jeopardy. Oh, okay. That was the only TV show that could be on during dinner. If she didn't do that, I don't think you'd be where you are right now, Neil. Possibly not. Okay, for my final number, Toy Story is a juggernaut. Ahead of Toy Story 5's release tomorrow, Disney said that the franchise has driven$16 billion in total revenue for the company in the 30 years since the first one came out. It speaks to how lucrative it is when a property manages to stay relevant across multiple generations. After all, I was four when the original Toy Story came out.