← Morning Brew Daily
Morning Brew Daily
A New Southwest Air Arrives & US Dollar Dips to 4-Yr Low
00:27:53
New look Southwest is here & US dollar in the doldrums
Loading summary
Transcript47 lines
- [00:00]
Toby Howell
Foreign.
- [00:05]
Neal Freyman
Brew Daily Show. I'm Neal Freyman.
- [00:07]
Toby Howell
And I'm Toby Howell.
- [00:08]
Neal Freyman
Today, why did Amazon pay $75 million for the Melania documentary then?
- [00:13]
Toby Howell
You won't believe how much money Southwest expects to make off its seating changes. It's Friday, January 30th. Let's ride.
- [00:26]
Neal Freyman
Good morning and happy Friday. Major announcement. Incoming President Trump said he's going to reveal his pick to become the next Fed chair this morning, and all signs indicate it's going to be. Kevin Warsh, Wash is a former Fed governor who was actually passed over for the job in 2017 by the current Fed chair, Jerome Powell. He's known for his previously hawkish views on inflation, which means he supported higher interest rates, though in recent months he's publicly called for lower rates, likely a key factor in securing Trump's support. If nominated and confirmed, he'll take over for Powell, whose terms ends in May.
- [01:00]
Toby Howell
How did the market react to this breaking news? The stocks fell, treasury yields rose, and the dollar also rose. The trades basically reflected speculation that Warsh is going to be a little less enthusiastic to cut rates than maybe other candidates would have been. But as you said, that tune changed of late. So then it leads to some questions about is he driven by data or is he driven by who's in the presidency. Because if you change your tune after many years of being hawkish on monetary policy to suddenly being dovish and much more amenable to rate cuts, then you're saying, what do you actually stand for, dude? But the market's kind of trading on what the body of his career work has been, rather than his recent change to being more open to rate cuts. We'll see. Anyway, you never know with Trump. He actually could change his mind as of this morning, but it's looking like goodbye, Jay Powell and hello Warsh. And now a word from our sponsor, Sandals. Neal, what do you look for in a vacation?
- [01:57]
Neal Freyman
I just want to go somewhere where I can relax, read a good book by the pool, and clear my head a bit. Is that so much to ask?
- [02:03]
Toby Howell
Wow, man, you sound pretty stressed, which is crazy because you get to spend every day with me, but it sounds like you'd also like Sandals Resorts. Get away from it all at the Caribbean's best beaches. Powdered white sand and turquoise waters and not a worry on your mind.
- [02:19]
Neal Freyman
Sandals Adult only Resorts lets you explore the Caribbean's most beautiful islands like Barbados, Jamaica, St. Lucia and more.
- [02:25]
Toby Howell
There is no better place to experience the Caribbean then at resorts founded by a family from the Caribbean. The winter blue sale is now on. So visit sandals.com for the best all inclusive value in the Caribbean. That's sandals.com Apple still hasn't figured out its AI strategy, but you know what's better than AI? An iPhone. And they sold a lot of them last quarter. Reporting earnings yesterday, Apple notched its biggest sales jump in four years, a result Tim Cook called staggering. While everyone else in the big tech world was plowing money into AI buildouts, Apple pulled in $143 billion, up 16% from a year ago. And a record for the company. The profitability stood out to Apple posted net income of $42 billion, the most money ever made in a single quarter by any public company ever. It did it thanks to old faithful iPhone Revenue surged 23% as people took a liking to the 17th edition of the best selling product ever since. The strong results also stand out even more when considering A everyone and their mother is trying to kill the iPhone right now with some AI gadget of their own and B software focused companies are getting demolished right now as the market scrutinizes all the money they are spending. The one sneaky surprise from Apple was an announcement before earnings. It acquired a startup called Q.AI for $2 billion, which helps devices to interpret whispered speech and enhanced audio and NOISY environments. Per TechCrunch Neil Apple's earnings feel a lot different than the rest of the big tech world.
- [03:57]
Neal Freyman
Tim Cook just bought himself a lot of time. We know that Apple's transition to AI or its investments and I have not gone as well as the rest of the industry, Siri is still a debacle. And so the pressure was on Tim Cook to deliver a very solid quarter and he did. So now Apple has a lot of money and a lot of resources thanks to this booming iPhone sales to throw at AI. And they can do it over a longer time horizon than maybe investors initially wanted. What's, what stood out to me actually was that product revenue growth outpaced service revenue growth. And that's very interesting because a lot of growth for Apple in the recent years has come from just squeezing more money from its existing user base by selling them services like Apple Health or Apple Music. But product growth came in at 16% year over year and service revenue expanded about 14%, which shows that Apple is still selling people products and gadgets and hardware that they actually want.
- [04:52]
Toby Howell
Yeah. Mark Gurman, who covers Apple for Bloomberg, put it well, he said the iPhone absolutely crushed it. The new designs worked, the new colors work. But then he also put a word of caution out There, he said this shouldn't change the overall need to have a reckoning to ensure they are a key part of future in AI hardware, software and services. So I think buy Tim Cook Time is a great way of framing it because all the question marks are still out there. But now they have, it's clear that their products are still making money. It's still, it was a gangbusters quarter for their core business. So you can't be too mad at a company for doing what it does best. But let's talk about the toe that it dipped maybe into the AI world with this sort of surprise acquisition for $2 billion of this AI startup. It is, it interprets whispered speech which what does that actually mean? What is QAI actually do? And, and apparently it's going to feed into maybe a wearable strategy, a AirPod strategy where you're in a crowded room, you could talk on the phone without really talking out loud. What's also fascinating about this company is the CEO also sold a startup to Apple a few years ago. In 2013, he sold Prime Sense, which was a 3D sensing company, for $360 million. Now he sold this next startup for $2 billion. Apple just hired the dude. You could have saved a lot of money and a lot of heartache over the years.
- [06:14]
Neal Freyman
All right, so with Apple, that sort of rounds out the big tech earnings of the week. I would say Meadow was the big winner. Their stock jumped 10% because their ad business is absolutely crushing and investors didn't really care about how much they're spending on AI. The biggest loser was clearly Microsoft. Microsoft shares were down about 10% yesterday and it was a huge wipeout. It was a historic wipeout. Is Microsoft's biggest daily decline since March 2020. One of the biggest stock market wipeouts of all time. Microsoft lost $357 billion in market cap.
- [06:48]
Toby Howell
And it's not just Microsoft, it's just the entire software industry as a whole. 73% of public software companies fell yesterday. Atlassian, it fell 12.2%. It's in its biggest drawdown ever. ServiceNow also fell 12%. Also now in its largest drawdown ever. I mean, Microsoft literally setting market cap shaving records out there. It is crazy. We've spoken about a little bit how vibe coded apps have eaten into the software trade by saying maybe people could just go and code out their own solutions. They don't need to invest in these big software companies anymore. And also just AI spend in general. The market is kind of coming to a reckoning with how much money they're spending, which is again why Apple looks so different from everyone else, because they ain't spending much on AI at all. And suddenly that looks good to investors.
- [07:35]
Neal Freyman
Moving on. The documentary Melania hits theaters this weekend. And just about everything surrounding its release has defied industry convention. First, the movie Melania follows the intensely private first lady Melania Trump over 20 days in the lead up to her husband's second inauguration last January. Now the curiosities. Amazon paid $40 million to Melania's production company to secure the rights, which is basically unheard of for a documentary. In fact, it's the most Amazon has ever paid to secure the distribution of a single film. Then came a Super bowl sized marketing campaign. Amazon has thrown $35 million behind Prom, the film, buying pricey NFL playoff commercials and taking over the sphere in Las Vegas. A marketing budget of $35 million is roughly 10 times what other high profile documentaries typically receive, according to the New York Times. Finally, the film will enjoy a wide Release, coming to 3,300 theaters worldwide. The vast majority of documentaries do not get a release remotely close to this scale. Given how detached this all appears from market reality, critics are accusing Amazon of buying and lavishly marketing Melania as essentially a bribe to ingratiate themselves to the White House. Toby, how much money this movie actually going to make?
- [08:44]
Toby Howell
I mean, it's expected to make 2 to 5 million dollars in its opening weekend, which is not a lot of money, but I guess it's a lot of money for a documentary. Amazon is trying to say that this is not obviously a B word. It is something that they bought because they think customers are going to love it. That, I guess, remains to be seen. Where this is a big departure from tradition though, is that first ladies typically do not do this while they are still in the White House. That's not to say that after leaving the White House, they don't try to, you know, monetize their stories in a way. In a way, often that comes in the form of a book. I mean, Michelle Obama wrote Becoming. Hillary Clinton also has written multiple memoirs. If you even go back to Eleanor Roosevelt. She sold her autobiography rights in 1937 for $2 million today. That faced a lot of criticism at that time. So this is almost something that has happened before, but never on this scale, never during an active presidency. And it's kind of throwing into question, like, what is the first lady allowed to do? What should they do? What is the role of the first lady in modern society? All those questions are being brought up Because Amazon is just spending so much money on this thing.
- [09:54]
Neal Freyman
And Melania herself is pocketing $30 million from Amazon's purchase of the rights. There's another angle here, which is who is directing the movie? And his name is Brett Ratner. He is best known for the R trilogy. But back in 2017, he was accused of sexual misconduct by multiple women and was essentially canceled. Melania is his first feature film in 12 years, and it's not going to be his last. Because remember how Trump actually pushed David Ellison at Paramount to make a Rush Hour for. Well, Rattner is going to come back and direct that as well. Yeah.
- [10:29]
Toby Howell
There's a reason why Ratner just suddenly became thrust into the public eye. And it really is this documentary. But then there's also some critique. Is this even a documentary at all? If the subject of film has producer credits, if they have editorial input, like, then does it just become myth making? That is some of the criticism that most movie critics in general have shown. But a lot of documentarians are going like, this just doesn't happen for our industry. It is really hard to make money even with the biggest documentaries ever released. And now Melania is just completely bucking the trend because they never get these widespread theatrical releases.
- [11:06]
Neal Freyman
Yeah. So only. So only five documentaries have ever made at least $75 million in North America. That's how much Amazon is paying for this. Those documentaries are Fahrenheit 9 11, which is in 2004, which is by Michael Moore. March of the Penguins, an absolute classic. Michael. And then the three music ones. Michael Jackson's this Is it, which I love that movie. Justin Bieber, Never say Never, which I love that movie. And also. And finally, Hannah Montana, Miley Cyrus, Best of Both Worlds concert, which also. I love that movie.
- [11:36]
Toby Howell
I've seen the last two, only I haven't even seen the Penguins. Come on, you got to watch better documentaries. Moving on. So you may hate that Southwest got rid of its open seating and free checked bags, but man, do investors love it. Shares jumped the most since 1978 on Wednesday, surging 19% after execs painted a rosy picture of what life will look like under their new strategy. While other airlines, like Delta, lean heavily on premium seats to drive profits, Southwest's egalitarian seating strategy meant it was missing out. Delta raked in nearly $4 billion in profit last year, Southwest just 512 million. But here's the wild part. For 2026, the carrier expects earnings to quadruple. CEO Bob Jordan said in an interview. The changes move Southwest from kind of Mid pack in terms of profit margins to top of the industry margins. Neal For a long time Southwest hung its hat on a no frills flying model. Now it's looking a lot frillier and a lot more competitive because of it.
- [12:36]
Neal Freyman
When anything happens in the airline industry, any airline changes its strategy, I always go to Gary Left who writes this blog, View from the Wing. He is an airline industry expert who a lot of people look to for insights. He's not convinced about Southwest turnaround. He wrote you would not expect a strategy of taking the most financially successful airline in history, which is Southwest. It had always turned a profit until Covid every single year for over 50 years, discarding everything unique about their business model and copying financial laggards JetBlue and American. But worse because they lack ACC power, seat back entertainment, functional Wi Fi first class lounges and ovens for hot meals on board to a recipe for success. So he is not buying what Jordan, the CEO of Southwest is putting down by making these incremental changes that don't actually address what customers actually want to see in their airline.
- [13:25]
Toby Howell
Well, CEO Bob Jordan is framing it in this way. He's emphasizing choice, saying that customers can buy the product that they want, which feels ironic because the earlier model also emphasized choice. Like you could have free rein over where you were seating. So that's one of the talking points they're doing. And then the other thing that executives are kind of saying is that maybe customers don't care about all those things that left just mentioned because service quality and on time arrivals are probably the two things that customers care about the most. So maybe we don't need seat back outlets. Maybe you don't need in screen entertainment. They just want their planes on time and they just want it to be a quality experience overall. So Southwest had the lowest cancellation rate of any major US Airline last year. Maybe it'll just hang its hat on that.
- [14:08]
Neal Freyman
I think that doesn't vie with reality because the only two, the only two airlines that are doing well right now and have separated themselves from the pack are Delta and United. And they have all those things, all those features, seat back entertainment, WI fi lounges are the only two airlines that are actually making a lot of money right now. And Southwest is not exactly investing in those. Actually, the CEO did say that they were thinking about doing lounges. Southwest lounge does that.
- [14:35]
Toby Howell
I don't know. Lounge. I never go to lounges in general. You're the lounge guy. So I think this is very funny though. Like we talked about Southwest ending open seating earlier this week and I was very against it. You were like, I kind of liked the I like assigned seating. Now we've fully flipped on it after reading a little bit more about it. All right, we're going to take a quick break and come back with our Stock of the Week Dog of the Week right after this. Neil, have you heard of Public.com's newly launched generated assets?
- [15:02]
Neal Freyman
Yes. Helps you turn any idea into an investable index with AI, start with any prompt say renewable energy companies with high free cash flow or semiconductor suppliers growing revenue over 20% year over year and it'll get to work.
- [15:16]
Toby Howell
Well, so much for surprising you. But the I can screen thousands of stocks and will build you a one of a kind index and lets you back test it against the S&P 500. Then you can invest in a few clicks.
- [15:28]
Neal Freyman
Just add to public.com/morning brew and you can earn an uncapped 1% bonus when you transfer your portfolio. That's public.com/morning brew paid for by Public Investing. Full Disclosure in Podcast Description Pretty much everybody is using AI agents these days to automate just about everything.
- [15:47]
Toby Howell
I even made one to respond to all your emails and texts that explains.
- [15:51]
Neal Freyman
The deleted files, unauthorized changes and nonsense messages I keep getting. You're not using Rubrik Agent Cloud.
- [15:57]
Toby Howell
Rubrik Agent Cloud is the only platform that allows you to monitor, govern and rewind AI agent actions. One platform to help you unleash more agents faster without the risk it's running.
- [16:08]
Neal Freyman
In the background the whole time, watching what's happening, making sure things stay on track. You get full visibility. You can set guardrails so agents don't go rogue and if something breaks, you just roll it back like undo.
- [16:20]
Toby Howell
But for AI, head to rubrik.com for exclusive early access. That's R U b r I k.com Neil When's a good time to start working with a financial professional?
- [16:34]
Neal Freyman
Now? What about no Toby Now Northwestern Mutual can match you with a financial professional who will meet you where you are and work with you to build a financial plan based on what's important to you. They'll uncover blind spots and find new opportunities to help grow and protect your wealth.
- [16:49]
Toby Howell
Will they tailor it to my life and near and long term goals?
- [16:52]
Neal Freyman
Yes. Give yourself the right financial start to 2026 with the right financial partner. Find a better way to money@nm.com that's nm.com the Northwestern Mutual Life Insurance Company, Milwaukee, Wisconsin and Northwestern Mutual Wealth Management Company. Let's head to Stock of the Week Dog of the Week the Segment where Toby and I pick one stock that's going to complete dry January and another that had no discipline. I won the pre show Math Olympiad, so get to go first. And my stock of the week is Zoom. Not because people are video chatting more, but because it made a remarkably timely bet on an AI giant. Zoom stock popped 18% this week after analysts at Baird announced a discovery. Back in 2023, Zoom's venture arm invested in Anthropic, the maker of the cloud chatbot that's now valued at $350 billion. Zoom most likely sunk in about 50 million in anthropic back then, meaning it could see a return of about 78 times its initial outlay. Barrett estimated that Zoom's current anthropic state could be worth between $2 billion and $4 billion. And the biggest payoff is yet to come. The analyst wrote. Zoom is literally invested in Anthropic's cloud success. And as Anthropic IPO rumors accelerate, the investment could become even more meaningful. Zoom, finding a bunch of billions in its back pocket couldn't come at a better time. As it struggled to recapture the glory days of the pandemic. Shares began cratering in the summer of 2021 and are now down percent from their Covid peak. Toby, this is like betting on the Patriots to reach the super bowl back in August.
- [18:25]
Toby Howell
It's never actually a good sign if the biggest thing that makes your stock pop is the fact that you invested in another company. But I think Zoom will take any w that they can at this point. Others do have access to the golden goose of Anthropic, though. Amazon has a very large stake in anthropic. They invested $8 billion back when the company was traded or was around a $60 billion valuation. Google has 3 to 4 billion in anthropic as well. It's tough to know exactly how much they're worth now, but it is a lot of money. So this is a story that you can see play out on bigger scales with bigger companies as well. But I do want to shout out another company, too, and that is ftx, the crypto exchange that imploded a few years ago. It bought an 8% stake in Anthropic in an early round where it was valued at $500 million. So it had the earliest investment of all of them. It eventually sold that stake during bankruptcy proceedings for $884 million. Pretty good return. But if this next round of funding goes through and it values it at $350 billion, that investment alone would have been worth $28 billion. It would have been plenty to make all creditors whole. So FDX Low Key, the best anthropic.
- [19:35]
Neal Freyman
Investor of redemption for Sam Bankman Fried. Can we talk about how insane this IPO slate is going to be this year? Not only is Space X planning to go public in the biggest IPO of all time, Anthropic is going to go public as well, or wants to. And it's currently valued at 350 billion. Usually that's going to rise ahead of the IPO. So we're seeing like 500, $600 billion IPO. And then also the Wall Street Journal reported last night that OpenAI is laying the groundwork for a public listing later this year in Q4. It wants to be anthropic to the public market. So potentially we could see SpaceX, OpenAI and Anthropic all go public this year. The hottest club in New York City is going to be the stock exchange.
- [20:16]
Toby Howell
My dog of the week is the whole damn US Dollar because it just hit a four year low. It spent all week falling compared to a basket of other currencies, bringing its total slide this year to nearly 10%. What does a weaker dollar actually mean? Well, it depends. If you're an importer of global goods, tough luck. It makes things more expensive. If you're an exporter though, suddenly your doodads and trinkets are more competitive compared to your global peers. Most likely though, you're not an importer or an exporter at all, but you are a traveler. A weaker dollar raises the cost of your overseas trips from hotels to flights, the doodads and trinkets that you buy abroad. Now don't get me wrong, the US Dollar is still strong. Historically speaking. It's also still the world's so called reserve currency. But cracks are forming due to a combination of Trump's trade war threats, overseas markets getting their swagger back, and the greenback behaving more like a risky currency than ever before. Neil, with the dollar looking this bad, I'll take any extra ones you have lying around off your hands.
- [21:16]
Neal Freyman
All right, hit me, hit me with the Venmo request and I'll consider it. The show contains multitudes. We just talked about Zoom making money from an anthropic stake and now we're talking about the collapse of the American led world order because that's what this is. The dollar is the dollar. Strength is tied to American exceptionalism. And when foreign investors are putting money in the United States and the United States economic Growth is growing, is going faster than the rest of the world. That's when you see the dollar rise and it is actually in freefall right now. And that was only propelled by comments from President Trump this week. When asked about the falling dollar, he didn't seem to care at all. He said, no, I think it's great. I think the value of the dollar, look at the business we're doing. The dollar is doing great. That led to another big slide in the dollar. After those comments, Treasury Secretary Secretary Scott Bessant the next day tried to clean that up a little bit with a little bit of a walk back. He said the US Always has a strong dollar policy. Trying to emphasize to Wall street and investors that the US still believes that a strong dollar is in its best interests.
- [22:17]
Toby Howell
And we're not saying that the dollar is in a full on collapse right now. But I'm going to steal a metaphor from an op ed written in the Financial Times that said, like termites eating away at a house's woodwork, Trump's do dysfunctional policies are eating away at its support and rendering the US Currency acutely vulnerable to future shocks. So basically no imminent collapse, but steadily hollowing out of the structure, the system that once looked very, very solid. It was just a de facto fact that the US Dollar was always going to be strong, always going to be the world's reserve currency. Now it seems a little bit more vulnerable to some of these crazy geopolitical shocks that we see. It doesn't behave the way that it typically has in, in times of other crisis. Usually a geopolitical crisis means a flight to the safety of the US Dollar. That has not happened of late. When the Liberation Day tariffs were rolled out, that was a big shock to the global economy. The dollar actually fell, which was a massive departure of how it usually trades. So just certain cracks here and there developing. And usually when the dollar does chill out, it's more just apathy towards the craziness rather than any sort of resembling the the structures of all that used to support the global economy.
- [23:28]
Neal Freyman
Look out for termites. Let's sprint to the finish with some final headlines. The race is on to avoid another government shutdown, which would take place at midnight tonight if lawmakers don't approve a deal to fund a large chunk of the government. Last night, Senate leaders reached a bipartisan agreement endorsed by President Trump. But they still need to rally enough votes to pass it in time. Things seem to be smooth sailing to prevent a shutdown until last Saturday when ICE agents fatally shot ICU nurse Alex Preddy in Minneapolis. After that, Senate Democrats and some Republicans said they wouldn't vote on a spending package that includes long term funding for homeland security. The current deal as it stands separates funding for DHS from the broader spending plan and funds it for just two weeks while Congress debates potential ICE restrictions. Still, it's unclear whether the deal will be finalized by the midnight deadline because there are holdouts. The odds of a shutdown are 68% on Kalshi as of this morning.
- [24:18]
Toby Howell
One potential thing to keep an eye on as this shutdown looms is tax filing season. Remember that opened on Monday. What would a shutdown mean for the irs? Obviously, it's a little bit of uncharted territory because as any cpr, as any just accountant knows, this is the height of filing season. And if IRS workers are furloughed, that throws everything in it to up in the air. The IRS has said that they promised to get your refunds issued within 21 days of filing. They are sticking to that. And it also has just a little bit more importance this filing season because remember, Trump has kind of hung his hat on these large refunds tied to the big beautiful tax bill. So this is a big thing that is going to go towards talking about affordability leading into midterm elections. If those returns cannot be processed in time, you lose some of that luster. So just a sub note to look at as we process if the government is actually going to shut down.
- [25:13]
Neal Freyman
All right, let's close out this Friday show with some upbeat news. Life expectancy in the United States just hit an all time high. According to a new national center for Health Statistics report, an American born in 2024 can expect to live to age 79 on average, a more than half a year increase from 2023 and the highest level on record. The increased longevity is the result of two main factors. Deaths from drug overdoses and COVID 19 are way down. At the peak of the pandemic, Covid was the third leading cause of death in the U.S. deaths. Now it's number 15. Meanwhile, drug overdose deaths have plummeted from epidemic levels. In 2023, synthetic opioids like fentanyl were involved in around 73,000 deaths. Last year, they tumbled 34% to 48,000. Health experts say that while this is undoubtedly good news, the US Trails most other wealthy countries in terms of life expectancy. So there's still plenty of work to do. Still, Toby, Brian Johnson would be proud.
- [26:07]
Toby Howell
I think everyone's hanging on to see Christopher Nolan's the Odyssey this summer. I would have want to croak before that comes out either. I was looking into the CDC data a little bit. Women can still expect to live a few years longer than men, but that gap is shrinking. The life expectancy for women increased by 0.3 years to 81.4 while life expectancy for men increase 0.7 years to 76.5. So spend those extra four years wisely. But we're coming ladies, like we're coming in your rear view mirror.
- [26:37]
Neal Freyman
That's because we just just we're sitting on the couch watching football and not expending any energy. All right. That is all the time we have. Thanks for starting your morning with us. Have a wonderful Friday and an even better weekend. If you want to get in touch, send an email to Morning Brew daily at Morning Broadcom or DM us on Instagram @me Daily Show. Let's roll the credits. Emily Milian is our executive producer. Raymond Lu is our producer. Our associate producers are Olivia Graham and Olivia Lake. Hair Makeup is thinking about quitting after remembering they also invested in Anthropic. Devin Emery is our president and our shows are production of Morning Brew.
- [27:09]
Toby Howell
Great. So today, Neil, I wish you all well.