Toby Howell (2:21)

Join Colin and Liz Ann as they explore questions like how do you evaluate corporate bonds that look interesting? And what sectors are on the move Right now, you can download the latest episode and subscribe@schwab.com on investing or wherever you get your podcasts. New York is cooking up a new tax, but unless you're deciding between a Patek Philippe and a Richard Mille to wear to dinner, it's probably not going to affect you. New York Governor Kathy Hochul unveiled a pied a tear tax this week, the which will go after second homes in New York City. Specifically, it would target homes valued at over $5 million whose owner's primary residence is outside of the city. The proposal comes from the governor's office, but it has New York City Mayor Zoran Mamdani's fingerprints all over it. Mamdani has been pushing to advance his tax the rich agenda he pledged to execute during his campaign, but has repeatedly run into opposition from Hochul, who doesn't want to use tax hikes to close the city's estimated $5 billion budget shortfall. But Hochul's Ide target wealthy out of towners raising an estimated $500 million in additional revenue in the process, was quickly endorsed by Mom Donnie, who jointly unveiled the plan. Peter Terre is French for foot on the ground, but just think of it as a secondary residence you only live in for part of the year. There's around 13,000 or so units in the city which are over $5 million but aren't lived in full time. Mom Donnie singled out Ken Griffin, the billionaire hedge fund owner of Citadel, whose primary residence is Miami but also owns a $240 million penthouse in Manhattan. Neal this policy is still just a proposal for now and has not yet been approved by the state legislature, but it's got its foot in the door and on the ground.

Neal Freyman (4:05)

New York City is actually not a trendsender here. Other cities have a similar tax on the books. British Columbia has a vacancy tax. France has a real estate wealth tax. Oakland California approved a vacant property tax in 2018 that charges up to $6,000 annually on properties that are used less than 50 days a year. New York City tried to get crossed the finish line several times before in 2014 and 2019, but that was stymied pretty aggressively by the real estate industry. It didn't really go anywhere. It was doa. It looks like the political winds have shifted though, and there's a lot of support behind this one, besides just a small progressive faction that supported the last ones. I mean, just look at the video that Zoran posted. He about this particular taxi filmed himself in front of Ken Griffin's $238 million apartment on Central Park South. That video. Zoran's had a lot of videos go viral. This one, according to his comms director, was the biggest one ever. It was retweeted 34,000 times.

Toby Howell (5:04)

And this time, it does seem like the real estate industry is a little bit left out to dry. The rest of the broader business community isn't rallying around the real estate industry because they're essentially just happy that they're. The intention is directed away from them and directed on a specific industry like real estate. The real estate industry's argument against this, though, is the same ones that they've used in the past, like you mentioned in 2014 and 2019. They think that it's going to artificially warp the market. All you're going to do is see a lot of units come online that are priced just below $5 million, trying to undercut that new effort, that new tax. They also say it's just going to dampen demand in general from wealthy buyers. Why would you buy in New York City when you can go buy in Florida that doesn't have these taxes? And if that weakened demand comes to pass, then builders might start pulling back on construction a little bit. Maybe that reduces the housing supply, leading to a shortage, and it has almost the reverse effect of what you intended. So those are some of the reasons why maybe people aren't a fan of the PITA Terror tax.

Neal Freyman (6:12)

Will this actually raise the money that's required? So New York has this $5.4 billion budget shortfall, and it's looking for ways to close that gap. The revenue projections from the Hochul administration are is that the Pied Terror tax will deliver at least $500 million in revenue to the city. However, another. A separate Independent Budget Office analysis estimated that it would bring in a lot less than that, just $232 million in. In revenue. So we're all looking to the state legislator to see whether they're going to pass this. And one, one factor that may give this a little bit of a boost is that it is not a standalone bill like it has been in the past. So you can just have a particular vote on this specific bill. It's going to be wrapped up into the broader budget. So if you like the budget overall, then this is just one provision in that. And that's why the real estate industry was a little blindsided by this. And that's why they're going to fight tooth and nail to have it not pass along with billionaires like Bill Ackman, who also came out this. But it seems like there's a lot of momentum, not just from a small group of folks who, who wanted this in the past, but from a broader coalition. Moving on. Yale says the problem with colleges today is Yale. On Wednesday, a 10 person committee from Yale University released a highly anticipated report on the declining trust in American education. And it acknowledged that itself and its Ivy League peers were largely to blame. The report, which was commissioned by Yale's president last year, identified three main reasons that universities are suffering a plunge in public opinion. One, skyrocketing cost, Two, an opaque, unfair admission system that rewards the wealthy and elite at the expense of the middle class, and three, a culture that stifles free expression. The committee proposed dozens of solutions to address those problems and restore universities as institutions Americans see as a worthwhile investment. Because right now, colleges are not considered trustworthy. In a 2024 survey, a record low 36% of Americans said they had a great deal or quite a lot of confidence in higher ed, compared to 57% a decade ago. Seven in 10Americans say higher education is heading in the wrong direction. And 35% of Americans thought college was very important, which is half the number from 2013 overall. The committee said that they believed in the purpose of higher education and it's in a tough spot. Colleges are, quote, expected to be all things to all people, selective but inclusive. Affordable but luxurious, meritocratic but equitable. However, they concluded, without a clear mission and purpose, it becomes difficult to judge whether colleges and universities are living up to their fundamental commitments.

Toby Howell (8:40)

Yeah, I think the word that stood out to me in your intro, Neal, was opaque. Not just when it comes to admissions transparency, but also when it comes to the affordability piece. No one even knows how much they're paying to go to college these days because even though the sticker prices ticked up above, you know, $100,000 annually at some places, obviously that comes with a lot of caveats. Usually you're not getting charged full tuition, you're getting some sort of of financial aid. So even though that's a good thing on the service, making it more affordable to go to college, the fact that you just don't know how much to pay going in is an issue. And it's why people are not trusting college or the institution of higher education like they have in the past. You can point to someone like Yale, though, who has been doing better with this. They released this blanket statement in the fall of this year that families earning up to $200,000 per year will be able to attend at Yale tuition Free. So anyone who is making less than $200,000 a year, welcome to Yale for free. That kind of transparency goes a long way towards restoring some of the trust that it's lost over the years.

Neal Freyman (9:49)

And then on the admissions front, the committee blasted Yale and other other colleges as skewing toward the wealthy and the elite. The report said that applicants from the top 1% of the income distribution are substantially more likely to gain admission than equally credentialed middle class peers. And they propose just when you apply to college, it should be about how you're doing academically and maybe nothing else matters. So they proposed a minimum standard of academic academic achievement, whether that's a minimum standardized test score or maybe a Yale or college specific entrance entrance exam that would ensure that no student is admitted without the requisite academic preparation and ability. So that would be nice for all of us who thought they had to do a ton of clubs just to get into these colleges. And then we got rejected.

Toby Howell (10:33)

Anyway, what about this proposal? Neal, I want to hear your thoughts on this. A device free policy in the classroom which would, you know, do away with phones, with laptops, with tablets. Do you think that's a good way to learn while you're in college?

Neal Freyman (10:47)

I think it depends on the class because I was thinking about some of my smaller seminars and no one had laptops in there because that would just be weird. It was, it was part of a discussion. I don't know what I would do with myself if I'm in an 800 person Psych 101 or Econ 101 class and I didn't have my laptop to maybe watch some European soccer games in the afternoon. So it might be tough for me.

Toby Howell (11:07)

You would focus. That's what you do. You'd lock in on the content and lock in. But yeah, I feel like I love that idea. You know, it almost goes back to the very first thing we talked about in the show. People are moving away from, you know, phone environments. They want to be more in person. So this went from a discussion about higher ed to a discussion about our relationship with technology. But it's all interconnected.

Neal Freyman (11:28)

I'll tie it back to one final piece. Is they. They want to. They want colleges to address grade inflation by establishing some sort of quota system or some sort of standardized GPA because grade inflation has gone insane. And Harvard right now is grappling with this. They're weighing a proposal to just cap the amount of A's per course because this is crazy. In the 2024, 2025 school year, 60% of grades that were given out at Harvard's were A's and somehow I don't think I would even get one of those. Welcome to Stock of the Week Dog of the Week, the Friday segment where Toby and I pick one stock that's defying the laws of gravity and another that's under pressure. Yes, I have been listening to Queen. I won the pre show bicycle race so I get to go first. And my Stock of the week is stocks. The entire stock market. Because you can't pick favorites when so many companies are on a heater. It's scarcely believable given the upheaval this spring. But the stock market has now recovered all of its losses since the Iran war began and then some. The Tech Focus NASDAQ 100 hit a new all time high yesterday after posting a 12th consecutive day in the green, its longest winning streak since 2009. The broader S&P 500 also reached a new record for the first time since January, closing above 7,000 points for the first time ever. And it hasn't just been any bull run. This stock run up has gout, gout level acceleration. Deutsche bank notes that the S and p has ripped 10.7% higher over the 11 sessions through Wednesday, which is a bigger bounce back than the one Post Liberation Day last April. Not to mention the S and P has gained more than 10% in 11 sessions 15 times this century. So it only happens once every few years. Don't get used to it. Indeed, April is on pace to be the S&P's best month since November 2023. Wall street appears to be a split screen image with everything that's happening not on Wall Street. The Strait of Hormuz is still closed, causing the biggest oil shock the world has ever seen. Meanwhile, American consumer sentiment just fell to its lowest level on record as inflation and a glacial job market weigh on families. So Toby, help me make sense of this.

Toby Howell (13:30)

I will do that deal. I do think that part of the reason the market has had this run up is optimism about the Iran war. Even though the Strait of Hormuz is still close. Trump has floated that a deal was very close over the cease fire has held, albeit delicately, for about a week now. So investors have expected that pace of the war to de escalate rather than escalate. That seems to be the trajectory that they are betting on. So that's number one. Number two, strong corporate earnings. I mean we floated at the beginning of the week, but JP Morgan, Goldman, Citi bank of America, all the big banks Absolutely crushed it. They reported not only strong earnings and profits for their own businesses, but also reported that the consumer was still busting out the plastic, they're still swiping their credit cards, spending at a robust rate. And finally, the third thing I optimism. I mean the market goes as AI goes. Still, up until this point, TSMC reported blowout earnings. They are the biggest chipmaker maker in the world. Tesla's been teasing a new chip. It seems like the software, you know, trade, AI trade that has been powering much of the stock market came roaring back these past couple of days. So that three headed monster is why we're seeing markets just rallying to the moon.

Neal Freyman (14:46)

I said I wasn't going to hand out any favorites, but I do want to pass out some game balls to some specific companies that are doing well. And you should probably look at your portfolio if you have any of these companies. Tesla is up 12% this week after Elon Musk teased a new chip. Oracle is up over 30% over the past five days. Intel is having its best stretch on record. It's up nearly 60% in the past couple of weeks. And then Quantum stocks went absolutely ballistic this week. A bunch of them. Rigetti Computing. Quantum Computing, D Wave Quantum are up over 30% this week. And that came after Nvidia said it was rolling out a new chip to help boost Quantum. So wherever you look, especially in tech, stocks are going way up. And then let's look not in tech. American Eagle is up after announcing a new ad campaign. With who else? Sydney Sweeney, Hims and hers Rose on RFK saying he was going to ease restriction on peptides. And then Uber is up as well. It is reportedly committing more than $10 billion to robotaxis. So all across the board, stocks are going up and to the right.

Toby Howell (15:49)

Not to rain on your parade with a little bit of a nuance deal, but 2/3 of the S&P 500 companies are actually still lower than they were before the war began. So we are maybe seeing some of that concentration, some of that top heaviness, you know, the stalwarts of the market. Nvidia, American Eagle. I'm joking about that last one, but we're maybe seeing more concentration in the top part of the market again while two thirds of companies are still kind of lagging behind.

Neal Freyman (16:15)

You always have to bring nuance, Toby.

Toby Howell (16:16)

That's what they call me, Toby. Nuance. How? All right, take a quick break and come back with our dog the week right after this. Marketing your brand these days probably feels harder than finding perfectly ripe strawberries at the start of spring.

Neal Freyman (16:31)

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Toby Howell (16:43)

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Neal Freyman (17:08)

Signed up to watch a movie a friend recommended. Forgot about the platform for months.

Toby Howell (17:12)

Same, but Rocket Money made it easy to fix. Canceled what I wasn't using and now checking my spending takes like like two minutes a week. Barely any effort, but I'm saving real money.

Neal Freyman (17:22)

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Toby Howell (17:27)

Morning Brew listeners can start building better Money Habits@RocketMoney.com MBD.

Neal Freyman (17:38)

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Toby Howell (18:23)

My Dog of the week is live golf because it appears to be dying. According to multiple reports, Saudi Arabia's Public investment fund is likely to end its funding of the upstart golf league at the end of this season. Earlier this week, it looked like the end might be more inevitable than a nil three putt in. But LIV Golf CEO sent a memo to his staff on Wednesday saying the 2026 season will continue as planned for the Public Investment fund, AKA the piff. The eye watering sums it was paying to watch Bryson DeChambeau and John Rom beat up on hapless fields started to get hard to stomach going forward. It is refocusing its investment strategy on domestic projects and starting to emphasize monetary returns. It announced this week and although PIFF Governor Yassir Al Rumayen said the plan was in place before the US Iran war broke out, he admitted that it was a factor when it came to repositioning some of its priorities. In total, it's been a very, very expensive foray into the world of professional men's golf, with more than $5 billion going into the league since launch. To put in perspective just how much money has been floating around, Taylor Gooch earned more in prize money from his three years on LIVE than three time major winner Jordan Spieth has over his entire career. And if you just mutter to yourself, Taylor who? That's exactly my point, Neil. It's not over yet. But it sounds like the PIFF is telling LIVE to meet it at the ninth green at 9pm and dress nice.

Neal Freyman (19:49)

There was a point not too long ago where it seemed like Saudi Arabia was going to take over just pretty much every sport. They were into boxing, F1, soccer, tennis, and then launched this PGA Tour rival with LIV Golf. And now we're seeing a broader retrenchment and it doesn't just apply to live. PIFF also sold its majority stake in the Al Hilal soccer team in Saudi Arabia. And there's also reports that it's pulling back on its sponsorship of a flag football event fronted by Tom Brady. So it seems like they're looking at their bank account, Saudi Arabia, and saying, actually, I don't think we can just take over the entire global sports world because we simply can't afford it. They're scaling back projects elsewhere and they're saying, okay, we need to actually just focus on building our economy here. So they release this new five year plan focused on domestic projects and they're ending some of these side quests abroad, like in golf and soccer.

Toby Howell (20:42)

Yeah. The PIF manages nearly $1 trillion in assets, which sounds like a lot until you start to go through their ledger and realize they had a lot of financial commitments piling up. They are also going to host the World Expo in 2030. They have the FIFA World cup coming in 2034. They tried really hard to make Neom their Sci Fi Linear city through the desert, a thing but that has been beset by cost overruns and delays. So when you are kind of going through and checking the till, if you will maybe live is the thing that said, do we really need to be doing this anymore? Like, do we really need to be paying these golfers, some of which you don't even know the names of, so, so much money with these massive prize pools and although on the surface LIV has kind of regrouped and say, hey, everything's hunky dory on our front, it does look like the PIF is saying this is probably not the biggest priority we have going forward.

Neal Freyman (21:39)

I don't think anyone in the golf world is upset about this because golf has been plagued by this civil war for many years. And some of the best players in the world, like Bryson DeChambeau, John Rahm went to Saudi Arabia to play in the live Tour for over $100 million. But that fractured the golf world and caused all kinds of of acrimony. What it did do was push the PGA Tour to pay its players more and actually reform some of the things that maybe lift that, that the live emergence pointed out were problems with the PGA Tour and how is treating its players. So I think all of us who are golf fans, you, you and myself included, are, are excited for a possible unity pact between LIV and PGA Tour. And maybe we'll see what happens with the PGA Tour welcomes these players back who did defect. Let's sprint to the finish with some final headlines. Netflix lost its stock price and the guy who helped start it all in the streamer's earnings reports. Yesterday it announced that co founder and chairman Reed Hastings will leave the board in June. Hastings has been with Netflix since The very beginning, 29 years ago, growing a DVD by mail startup into a Hollywood disrupting Goliath. But now he's stepping back to pursue philanthropy and personal interests. And about that stock price. Netflix Shares fell about 9% after its profit forecast came in lower than expectations. And it's been struggling to show investors it has a plan to grow after losing out on a bid to buy Warner Brothers Discovery. Besides hiking prices on all of us,

Toby Howell (23:01)

it seems like Netflix's only strategy is like, what if we just charge people more every single time? And it has been working to a certain extent. The other thing that is working is sports. I mean, we can't talk about Netflix now without talking about their foray into live sports. They're in discussions to maybe expand their relationship with the NFL. They aired the World Baseball Classic actually, and that was their most watched program ever in Japan. So they're having success here. They've also done a foray into video podcasts as well, which the jury is still out on if that has been as successful as sports. Who would have thought that the World Baseball Classic versus, you know, a live podcast. More people are watching the Baseball Classic. But I do just want to talk about Reed Hastings for a little bit he did say that, you know, philanthropy was next, but also his next chapter is already underway. In 2023, he bought a stake in Powder Mountain, which is a ski resort in Utah where he already owned a home. And he's kind of been transforming that into a great place to ski. So I would retire to Reed Hastings if I had a part of a mountain and wanted to turn it into a pretty sick ski destination.

Neal Freyman (24:13)

The tech founder to ski bum arc he is, he's trying to complete it

Toby Howell (24:17)

really is the dream. It's better to do it tech founder to ski bum rather than ski bump to tech founder. It seems more fun the second way. All right, moving on. Maverick is back, baby. Tom Cruise is returning for Top Gun 3. Paramount confirmed at Cinemacon in Las Vegas this week. The original reboot of top gun grossed one and a half billion dollars globally on a 170 billion budget and basically single handedly resuscitated the movie industry while it was roiling from COVID shutdowns. So they're doing another one. Neal, did you know that Tom Cruise does his own stunt?

Neal Freyman (24:51)

I did not. No one seems to talk about that. I promise I will watch the third Top Gun not on a plane like I watched the the second one. I don't think Tom Cruise would have endorsed me watching him do all these awesome stunts by himself on a very small screen. And I'm also excited to see what the, you know, the more supporting actors are going to be because just incredible ones in Maverick. So they're going to hopefully get some new blood, a new cast in there to help Tom Cruise do all sorts of awesome things in a fighter jet.

Toby Howell (25:21)

Also on the topic of sequels, Spaceballs is being rebooted with a 99 year old Mel Brooks recording a video that played at Cinemacon announcing the sequel to his sci fi parody. I have a confession to make, Neil. I have never seen the entire original.

Neal Freyman (25:37)

Well, I know every single word. So we are, we are two sides of the same coin. I watch that movie V maybe every single day for three straight years in middle school. And I thought it was the funniest thing ever. And so, yeah, I'm excited for the second Spaceballs. Obviously. Mel Brooks is a national treasurer. He's 99 years old. He's going to turn 100 this summer. So I love you, Mel Brooks. I love you, Spaceballs.

Toby Howell (26:02)

It sounds like we got to have a little Spaceballs watch party because I feel like it's. I would get you and your humor a lot more if I finally watched it from start to finish. Okay. Then finally, two other tidbits from CinemaCon. The third Dunes opening sequence was played and everyone was in universal agreement that this is going to be an awesome movie. So much so that people are saying that Marvel should be shaken in their boots a little bit. Because remember, Avengers Doomsday has to go toe to toe with Dune. They're opening on the same day and apparently Dune is looking a lot more compelling than Avengers Doomsday.

Neal Freyman (26:38)

It's going to be very interesting this, this date is December 18th and I think it's going to blow Barb and Heimer out of the water because those, these are going to be two of the biggest grossing movies of the year. But they also share a lot of overlap in the same demographic base about who is excited to watch it. So we're in a game of chicken right now to see whether Marvel is going to move this date. So they're not going to be going up against Dune 3 because Dune 3 also has more of the IMAX locations locked in. These, these IMAX locations would rather show Dune three than than the Avengers movie. So it'll be very interesting to see who blinks first. Finally, when you're on a plane, have you ever wondered what the pilots are talking about in the cockpit? Well, at least two of them are meowing like a cat. In a recording that's gone viral and caught heat from the FAA On Sunday, audio from air traffic control at DC's Ronald Reagan Airport revealed that the two pilots were meowing back to each other after one air traffic controller appeared to scold them, saying, you guys, you need to be professional pilots. One barked like a dog. Some people were amused, others were not. Like the country's aviation regulator, the FAA said it was investigating a meow gate, citing regulations that ban pilots from non essential conversation below 10,000ft in altitude.

Toby Howell (27:52)

Consider me amused. Neil. Being a pilot is stressful. So if you gotta be out the tower into your co pilot once in a while, bring some levity to the cockpit. That's okay in my book. Now do you need to do it over a live broadcast? Probably not. But I do love too that the tower subsequently roasted the pilots. If you listen to the audio, which I encourage you to do. So someone says this is why you still fly an rj where RJ means regional jet. A lot of early career pilots get their start flying for regional airlines. So that's a classic little aviation burn right there and I just appreciate that. So sort of banter.

Neal Freyman (28:29)

It's great banter. And we have a pilot source close to the show, actually, and we talked to them about whether this actually happens. Like, what do you think of people pilots meowing and they said, you know, it actually happens more than you think. That is all the time we have. Thanks for starting your morning with us. Have a wonderful Friday and an even better weekend. Just a reminder, we have a few spots open left for our bar trivia night on Tuesday. So I guess we are participating in this this trend of not just standing with a Dr. In your hand and actually doing some intellectual stimulation when going out. So that's next Tuesday. You can find the link in the show description to sign up and we hope to see you there.

Toby Howell (29:10)

And it is free, by the way. So yes, we are stimulating your minds, but we are doing it for free. So yes, sign up in the show

Neal Freyman (29:16)

description and if you'd like to reach us, send an email to Morning Brew daily at Morning Broadcom or DM us on Instagram at me Daily Show. Let's roll the credits. Emily Milian is our supervising producer. Raymond Liu is our senior producer. Our producer is Olivia Graham, and our associate producer is Olivia Lake. Hair Makeup is taking a summer Friday even though it's April. Devin Emery is our president and our show is a production of Morning Brew.

Toby Howell (29:37)

Great show today, Neil. I wish you all well. Hey, Mama. Thanks for making all my favorite recipes.

Neal Freyman (29:51)

Hi, Ma. Thanks for your unfiltered advice.

Toby Howell (29:54)

Hi, Mom. Thanks for always being by the phone. Hey, Mom. Happy Mother's Day.

Neal Freyman (30:00)

When you ship UPS Air at the

Toby Howell (30:02)

UPS Store, your items arrive on time or your money back, guaranteed at no extra cost. Exclusively at the UPS store US retail locations. Visit theupsstore.com airshipping for full details. Terms and conditions apply. Send your Mother's Day gifts at the UPS Store and we'll get your gratitude there on time.