← Brew Markets
Loading summary
Transcript42 lines
- [00:00]
A
Reddit knows its worth in a reported new negotiation with Google Gold hit a record high today. We ask our guest why and why this matters. And Fox may get an interest in TikTok. Will this ignite a new war for social Media? For Monday, September 22, it's Brewmarket Daily and I'm Ann Berry. More market details to come. But first, Tick Tock likely to be not only in the news, but part of it. We broke down on the show just last week that Fox Corporation ancestor company News Corp. Has resolved its long standing succession drama with founder Rupert Murdoch securing son Lachlan's role as both CEO and a controlling shareholder. Well, with that behind it, it looks like Fox may be gearing up for a new chapter already and this time in new media. President Trump said in an interview yesterday that Lachlan Murdoch will likely be involved in a deal to keep Tick Tock going in the United States. That's alongside Oracle's executive chair Larry Ellison and Dell Technologies CEO Michael Dell. CNBC reported that Murdoch is unlikely to participate in the Tick Tock deal personally, but that Fox Corporation could play a role. Now Larry Ellison's son David is CEO of Paramount Skydance, the media company that owns CBS News, suggesting that TikTok and American News outlets are swimming in ever closer circles. So here's my question. Non investment advice, just one person's view. What could this mean for other social media assets and in particular publicly traded ones? Let's start with Snap, a $15 billion market cap and the share price down 65% over the past five years. Could Snap be of a size that Versant, the news media business that will be spun out of Comcast later this year. Consider merging with and Reddit about a $48 billion market cap. A big bite but not far off the deal size of Paramount's rumored bid for Warner Brothers. So legacy news providers are trying hard to crack the digital media world. That's been true for a long time and what faster way than a tie up with a scaled social media platform both to distribute news and to access data for news ideas that will be well received. Fox Corporation share price popped this morning on the TikTok news and there is so much going on here in the media in old, in new, at the intersection. We're going to keep watching because stories coming out of this sector are not going to go away anytime soon. And stick with us as later in this show we'll unpack what Reddit's doing to cash in on its content with AI driven partnerships. Coming up, Gold's been hitting recent highs. We ask one expert why. But first, Brew Markets Daily is sponsored by Public, the investing platform for those who take it seriously. Our producer John was saying just this morning that he is diving into sector trends.
- [02:53]
B
That's right. Researching the markets, I see themes that cross over from one sector to the next. And at Public, you can not only invest in assets across different industries, like health care and cybersecurity, but in broader themes like energy transformation. You can create your own investment plan or use one of Public's premade thematic ones and automatically contribute to those on a recurring basis.
- [03:12]
A
Public combines a wide range of asset classes with the tools you need to build and manage your wealth, whether it's with stocks, options, bonds and crypto. So get started at public.com brewmarkets that's public.com BrewMarkets paid for by Public Investing.
- [03:25]
B
Full Disclosures and Podcast Description as large.
- [03:28]
A
Language generative AI models grow, they require content to be trained on, which has set up a conflict between AI companies that own those models and platforms that generate or host content. Who should be paid for content, how much, and who holds the negotiating leverage when it comes to these conversations. While the complexity of all of this has created a mix of lawsuits on the one hand and partnerships on the other to try and solve the for how much money there is and how it gets allocated. The New York Times, for example, is suing OpenAI for what it deems as an inappropriate use of its content, the content generated by journalists on the other end of the spectrum. We recently heard of a new negotiation between Reddit and Google, with Reddit trying to figure out how to monetize its content for Google's AI models and their training. Well, we dug into this and we're going to start with looking at how Reddit's content is unique. So John, tell us a little bit more.
- [04:22]
B
All right, a little background on Reddit. It IPO'd in March on 2024, and since then its share price has been up over 450% and has a current market cap of $48 billion. And it has 97 million active users. So that's daily active users. The site is very popular and it's unique in the social media world because Redditors see themselves as part of a community. The conversations posted across their forums tend to be detailed. They're niche and personal. It's the site known for the ask me prompt, where prominent or interesting people answer questions submitted by others in the Reddit community. And here's the point. It is a treasure trove of Specific how to expert analysis and deep dives into personal relationships and advice. And that's the kind of thing that's incredibly valuable to train AI.
- [05:11]
A
So as I was reading up on this particular deal, John, I found an article in the Verge and there's one sentence I just want to read coming out of it because I seem to so eloquently summarize much of what you just said. Quote. In a slop ridden Internet, Reddit posts are made by real people speaking candidly. Content is well sorted by theme and it is all ranked according to a human run voting system, not an algorithm. So that I thought that was a very interesting quote. And the irony not lost on what better way to train an algorithm than to have information that is not generation generated by an algo. But you know, the heart of this deal and the heart of this negotiation really lands on this question of who needs who more. And I think if you take a big step back, the natural bias, the perception coming into this is to think that Google, because Alphabet is so massive, is the one that's going to have, right, the negotiating power.
- [06:05]
B
Sure. Reddit needs Google. Google is going to send people to Reddit.
- [06:08]
A
Right. That would be the sort of instinct. But as it turns out, it's a little bit more complicated than that because in this most recent deal, Reddit seems to be increasingly aware of its value. The first partnership Reddit struck with Google over a year ago reportedly had Reddit it paid $60 million. But under this new deal, there would be a pricing structure that would involve dynamic pricing, John. And then the social media platform will get paid more as it becomes more vital to training Google's AI models to, to generate really compelling answers. And this is sort of the heart of where I think this deal is more nuanced than the last one. It's not just about the money. Reddit has figured out that the uniqueness of its content makes it very valuable for Google. But what Reddit is saying again beyond the pricing is it wants Google users to be motivated to become members of Reddit, active contributors to Reddit's online forum. That in turn grows Reddit and that also helps Reddit generate, yes, more content that it then sells back to Google to train Google's AI models on. So Reddit's really woken up to the fact that it is an important part of creating this flywheel construct and that would be a user generated content version of a partnership that actually could work at least for the companies. Right? Quite well.
- [07:25]
B
Right, exactly. And that's the flywheel that some Newspaper publishers are feeling doesn't exist that their writers are publishing content online and articles. And then Google is scraping that information and using it for AI.
- [07:39]
A
Again, just to sort of repeat a little bit what John had just said, the old model was you type into Google some kind of question and what would come back to you would be a rank ordered list of links. You would then click on that link as a user, Google gets compensated, right? It gets ad revenues as a result of that. And then say the New York Times on the other side of that link would be quote compensated or receive the benefit of having somebody go through and actually read the article. They'd be getting traffic and eyeballs and ultimately they'd be wanting to drive that into subscription revenue. So that was sort of easily understood. To your point, open AI and the generative AI summaries at the top of Google do not provide those links. And as a result that money making methodology has sort of disappeared for the underlying content generators. The other piece of this is talking about what the parallelism the user generated content world to bring it back, bring it back to Reddit for a moment. The community at Reddit is pretty vocal John, and they're not happy. They've basically said it's fine for you Reddit to go sell the data to Google, but we the users are the ones who created it. Where's our cut in all this money that's flushing around? Right. Talk to us about the outrage that we're seeing on Reddit as a result.
- [08:47]
B
There's lots of postings on Reddit about this and people that are saying that they're leaving the forum because there's a sense that there is a community that's been fought, fostered over the years and the moment that that community, it's a fragile thing that that breaks down. If there's a breakdown in trust where the users don't trust Reddit, then they'll flee and then the results that are being fed into the AI aren't valuable anymore.
- [09:11]
A
Trust in the case of the Reddit community and then copyright and IP in the case of the journalists right at the New York Times, those are the sort of the parallel communities to think about when this debate continues and it's going to continue around who owns the underlying right to this content and who gets sanitize it. Just one other thing John, before we leave this I wanted to share with you. I, I did nerd out. It's what I do and I went back to the earnings results of Reddit from the most latest quarter and the CEO Steve Huffman talked about how one of the innovations that Reddit's very proud of is that its own proprietary Reddit AI offering to brand customers and to paint a picture of what that is, you, a brand could go to Reddit and say, help me figure out what which part of the population my brand should appeal to. Help me figure out how to craft my brand messaging insights, insights from Reddit and the Reddit community. Now, I actually went to the same advertising festival that the CEO of Reddit referenced and I deliberately went to go check out the Reddit demo of this and it was pretty extraordinary. It was really compelling. You know, if you're an advertiser, well.
- [10:16]
B
That information is there and just to go back to it, it is human written, human ranked information.
- [10:21]
A
It's incredibly valuable and authentic and it lands in a way that brands exactly want to resonate with consumers. That level of intimacy and how to mimic that. Well, here's a final thought on this. If you are Reddit and you know that you're sitting on this treasure trove of data, if you are Reddit and you know that you can go and negotiate with brands directly to have them come to you and pay you for your insights, do you want to try as best you can to protect that? Or if you take your eye off the ball, are you at risk that Google comes and scrapes your data and then Google turns right around to those same brand partners and sells insights themselves. So you can kind of see why Reddit is starting to step up its focus on this and why shareholders are starting to pay very close attention to what these AI deals are going to look like. We're going to keep watching. There's a lot on this, and it's not just, by the way, on text heavy social media platforms. It's not just text heavy newspapers. This debate is going to cross over pretty soon, I think, on stereo, John, to video platforms and audio content and other kinds of content more generally.
- [11:21]
B
Absolutely.
- [11:22]
A
Well, let's take a quick break and when we come back, another day, another all time high for the price of gold. My next guest, an expert in commodities, is going to walk us through the rise. The price of gold continues to climb, having hit new record highs more than 30 times this year. And yet again today, while inflation, geopolitical instability and trade policy are cited as key price drivers, we wanted to learn more. Who's buying into this traditional safe haven? How are they doing it and what could it signal for the broader economy? To unpack all of this, I'm joined by John C. E O of Sprott Asset Management, where he's the portfolio manager for the company's physical commodity funds. John, welcome. It's fantastic to have you break this all down for us. Welcome.
- [12:05]
C
Thank you for having me.
- [12:06]
A
Well, I'm going to start, John with a broad question to set the stage and I'm going to invoke Warren Buffett to help our audience understand your perspective. Buffett has famously said that he doesn't like investing in gold because it's not a productive asset. There's no interest paid, there's no dividend. You don't get to live in it. So what's your response to it? Why is gold all day, every day for you?
- [12:28]
C
Yeah, I mean, it's a very popular point of view that he has held for a long time. But I think the more important perspective is that it has been a store of value for millennia. And whether you were 3000 BC in Egypt or today, people find that there is value in gold. There is obviously an affinity for gold. It's a proven long term store of value. And I think more recently, investors are more interested in it because they're viewing it as an alternative to fiat currencies, which are basically paper forms of money and things like debt instruments, like treasury bonds. So we're seeing more and more investors view gold as an alternative source of a debt or currency form.
- [13:13]
A
And John, why would they make that move? So when we hear buy gold as a hedge, we've talked about gold as a hedge to many different things, inflation being one of them, just break down for us. In simple terms. What does it mean for gold to be a way to hedge?
- [13:27]
C
Yeah, well, I think it's one of the most proven safe haven type of assets that investors can pick from. And safe haven meaning that in times of calamity or market dislocations, that gold typically shines really brightly. It holds its value during those periods of calamity. And as you said earlier in the show, there's a lot of uncertainty in the world right now around stagflation, obviously geopolitical and tariff wars and tensions. And investors are looking for an asset that is going to be a bit more of like a shock absorber in their portfolio, helping them to stay invested in some of the more volatile asset classes.
- [14:07]
A
And talk to us, John, about how one of the sort of comparison assets to gold may at one point have been U.S. treasuries. And we've seen treasury auctions be perhaps a little bit weaker this year than had been previously expected. Has that impacted the appetite for Gold versus US Safe haven assets.
- [14:27]
C
Yeah, we think that's actually had a really big impact this year. Historically, as you mentioned, U.S. treasuries and the dollar and gold have always played that safe haven role. But we've seen a decoupling this year where Treasuries have been under pressure. There are less buyers for them. The US Dollar has been softer against many major currencies and gold has been the one that has been incredibly resilient. So we think that's one of the reasons why gold has been so strong, because investors are shunning the traditional competitors to gold, which are US Dollars and US Treasuries and T bills.
- [14:58]
A
And just given where we are today with gold prices and another record high that was set just this morning, why would investors enter the asset class now?
- [15:07]
C
Yeah, it's a really great question as we're quickly getting to almost $4,000 an ounce. And gold was kind of stuck for a very long time trying to breach its old 2011 high. And that was around 2000. It is a timeless asset that should play a role in most people's portfolios. Again, we've always advocated it to be a small part of a portfolio and to really complement other asset classes that you have in your portfolio like stocks and bonds. And yes, the price has gone up very strong, but there's really unusual factors driving that right now. And obviously a lot of that is driven by geopolitics and concerns about some of the unconventional things going on with US Politics in particular.
- [15:51]
A
Well, talk to us about how someone can actually go buy gold as a hedge. So on the one hand you see these headlines, people buying literally bars of gold in Costco in the United States. But there are other ways using financial instruments to go do that. John, talk to us about how retail investors, everyday investors, can actually get access into gold as part of their portfolio.
- [16:11]
C
Yeah, over the last 20 years or so, the most popular way for investors to gain access to gold in their portfolios have been through exchange traded listings. And if you take a look at the collective assets globally of those kinds of vehicles, we're at $350 billion US so they have grown to an enormous amount. And it's an easy way for investors to obviously trade gold intraday through many, many different funds, through the, through the stock exchange. And you don't obviously have to go and buy it and store it, insure it and worry about, you know, it's chain of custody because all the bars are London Good delivery, certified.
- [16:52]
A
And then talk to us some more about some of the ETFs that are out there. I saw that. Sprott, you've launched a new active etf. Is gold part of that? If not, is it part of other ETFs that you see out there?
- [17:02]
C
Yeah. So we recently launched a gold and actively managed gold and silver miners etf. Those invest in the companies physically mining for gold. But our flagship gold product is our Sprott Physical Gold Trust, which is over $13 billion and is one of the largest physical gold ETFs in the world. And that trades on the New York Stock Exchange as well as the Toronto Stock Exchange.
- [17:27]
A
And where do you see the biggest sources of gold? Give us a bit of a geography lesson, John, Talk to us about where the most active mining happens today.
- [17:36]
C
Yeah, well, there's very big, big mining districts for gold in the world. Obviously South America, the United States, Canada, Australia, Russia. There's a lot of gold in the world that's obviously hard to find. And we've been mining the stuff for thousands of years, which makes it very scarce. But there are really big established mines around the world, and there's even more gold stored above ground in vaults held by central banks. And obviously these ETFs that I mentioned, and obviously private investors hold physical gold in different forms, whether it's small bars, coins, or jewelry.
- [18:11]
A
And Joel, where is the biggest stash of physical gold located today? Just give you a quick story. I remember when I was in London and I went to visit the bank of England once, and you could literally walk into one part of a museum and see a bar of gold sitting there. And it gave you a bit of a sense what it was like to walk into a vault in one of the big central banks. Who is the single biggest holder of physical gold today?
- [18:32]
C
Yeah, well, if you ever have the opportunity to go and see a vault, it is pretty awe inspiring. Just the sheer amount of these gold bars or even silver bars. And the biggest holders of gold are obviously, China has been accumulating massive amounts of gold over the last few years. But then central banks like the US are very large holders of gold. And obviously the ETFs I mentioned collectively are storing huge amounts of gold in different certificated forms. So broad exposure across many different segments of investors and central banks and institutions.
- [19:11]
A
And you get the final word, John, on bitcoin, is it the next gold?
- [19:16]
C
I just think it's very hard to replace gold because it is a tangible asset that I think has proven itself over the last 5,000 years. Bitcoin is obviously an alternative to things like the US dollar in a digital form. And that obviously has a role to play in people's portfolios. But gold, we think is the original, you know, the original form is physical gold.
- [19:41]
A
John Champaglier, CEO of Sprott Asset Management, thank you so much for joining. Come back if we have more record highs. Come back and tell us what's even going on. Thank you. It's 4:00pm on the east coast and there it is, the bell we've been waiting for. It's been a long day. The markets have closed. Now, we don't have a ticker T, but we're going to throw it over to our human ticker, our producer, John.
- [20:01]
B
That's right, the S and P closed up half a percent today. The NASDAQ was up 7, 10 of a percent and the Dow was up a quarter of a percent. One market headline. And just last week you shown a spotlight on Safra Katz from Oracle as your CEO of the Week. She's been at the helm of the company for a decade and Oracle share prices nearly doubled this year. But today, Katz announced, quote, this time of strength is the right moment to pass the the CEO role to the next generation of capable executives. Katz is stepping down as CEO but will serve as executive vice chair on the company board. Shares in Oracle were up nearly 6% today.
- [20:36]
A
And just a final thought, we have launched recently something that we call the merger moment. And that's where we shine a light on a particular deal that's happening amongst public companies. Now it's only Monday and already today a number of mergers and acquisitions have cropped up in the markets. News we saw Compass, the real estate agency company is making a big move in the space with a billion dollar plus acquisition. We've got Pfizer also announcing a big deal today. So as more of these deals announce by the time the end of the week rolls around, we want to do a deep dive on at least one of these. If you've got preferences and ideas for which deal you want to hear about, email us and we'll pull that into our merger moment. We'll send you the details online and right at the end, that's all for today's Brew Markets Daily.
- [21:21]
B
Brew Markets Daily is hosted by Anne Barry and produced by John Crateau, Tark Abdelatif and Emily Milian. Our technical director is Uchenawa Ogu. Brittany need to Taco handles audio guest booking by A.B. silver. And the president of Morning Brew Inc. Is Devin Emery.
- [21:33]
A
Wake up tomorrow with the Morning Brew newsletter and tune in to Neil and Toby on Morning Brew daily. And to get in touch, send an email or voice Memo to brewmarketshoworning brew.com See you back here tomorrow, same time, same place.
- [21:55]
C
Sam.