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Bitcoin Soars Past $120K & Delta’s Clever Way to Dodge Tariffs
00:30:56
Crypto week starts strong & Delta bends the rules
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- [00:02]
Neal Freyman
Good Morning Brew Daily Show. I'm Neal Freyman.
- [00:05]
Toby Howell
And I'm Toby Howell.
- [00:06]
Neal Freyman
Today, companies are dipping into their bag of tricks to avoid paying tariffs.
- [00:10]
Toby Howell
Then it's crypto week in the nation's capital and bitcoin is Soaring. It's Tuesday, July 15th. Let's ride.
- [00:22]
Neal Freyman
We are so excited to see you all tonight for the second morning Brew Daily Bar Trivia. Toby and I have been hard at work cooking up questions that will test and possibly break your mind, body and spirit. But also, we're just pumped to meet listeners and have you tell us we don't look at all like you expected.
- [00:39]
Toby Howell
And if you're not in New York, congrats on your cheaper rent. But we want to include you too. Tomorrow we will be posting the trivia questions online so you can play with your friends, family, coworkers, and you can also get mad at how hard Neil made some of questions the last time he got booed. But yes, super excited to see everyone in person tonight. Our second trivia night of many more going forward. Check that email for the exact time and location and bring those thinking caps.
- [01:05]
Neal Freyman
And now a quick word from our sponsor, Mortgage Matchup. Toby, what's the most important thing you've ever done at home?
- [01:12]
Toby Howell
Full scale model of the Taj Mahal made out of popsicle sticks.
- [01:14]
Neal Freyman
Well, for those of you looking to do something more productive, there's Mortgage Matchup. Powered by United Wholesale Mortgage. They connect you with licensed professionals who can shop on your behalf and give you access to more home loan options like conventional 1% down purchase, VA loans, jumbo, and more.
- [01:31]
Toby Howell
Okay, Mr. I have an issue with my friends and meaningful hobbies. How exactly is that more productive?
- [01:37]
Neal Freyman
One, because it could mean homeownership. And two, mortgage brokers can often offer the ability for borrowers to sign some or all of their documents at home, meaning a simpler and sometimes completely virtual closing process. They also offer a loan process that's optimized for a faster clear to close.
- [01:53]
Toby Howell
Yeah, well, I bet they didn't get to eat a Taj Mahal worth of popsicles.
- [01:58]
Neal Freyman
But they've helped borrowers save thousands of dollars. So check out mortgage matchup.com to speak to a real home loan expert from the comfort of your own home. That's mortgage matchup.com disclaimer United Wholesale Mortgage LLC. Equal housing lender and MLS number 3038 licensed in all 50 states and the District of Columbia. Congress kicked off its crypto week yesterday, aiming to push forward legislation that will bring the once maligned industry fully into the mainstream. Bitcoin has been ripping in the lead up to crypto week, vaulting higher than $120,000 per token this weekend. It's up nearly 30% this year after doubling in 2024. Let's just take a step back for a sec. If you told somebody less than three years ago that lawmakers would be holding what is essentially a week long celebration of the crypto industry, they'd have looked at you the way Larry David looks at anyone. Back in November 2022, the crypto exchange FTX collapsed as a result of massive fraud. The bitcoin fell to $16,000 and the industry lay in ruins, its reputation in tatters. The next year, Jamie Dimon said of crypto, if I was the government, I'd close it down. Warren Buffett had previously called bitcoin rat poison squared. Well, Warren, you may have missed the boat on this one. The crypto industry soldiered on post fdx, hoping that its most toxic baggage had left it for good. Companies poured hundreds of millions of dollars into the Trump campaign and other pro crypto candidates, hoping to find allies in government after being nearly su oblivion by a skeptical Biden administration. The gambit worked. And it's all led up to this crypto week in which Congress will debate three separate bills that would provide the clarity the industry has desperately craved. The idea is that a clear rules of the road would supercharge adoption and investment and legitimize crypto as a pillar of mainstream finance. Toby, how are you celebrating crypto week?
- [03:51]
Toby Howell
I'm celebrating by digging deep into these three pieces of legislation. Super fun. Yeah, I got to get to the nuts and bolts here. First, there is the Genius Act. Again. Again, I'm not going to go through and tell you what they all stand for. We're just going to call this one the Genius Act. This one has to do with stablecoins. A lot of companies like Walmart, these businesses have considered issuing stablecoins to their customers as a means to you speed up payments. This has already passed the Senate and basically companies are just looking for more legal certainty around and clear regulatory rules around what is allowed, what are considered securities, what are considered commodities. And that's what the Genius act focuses on. Then there's the Clarity act that would block federal agencies from using court rulings to extend regulatory power, ensuring that Congress, not the courts, are the ones that are defining how crypto assets are going to be classified and are going to be governed. And then finally there's the anti CBDC Surveillance State Act. That one's A bit of a mouthful that would prohibit the Fed from issuing a digital central bank currency, which is something that's been floated around over the years. And the reason behind this is that they don't want government surveillance of these digital assets. So those are the big three right there. Those are what is making crypto weak. Crypto weak. We'll see. Most of them do have pretty good support. Again, the Genius act has already passed through the Senate, but those are kind of what people are focusing on.
- [05:18]
Neal Freyman
Right, right. And the Republicans who are bringing this legislation have been huge, hugely supported by the crypto industry, which is getting exactly what they paid for in terms of supporting candidates. There is some opposition from the Democrats who say that these bills don't provide enough consumer protections around crypto. They point to what happened, as I mentioned, in 2022 with RTX and a number of the other frauds and scams associated with the industry so far. It seems to have shed that reputation in the past few years as it's moved more into the mainstream. And one of the tactics of how it's done that is these companies, pioneered by the company MicroStrategy, are essentially turning into Bitcoin treasury companies, where their sole purpose as a company is to raise money to buy Bitcoin and Etherium and other cryptos and hold them on their balance sheet. Investors are paying a premium to buy the stocks in these companies. MicroStrategy right now holds over $70 billion worth of Bitcoin, but it's worth over $120 billion on the stock market. So you see that delta there and how much of a premium microstrategy and other companies are getting when they do this particular maneuver. So more corporate holding of Bitcoin is also sending it much higher.
- [06:36]
Toby Howell
Yeah. Let's talk a little bit about the institutional demand for Bitcoin. Let's go back to the price. At the beginning of Donald Trump's reelection, it was $69,000 at its close on Election Day. Right now, it's over $120,000. So it's gone up by about 2075%. And a lot of that is coming from institutional demand and inflows into these Bitcoin ETFs. On Thursday, Bitcoin ETFs logged their biggest inflows in 2025. $1.18 billion in one single day flowed into these ETFs. They've become just a massive moneymaker for these ETF issuers as well. And then this final angle, too, that we should talk about, that crypto people do love talking about is that the dollar has been weakening over, you know, the beginning to Trump' second term. Bitcoin is up 28% year to date, but the dollars are down about 10%. So as Bitcoin, you know, grows more valuable in terms of USD, part of it is because USD is is weakening itself. So it's a bit of a one to two punch that creates the illusion that your bitcoin is worth more USD. Now of course, crypto purists say that one bitcoin is worth one bitcoin. They don't even measure it in terms of dollars. But it just goes to show you how much, you know, bitcoin has increased since Trump has started his second term and how much of that is powered by these institutional buyers.
- [07:57]
Neal Freyman
They say that necessity is the mother of invention. And boy, ain't that the truth for companies trying to avoid tariffs and preserve their slim profits. Take Delta for example. Bloomberg reported that the airline is ripping engines off its new Airbus planes in Europe, then sending them to the US to put them on other planes so they can enter service. It's a bit of trickery to avoid paying 10% tariffs that Trump put on aircraft made in Europe. So how does this work exactly? Well, the new Airbus planes in Europe aren't allowed to fly yet because their seats haven't been certified by regulators. Since these planes are twiddling their thumbs in the parking lot, Delta is borrowing their American made engines to use on its Airbus planes that are in the US Planes that are also not able to fly because of an engine issue. So Delta is managing to grow its fleet and avoid paying tariffs. A win win. This all may seem like a heck of a lot of work to not pay 10% more, but for a company like Delta, the tariffs up aircraft cost billions of dollars, so 10% on that is a significant tax. Plus, airlines have slim profit margins they're trying to protect at all costs. During Delta's earnings call last week, CEO Ed Bastian was adamant. We are not planning to pay tariffs on aircraft deliveries, he said. The hope is that the EU and the US Work out a trade deal that eliminates aircraft tariffs and allows both sets of planes to eventually get airborne.
- [09:19]
Toby Howell
I mean, back in January, Delta predicted 2025 would be the best financial year in the company's 100 year history. And now they are stripping engines from new jets in Europe and shipping them over to grounded planes in the US it just shows how much the macro environment has changed in a few months. Delta is far from the only company doing this or have done this in the past. Tariff engineering, whatever you want to call it, has been around for decades right now. I mean go back to Snuggies, they got classified as blankets instead of garments which dropped their tariff rate. Basically cut it in half. Converse has one of my favorite favorite instances of this. They added that felt to the soles of their Chuck Taylor's and they can actually classify them as slippers instead of normal athletic shoes. That drops their tariff rate by almost 2/3. And then a lot. I mean, Marvel tried to argue that his X Men action figures were non human toys instead of dolls which again cut the tax rate. Again, they are trying to find the smallest of margins, this smallest of definitions to reclassify one thing as another in order to SA tariffs. So Delta is figuring out one way to do this. But they're not the only company to do this in the past.
- [10:30]
Neal Freyman
No. And a big tariff trickery or sort of tariff engineering that you're seeing also happen right now is all these factories moving from China to Vietnam. Chinese goods right now face a tariff anywhere from 40 to 50%. Meanwhile, as a result of a trade deal announced with Vietnam, there is a tariff rate of 20% there. So China, Chinese and Hong Kong companies have set up more than 800 new investment projects in Vietnam in order to basically make their goods just in another country so they can get them into the United States at a lower tariff rate. Meanwhile, while all this is happening, the DOJ is beefing up its trade related criminal enforcement and hiring a ton of lawyers to go after tariff cheats because this is a big source of revenue for the government as as has emerged in recent months. And they need, they want to crack down on all this trickery as as possible. We should say there is a legal tariff trickery like lying about your product's value or lying about where it came from. And then there are this sort of exploiting loopholes like the Chinese manufacturers are doing in Vietnam or what Delta is doing, or what Congress and X Men have done in the past. So you're seeing companies find every way they can to save as much money as possible as a result of the tariffs.
- [11:47]
Toby Howell
Kraft Heinz is giving investors the same spiel your high school girlfriend gave you, explaining why breaking up is really the only way to move forward. The snack conglomerate is preparing to separate its grocery businesses from its sauce and spreads business. That means, as Bloomberg astutely put it, it is working to split its ketchup from its hot dogs. The logic behind the breakup is that not all Kraft Heinz products are created Equal. The company divided its products into three tiers, with brands like Heinz Ketchup and Kraft Mac and Cheese at the top, Jell O and Capri sun in the middle, and Oscar Mayer Meats and Velveeta Cheese bringing up the rear. It wants to shed some of those meats and cheeses at the bottom of the pile, which are falling out of favor with consumers to focus on faster growing units like hot sauces and condiments. Though, according to reports are still working out which brands would be spun out. The breakup would mark the end of a rocky relationship dating back to a 2015 merger engineered by Warren Buffett's Berkshire Hathaway that was supposed to create a packaged food giant. Instead, things curdled like cheese left in a hot lunchbox, with the stock falling more than 60% since the companies combined, erasing $57 billion in value. Neal Kraft Heinz Power ranking meats, cheeses, sauces and desserts to satisfy shareholders. Sounds a lot like my middle school lunch table trading economy.
- [13:05]
Neal Freyman
They're probably the cheese that Kraft Heinz makes probably won't curdle in your hot lunchbox. It won't do anything because it is so processed. And that is the main problem here. Per capita consumption of natural cheese is up 3.6x over the past five decades, while processed cheese consumption hasn't budged at all. Cheese and Dairy made up 14% of Kraft Heinz's revenue in 2023. That's down from 21% just seven years earlier. Now, you know, I may not want to admit this, but I'm a huge Kraft singles guy. Like, I think that is elite cheese. But it's clear that consumer tastes are moving away from processed meats like Oscar Mayer and processed cheese like singles and Velveeta, and moving towards more natural, healthier, cheaper, cheaper alternatives. And those are just kind of products that Kraft Heinz doesn't make. And it's six straight quarters of sales declines kind of shows that.
- [14:00]
Toby Howell
And then a lot of people use this as a chance to kind of say, hey, Warren Buffett, you got this one wrong, because he was behind this engineering of this merger right here. But if you actually go into the numbers, Buffett came out a little bit better than expected. They paid $4.3 billion for their stake in Heinz. They added a couple more cash when Kraft, when they actually merged, took their total stake to nearly $9.8 billion. Today, their 27% stake in the joint company is worth $8.8 billion. So it looks like they lost $1 billion on paper, but over the time that they owned this business, they received $6.3 billion of dividends. So he's technically up 60% on his original shares that he acquired. So even when Buffett loses, even when he gets catch up on his shirt, he still comes up on top because he just buys and holds these businesses for a long time. Up next, we're going to talk about handbags.
- [14:57]
Neal Freyman
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- [15:51]
Toby Howell
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- [15:58]
Neal Freyman
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- [16:06]
Toby Howell
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- [16:10]
Neal Freyman
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- [16:22]
Toby Howell
Next time you see your friend with a dubious income stream rocking a Birkin bag, it might not be because of their access to the bank of mom and dad. They might just be rocking a new super fake. A growing segment of ultra high end knockoffs that I want to talk about on today's edition of Toby's Trends. Super fakes, as you might presume, are really, really good counterfeits. Not like the ones you see hawked on street corners, but bags so exact they are nigh indistinguishable from the real things. The super fake economy runs through encrypted messaging services where buyers can place orders, receive customer service and take their deliveries in branded boxes. Just like the real deal, the best super fakes can cost up to $5,000 according to the Wall Street Journal and aren't even called fakes anymore with language like replicas, super clones or one to ones used by fans instead. Whatever you call them, they are a growing thorn in the side of real luxury manufacturers as evidenced by gen Z spending $5 billion less on luxury brands in 2024 than the year prior according to Bain and Company. It's also led to growth in the super fake forensics industry with the secondhand site the Real Real investing in X ray machines to examine the insides of bags sold on their site to ensure their veracity. These bags are so good that counterfeit professionals are saying that industrial espionage is likely at play. Stealing things like tech packs that give instructions on how to make certain products down to the number of stitches involved. Or even poaching workers from real factories to make use of their hands on experience. Neil I think super fakes is an apt name for these things because it is wild how close they are to the real things.
- [17:59]
Neal Freyman
Yeah, the luxury resale website Fashionphile, they put a counterfeit Louis Vuitton handbag on display right next to their a real one at their flagship store here in New York City and give people a quote authenticity challenge to see if you can spot the real from the fake. They say that people who work as sales assistants for the top luxury brands, brands cannot tell the difference. So there is a level of sophistication and artistic mastery here that we've never seen before in the counterfeit industry where typically you get a fake and you know you're getting a fake and that's okay because it's super cheap. But the playing field is become completely level. And as you mentioned those stats on Gen Z spending so much less on luxury brands. There seems to be a growing animosity towards luxury brands because there's growing awareness around how much they are marking up those products just because they're slapping that label on it. And it actually doesn't cost that much to make these things but you're making us pay 15, 20x what you actually cost to manufacture it. Meanwhile these other, I don't know, you wouldn't call them brands but like people in China are making items of the same quality and charging much less. That's much more palatable to the younger consumer.
- [19:10]
Toby Howell
They almost are brands at this point too because certain companies, certain factories are getting customers just like real companies where they pay social, social media influencers to review their fake handbags just like a real company would. And then also this new distribution model is really causing authorities and companies to kind of scratch their Heads because it is a nightmare to try to attract, you know, direct to consumer fakes. Usually in the past, ports could keep an eye out for big shipments that they could intercept of, you know, 100 Louis fake Louis Vuitton bags. But now, if you're selling directly consumers over these, you know, telegram channels, these WhatsApp channels, how are you supposed to, as a customer authority, nab one bag? Going through to Neil, who really wanted a new Birkin bag. I know you've been eyeing one. So it's almost like become this very exclusive club where if you want access to the best counterfeiters, you have to join these telegram groups. You have to join these exclusive group chats, usually pay for access to them. So it's a whole new ballgame out there. Super fakes are super good and they're like pretty expensive too. So there is almost another status game being played underneath the bigger status game of like, I want my $5,000 fake broken bag rather than the $500 one. So truly a insane world. So if you're in the market for a new handbag, maybe look, the super fake route. Now let's sprint to the finish with some final headlines. Nvidia is out of timeout in China after securing the White House's blessing to Resume selling its 820AI chips in the region following a meeting between CEO Jensen Huang and President Trump. While not Nvidia's top of the line technology, the Commerce Department still restricted sales of the chip back in April, causing the company to lose out on $8 billion in revenue designed specifically for the region with downgraded features. The About Face resurrects that revenue stream for Nvidia, Neil, this is a company that has had the goalposts continually moved on them when it comes to designing and selling chips in China. But whatever Wang told Trump at their last meeting appears to have worked. Nvidia's shares are up about 4% this morning as investors digested this good news.
- [21:15]
Neal Freyman
Jensen has emerged as a key broker in the trade war. He didn't set out to be CEO of Nvidia and be this, you know, diplomat between the US and China, but because Nvidia does so much business in China and they make an item, a product like these high end AI chips that are at the center of the simmering cold war around tech between these two countries, he is shuttling back and forth between Beijing and D.C. trying to work out a deal that allows his company to sell not top of the line chips, but middle of the line chips to China. Yes, shares are up this morning. It's lifting the entire market as Nvidia does, because it's, it's worth over $4 trillion as we head into this big corporate day because there are bank earnings on tap and we have a big inflation number dropping also this morning. So the fact that Nvidia's giving this overnight markets a lift is a good sign. Heading into this pretty crucial day. The Trump administration appears to be openly establishing a possible legal pretext to fire Jerome Powell for cause. Trump has repeatedly hammered Powell for not lowering interest rates. But in recent days, those attacks have taken a different flavor. Trump officials have been publicly criticizing Powell for a $2.5 billion building renovation they say got wildly out of hand and speaks to Powell's mismanagement as head of the central bank. Yesterday, Powell ordered the inspector general to review the Fed's building renovation for cost overruns and any other issues. The Fed also added details about the project to the Frequently Asked Questions page on its website. So it appears that Powell, in the Fed's understated way, is also getting his legal ducks in order ahead of a potential firing by Trump over this renovation. Suffice it to say, sacking Powell over a building project would set a whole new precedent by which a president exerts control over over the central bank.
- [23:04]
Toby Howell
Yeah, let's look at what the powers granted to the Fed's Board of Governors to make over its real estate decisions. And it is pretty wide authority. The Federal Reserve act says that it may maintain, enlarge or remodel any buildings or buildings it is acquired or built, and it shall have sole control over such building or buildings in space there. And so it does look like they have pretty wide leeway to do what they want with their real estate. That's one part of this equation of like, is this going to be a vector that Trump can use to remove Powell from his position? But then the other angle, too, is that this would be very, very bad if somehow Trump did end up removing Jerome Powell. Because we've talked a lot about the Fed's independence is something that markets like global markets rely on. And if that goes away, it could lead to the collapse of the currency and bond markets. That is not my words. That's a Deutsche bank analysis. Analysts saying that we consider the removal of Chair Powell as the largest underpriced event risks in the market right now. So there's two sides to this. Like, let's dig into the legal details of if this is something that can actually happen. But if it does happen, it would not Be good for global markets.
- [24:08]
Neal Freyman
I want to see what this renovation is.
- [24:10]
Toby Howell
It must be big and cool. Part of the issue is that there is somehow this rumor got started that they added a rooftop garden with beehives on it. And that's been a major attack vectors like you can't be adding rooftop gardens with beehives if you want to, you know, be fiscally responsible.
- [24:24]
Neal Freyman
All right. Hope you already bought tomatoes for the caprese salad you're whipping up for dinner because the fruit, yes, it's a fruit, will probably get more, more expensive in the United States. That's because Yesterday a nearly 30 year old trade agreement between the US and Mexico ended resulting in a 17% tariff on most tomato imports entering north of the border. Many Mexican tomato buyers in the US say they won't eat the tariffs and analysts expect prices to rise about 10% as a result. This goes back to April when the Commerce Department said it would withdraw from a long standing trade agreement with Mexico on July 14, blaming Mexico exporters of low unfair pricing that undercuts American tomato producers. And many American farmers are celebrating the tariff, calling it long overdue. But buyers that have relied on cheaper tomatoes like restaurants are afraid that higher prices will cause them to go out of business.
- [25:15]
Toby Howell
Yeah, US growers are saying that it's about time for these tariffs to come in because they've been trying to fight what's called dumping, which is essentially just Mexican importers putting a lot of cheap exports into the foreign market of the United States in undercutting those home grown product prices. So this is a big win for those home growers. But growers in Mexico saying that the actions of some growers who have been dumping are not enough to blow up this entire agreement that's been in place for decades right now. And, and then caught in the middle are just like these pizza makers are going, hey, it's going to make our pies more expensive. Like anyone who makes stuff with tomatoes even it's such a fine margin business. Food is always a very fine margin business. So any hits to your input costs do end up reflected in your bottom line. So you probably will see more companies end up turning to domestic growers. Heinz already actually only uses homegrown tomatoes in its catch a product selling the US So we might see others follow in their footsteps. Finally, long a not so secret secret, Starbucks is officially making its secret menu full of specially modified drinks official. Real Starbucks lovers have known that if you add a syrup here and a cold from there, you could create your own Frankenstein's monster of a beverage. For instance, adding two pumps of vanilla syrup, sweet cream, cold foam and cookie crumble topping to a cold brew would create a sugary hybrid called cookies on top. Again, secret here is a bit of a misnomer. Starbucks has a whole broadcast channel on Instagram called the Starbucks not so Secret menu. But in addition to finally officially recognizing some orders, Starbucks is hosting a contest over the next seven days where customers and employees can submit their own drinks for a chance to win at $25,000. Pretty smart here, Neil. Make your customers come up with new viral drinks while using your existing ingredients so you don't have to spin up a full new supply chain.
- [27:06]
Neal Freyman
The social media to menu pipeline is strong. This seems to be the work of new CEO Brian Niccol who did this exact same thing at Chipotle when he was CEO there. They introduced three new menu items based on TikTok users personalized orders. I would enter this contest, but I am just a little bit overwhelmed by the amount of options that Starbucks offers. This is what Bryan Nichols also trying to streamline with all of the various customized customizable things you can add to a Starbucks latte, squirt shots, cold foams, all the all that, it adds up to more than 383 billion different possibilities just for a latte. So that makes my brain go a little crazy and I think I'm just going to stick with a cold brew.
- [27:53]
Toby Howell
That makes me optimistic though, because that means that there's something heretofore yet uninvented that I could come up with with that could be the new hot drink.
- [28:00]
Neal Freyman
Of the duality of man.
- [28:02]
Toby Howell
The duality of man. Yeah.
- [28:03]
Neal Freyman
All right. That is all the time we have. Thanks so much for starting your morning with us. Have a wonderful Tuesday. If you have any thoughts on today's episode, send an email with questions, comments or feedback to Morning Brew daily at Morning Broadcom. 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 and makeup is the real thing. Devin Emery is our president and our shows are producing production of Morning Brew.
- [28:27]
Toby Howell
Great show today, Neil. Let's run it back tomorrow.