What Deportation Means for the Economy & Mattel's 'Wicked' Mistake on Toy Packaging

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0:29Good morning, Brew Daily Show. I'm Neil Freiman. And I'm Toby Howell. Today, the major economic implications of Trump's mass deportation plan. Then the toy company Mattel made a wicked mistake on the packaging for some wicked dolls it's selling. It's Tuesday, November 12th. Let's ride.

0:51Toby, yesterday marked 50 days left of 2024. First of all, how are your resolutions going and any items you want to check off your to-do list before the year is up? I got a long to-do list, actually. Just two items. One, get my music listening habits in order. Spotify Wrapped comes out November 29th. And right now, all I have is Hans Zimmer soundtracks. Also, quick plug to listen to MBD as many times as possible between now and November 29th. So you're in our 1 % of fans. But number two, I was just thinking about the skills I could feasibly learn before the end of the year. We got less than 50 days left.

1:25I was thinking juggling. Feels a little too easy, maybe. I've never been able to juggle. Too easy. That's a little cocky. Well, I don't know. I can juggle three. How long does it take to learn how to juggle? Not that long. Okay, so maybe that's too easy. You should have to set aside a Saturday. It's rainy and cold. Learn how to juggle. Well, I was thinking I would just make this a nice audience engagement thing. What should I learn before the end of the year? I will try to follow through on if you give me a skill to learn. Maybe it's basket weaving. Maybe it is juggling. Whatever it is, please email me, and I'll try to learn this skill before the end of the year.

1:58How about baking? So then you can bring in stuff for us here at the office. Oh, always with a little self-interest. Baking is easy. I can already bake. What do you want? Just tell me. I'll make you some chocolate chip cookies. Now, a word from our sponsor, Sage. Not the herb, but the platform built for CFOs to make your life easier. If you're a finance professional, you're always walking a tightrope. You want to get in the weeds and make sure you're up to date on things like bill pay. But you also want to see the big picture so you can make sure your company is on the right strategic path. And that is why Sage is great with Sage AI.

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3:35Eye problems can occur. Tell your doctor if you have new or worsening eye problems. You should not receive a live vaccine when treated with EBCLIS. Before starting EBCLIS, tell your doctor if you have a parasitic infection. Searching for real relief? Ask your doctor about EBCLIS and visit ebglis.lily.com or call 1-800-LILY-RX or 1-800-545-5979. Yesterday, President-elect Trump selected anti-illegal immigration hardliner Tom Homan to become his administration's border czar, showing that he's serious about carrying out his signature campaign promise to enact the largest mass deportation campaign in American history to remove criminals from the country.

4:10Homan, the former acting director of Immigration and Customs Enforcement, or ICE, said at a conference earlier this year that, quote, if you're here illegally, you better be looking over your shoulder. Homan has vowed to run the biggest deportation force this country has ever seen. If such a deportation of undocumented immigrants takes place, it could have profound effects for the U.S. economy, particularly in structures like construction, agriculture, housing and caregiving, where many of them work. For instance, 14 percent of construction workers in the U.S. are undocumented, according to the advocacy group American Immigration Council.

4:45Economists warn that mass deportation on the scale Trump has promised could cause labor shortages, delayed projects, higher consumer prices and slower growth. We don't have an exact number on how many undocumented immigrants are living or working in the United States. One analysis from the left leaning Center for American Progress estimates that there are 11.3 million with 7 million of them working. The Pew Research Center, a nonpartisan organization, offers a lower estimate of around 8 million people. but all agree that there are millions of undocumented people in the labor force working at companies that rely on them and that mass deportation could cause significant economic upheaval.

5:25Look, let's talk about how we got here. So this was a central theme of the Trump and broader Republican campaigns that immigration was a big problem in the U.S. for things like crime and economic issues like housing prices. They won convincingly, the Electoral College, popular vote, the Senate, and it's looking like the House. And they say now they have a broad mandate to enact those plans to curb immigration. They say it's what the people want. A lot of analysis and economists have come out since those campaign promises were first introduced and saying, look, here's what might happen to the U.S.

5:59economy, because it looks like while you said we don't exactly have an estimate, we think that about 5 percent of the total U.S. workforce are unauthorized immigrants. And many studies have put out what would be the economic hit, because many of them are working. If they were to be deported, a lot of companies would be facing widespread labor shortages. There could be major implications. One study that was published in the University of New Hampshire in August said that a deportation program on the scale that Trump has promised, which would ultimately deport 11 to 13 million people, would reduce the nation's gross domestic product, our GDP, by anywhere from 2.6 percent to 6.2 percent.

6:36And that would amount to an economic hit of anywhere between$711 billion and$1.7 trillion. And again, this would not hit all sectors equally. There are certain sectors that if you go down the line, it would be a much more disproportionate impact. Yeah, construction and housing is a big issue. Two industries do rely pretty heavily on undocumented immigrants, according to the American Immigration Council. Their research shows that the construction industry would lose one in eight workers. that. You mentioned that 14 % of construction workers in the United States are undocumented. Another industry that would take a major hit is farm workers as well.

7:12The USDA actually estimated back in 2018 that 41 % of farm workers are undocumented. That's the most recent figure available. So you're talking about hits to GDP in the potential of trillions here. I mean, that New Hampshire study estimated literally it could cost a trillion dollars. So there are certain industries that just would be more effective. It is something that has a major impact on the economy of the United States. Yeah. Economists like to talk about something called 3D jobs, and those are dirty, dangerous, and demanding work. There's those 3Ds, which are largely occupied by undocumented immigrants.

7:50And what they say in their research through decades of study is that it's not a like for like, if you like native born Americans do, won't just move into these jobs should these, uh, these migrants get deported. And therefore that leads to massive labor shortages. I mean, go back to 2011, Georgia passed a strict immigration law. They lost a lot of workers in their peach, vegetable, fruit, uh, fruit industries that there's estimates by the Georgia Agribusiness Council, that there was all of these unpicked produce that was left on the vine because people just weren't there to pick them. And those costs ballooned into$1 billion.

8:30Go to Idaho and the dairy industry. There's estimates that 89 % of the dairy industry in Idaho are foreign born. Nationally, that number may be closer to 50%. So widespread impacts from anywhere from fruits and vegetables to dairy. And I also want to go back to housing and construction because according to Chad Prinky, who's the CEO of a consulting firm, Well-Built Construction Consulting, he said there's going to be incredible delays in the building specifically of single family and multifamily construction homes. He said the average 18-month project could take five years to complete because of labor shortages.

9:09Said it would be different all over the country Two difference between Boston and Austin, Texas, for example, Prinky said in Austin, it would basically shut down every project. And just to zoom out here, we are emerging out of the COVID-19 pandemic where it finally seemed like supply and demand in terms of the amount of workers and the demand that companies had for those workers was finally equalizing. If this deportation plan does go to plan, we're looking at less workers now, which would force wages upwards, which and that ripples through the entire economy, the entire supply chain, everything from grocery stores to, you know, sporting goods stores.

9:46you're going to see prices going up as well. So when we talk about just an economy-wide implications of this, we are talking truly across the entire swath of the economy. The United Nations Climate Summit kicked off in Baku, Azerbaijan yesterday, but attending a conference about how the earth is getting hot has proved to be a not-so-hot ticket. Nearly 200 nations are coming together at the 29th Conference of the Parties, aka COP29, as the UN meeting of the minds creeps up on three decades of gathering to try and figure out ways to mitigate the worst of global warming. But Joe Biden opted to skip and send a delegate instead, as did top leaders from China, India, France, Germany, Brazil, and the EU.

10:28In total, 48 fewer heads of state are addressing COP29 than last year. Part of this year's tepid turnout might tie back to last year's frustration when talks stop short of calling for an international plan to reduce fossil fuels by replacing phrases like phase out with more lenient suggestions and language. Plus, this year's decision to host the summit in Azerbaijan, a petro state who derives 60 % of its income from fossil fuels, might also have some feeling pessimistic. But this year, the theme of the meeting is finance cop as the UN tries to estimate the funding needed to fight climate change.

11:02But figuring out who pays and how much is proving to be quite contentious. It is, because the amount of money that the U.N. wants, richer countries that have already been transitioning to renewables but have been the source of the large amount of the emissions that have ever been produced in the world could amount to more than a trillion dollars. We've thrown around that trillion stat a lot this show already. One, they did manage to get an agreement actually yesterday at the start on a global carbon market, which basically establishes a financial market for carbon credits. So if you are a country that's doing well and you're getting a lot of your energy from wind and solar and nuclear, then you can sell credits to, you can make money by selling credits to less developed countries that are still in the process of transitioning over to renewable.

12:00So that was kind of a big win. No one was really, as you mentioned, no one's really expecting much to come out of this conference. But it looks like they already got some things in motion on the first day. So I did mention that one of the big things at this year's conference is trying to get the developed countries to pay, to help subsidize undeveloped countries in their fight against climate change as well. There was this$100 billion pledge that was rolled out actually decades ago at this point where they were supposed to contribute$100 billion to a climate-related fund. One, that number looks kind of woefully small at this point.

12:32But two, new targets have been tossed around because when that initial number was decided upon, nations like China as well as most of the Middle East countries were not considered developed under the UN's guidelines. And so now people are saying, wait a second, we need to draw up new regulations that include China, include Saudi Arabia, who are not obliged to contribute to this fund, were not obliged to lead on finance in years past. So now they're saying we need, one, a lot more money, and two, we need these countries that have come to the forefront of economic kind of power in the last decades to start contributing as well.

13:05And of course, there is a major overhang, a major shadow, which was the election in the United States. Donald Trump has pledged to roll back a lot of environmental regulations that have been passed over the past four years. He has vowed to remove the United States from the Paris Climate Agreement, which was reached at the COP in 2015. Yesterday, he made his EPA pick, who is the former New York representative, Lee Zeldin. and Lee Zeldin has said he wants to roll back things like tailpipe regulations for vehicles, rules that slash power plants emissions. So there appears to be a broader rollback and a backing away from climate initiatives that are going on in the United States.

13:50And the United States being the world's largest economy kind of sets the stage for the rest of the world when it comes to this. So the people there from the Biden administration are saying we're not backing down from, you know, Maybe climate's going to be on the back burner for the next four years, but this is a longer haul that the U.S. is absolutely committed to. Ahead of its premiere later this month, Wicked has staged an all-out marketing blitz that puts Glinda's materialism to shame. But one of its brand collaborations is not going over so well with the parents. Sunday night, the toy company Mattel apologized after one of its dolls tied to Wicked was found to contain a misprint on the packaging.

14:28Instead of writing the URL wickedmovie.com, which directs to the movie website, it had left out the word movie, and that is a big problem because that's a link to a porn company's website. Mattel said it deeply regrets the unfortunate error and is taking immediate action to remedy this. It didn't say how many dolls were slapped with the X-rated packaging or whether it was recalling the product, but a search on Target and Amazon listed the item as unavailable. But God bless capitalism. people who bought a doll with the now infamous packaging are listing them on eBay with one seller offloading two for$99 a piece, more than double the original price tag.

15:07Toby, this is even more embarrassing than when I sang for good at my high school graduation. Oh, you nailed that, Neil. This is especially embarrassing because Wicked is kind of going the Barbie route when it comes to merch for this movie. They are going all out. You are seeing stores just plastered with pink and green. You can find Elphaba Squishmalls. You can find Stanley cups with the green gradient. I even saw pimple patches that had the Elphaba hat on them. One of the weirdest ones was a Walmart was selling this mac and cheese container that was either pink or green, depending on which kind of thing you got, which I don't want my mac and cheese to be pink or green at any, that's just not an appealing color to me.

15:48But I do think that it shows that they are trying to turn this into a big box office temple of the Barbie ilk where you can just have these recognizable characters, these recognizable colors, and just going top to bottom across all retail shelves, plastered in pink and green. And they think they can because Wicked, ever since it premiered in 2003, and little flex here, I saw the original cast that year. Thank you, Mom, for taking us. That is one of the biggest Broadway shows, most popular, best-selling of all time. It's generated more than$1.67 billion in ticket sales only at the Gershwin Theater, and that's not counting all of the other national tours as well.

16:26More than 14.5 million people have bought tickets to see the show in the last 21 years. So this is an interesting bet on a musical that hasn't been kind in the box office in recent years. There have been some major flops, and they're just hoping Wicked can defy, if you will, the gravity of the broader movie musical market, which has seen some downturn. I will, all right. Yeah, Dear Evan Hansen, Mean Girls Musical. Those have been two notable flops recently. This movie needs to do well because it has a$160 million budget. That is Marvel superhero territory we're talking about right now. One thing that I do want to point out is Mattel is liking this current kind of crop of toys because not only does it have Wicked merch coming out, which hopefully can solve the packaging issue that we started this story with, but it also has Moana 2 dropping.

17:17So those are two absolute powerhouses in the toy industry. So Mattel is kind of sitting back and saying, we're looking at a good Q4 here. Up next, it is Toby's Trends time.

17:49all protected with end-to-end encryption. It's time for WhatsApp. Message privately with everyone. Learn more at whatsapp.com. 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. Like a good neighbor, State Farm is there.

18:49am calling Chegg yourself before you reg yourself. Chegg stock is down an insane 99 % since reaching an all-time high just a few years ago in 2021. $14.5 billion in value, poof, gone in a smoke of artificial intelligence. A look under the hood shows that it's lost half a million in paid subscribers with no end in sight, as students realize that Chachabiti and other large language models could help them with their work like Chegg did, but for free. So, Neil, I want to talk about how there's not really a better example of a company getting swept away by the rise of AI than poor old Chegg. Right.

19:25So look at this survey of college students by the investment bank Needham. 30 % intended to use Chegg this semester, which is down from 38 % in the spring. Meanwhile, 62 % plan to use ChatGPT, which is up from 43 % in the spring. It's not hard to fill in the blanks here about what's going on. People are turning to AI, students especially, in really big numbers, maybe more so than I would have expected a few years out after its release. And Chegg has just collapsed as a company. It had 11 % revenue drop in the second quarter. And this quarter, it's expected to have a lower sales of 15%. So this is an absolute destruction of a business model by AI.

20:09Earlier this year, Chegg laid off 441 people. And I think you have to say this is a pretty precise instance of AI taking somebody's job. And what's ironic, too, is that Chegg had AI on the mind for years. I mean, back in 2018, they were using open source models developed by OpenAI to help offer, you know, grammar assistance, help in a writing aid feature. But they kind of backed away because they were afraid that kind of still a fear now is that these AI kind of generated answers would give misinformation to people and they didn't want to stake the reputation on an AI model. So they kind of backed away from really going down that path.

20:49So they were directionally correct. They knew that AI was maybe going to become a thing, but they just didn't want to take the leap full in. So that's why you need maybe like a Sam Altman to just put this out into the world. Hallucinations be damned. So it is wild, though, to see just how close they were to actually maybe being on the frontier of this large language model boom. But instead, they're on the complete other side. And Chegg was not a small company. It was almost$15 billion. And I do think we talk a lot about the hypotheticals of AI potentially wiping out certain industries. But this is just such a clear example of them saying everyone started using AI.

21:23No one uses our product anymore. And now our company is essentially gone. Yeah, they had a one-day wipeout of 48 % when they said originally earlier this summer that they were losing market share to chat GPT. It's a pretty interesting example of what economists call creative destruction, of one innovation out basically killing the other. And hopefully in the long run, it leads to a destruction of business and lost jobs. But the idea is that in the long run, that AI and replacing the old with the new will lead to further job gains, further productivity, further economic growth. So we're seeing it in action right now, and it's pretty startling.

22:02Let's sprint to the finish with some final headlines. Bitcoin is on an absolute bender right now. Yesterday morning, we discussed in astonishment how it topped$80 ,000 for the first time. Well, in the span of 24 hours, it rose to nearly$90 ,000. and the post-election euphoria shows no signs of stopping. Bitcoin and the rest of the crypto market has jumped about 25 % in the week since election day on November 5th. And the value of the global crypto market rose above$3 trillion, topping its previous peak set in November 2021. Maybe the current attitude around crypto can best be captured by a note the asset manager Bernstein wrote to its clients yesterday.

22:40They said, and I quote, buy everything you can. Yeah, it is insane out there right now. Now, one thing that is interesting about this particular bull cycle is that usually when Bitcoin peaks, you can go back and track Google search trend data and see a corresponding peak with people just Googling Bitcoin, like what is Bitcoin, Bitcoin, etc. This time, the peak is not as high. So I'm not really sure what that means. I think it just means that more people are already aware of it. So you don't need to search it anymore. But we are not seeing the same amount of maybe retail interest this time around.

23:11So maybe it is smart money moving into Bitcoin. Maybe it's less retail people getting in. this time around, but for whatever reason, we are not seeing a similar spike in search traffic, even though Bitcoin is just absolutely flying right now. And I mean, if we see 90K, that means we're on the road to 100K, which was just unfathomable to think about even just a few years ago. Two US-based commercial passenger jets, one operated by Spirit Airlines and the other by JetBlue, were hit by bullets yesterday while flying near Haiti's capital port of Prince. The Spirit Airlines flight was riddled with bullets and diverted to the Dominican Republic, where one flight attendant was treated for minor injuries, but all passengers made it through unscathed.

23:51The JetBlue flight, on the other hand, didn't even know it had been hit until it landed in New York, where an inspection revealed the hole had been struck by a bullet. These incidents come against a backdrop of political unrest and gang violence in Haiti, but still, it is rare for passenger planes to be shot at and hit by gunfire. Yeah, I mean, I've never heard of this before, but it is definitely symbolic of the violence that has engulfed Haiti. The UN estimates that gangs, politically connected gangs, have banded together, and they basically took over control of the capital. They control 85 percent of it right now.

24:25They've cut it off from the rest of the world or the rest of the country. So what's happening with the rest of Haiti is they just removed a prime minister and they just installed a new one who's an entrepreneur yesterday. So you have this insane political backdrop that's going on. Meanwhile, they're going to see basically no visitors, at least from the United States, because all of the commercial carriers have stopped flying there, paused at least for the next few days. JetBlue, after this happened, said they're going to not fly there through December 2nd. So basically, you know, for a nation that had been isolated, it's going to be even more isolated after these incidents.