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US Plans Hormuz Blockade & Wall Street Bigwigs Nervous About Mythos
00:25:16
Blockade trade & an emergency meeting about Mythos
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- [00:02]
Toby Howell
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- [00:30]
Neal Freyman
Good morning, Brew Daily Show. I'm Neal Freyman.
- [00:33]
Toby Howell
And I'm Toby Howell.
- [00:33]
Neal Freyman
Today the US Is countering Iran's blockade of the Strait of Hormuz with its own blockade band.
- [00:38]
Toby Howell
Anthropic's new model Mythos has Wall street in a tizzy. It's Monday, April 13th. Let's ride.
- [00:49]
Neal Freyman
Good morning and welcome back to the week. You know when you go down a YouTube rabbit hole and get caught in an aesthetic nostalgic spiral looking at all your favorite old videos? That was basically Justin Bieber set at Coachella. While headlining the music festival Saturday night, Bieber spent a half hour in the middle of his set sitting behind a laptop, scrolling through his past videos like Baby and Beauty and a Beat, then playing them over the festival's sound system and singing along in an octave lower. The first takeaway he apparently has YouTube Premium, no ads. Second, people kind of dug it.
- [01:19]
Toby Howell
Yeah, I didn't hate it either. Neil Biebs and YouTube have a history. It was where he was discovered. I at one point, Baby was the most viewed video on the entire platform. It's now the most disliked video ever on the entire platform. So you can't tell the story of Justin Bieber without YouTube. So it did feel very nostalgic because he did go very deep in the archive. On the other hand, though, you paid a lot of money to go watch a Coachella set in the stat. What you got was him scrolling to YouTube. I think the final thing, though, is that guys, no matter how famous or how rich they are, will do anything in their power to sit you down and show you YouTube video.
- [01:58]
Neal Freyman
This episode is brought to you by On Investing, an original podcast from Charles Schwab. Each week, host Liz Ann Saunders, Schwab's chief investment strategist, and Colin Martin, head of fixed income research and strategy for the Schwab center for Financial Research, analyze economic developments and bring context to conversations around equities, fixed income, the economy and more.
- [02:15]
Toby Howell
Join Colin, Liz and and their guests as they share insights into what might be moving the markets and why, as well as what indicators. They are watching for signs of change. They'll also answer investor questions on everything from how sectors are evolving to what the bond markets are telling us to where to look for opportunities and considerations for your portfolio.
- [02:34]
Neal Freyman
You can download the latest episode and subscribe at schwab.com/on investing or wherever you get your podcasts. President Trump announced the US blockade of the Strait of Hormuz, escalating the conflict with Iran after marathon peace talks failed to produce a breakthrough over the weekend. You might be thinking, wait a second, isn't Iran already blockading the Strait of Hormuz? Yes, and what the US intends to do is a blockade of a blockade. Blockade ception of it. Like a chess match where one player's piece is under attack, but instead of moving that piece in danger to safety, they decide to put pressure on a separate opponent's piece. It's a risky, high stakes move to undermine Iran's main source Source of It's a risky, high stakes move to undermine Iran's main source of leverage in the war. Energy experts have been pushing the Trump administration to apply the blockade strategy for weeks, Bloomberg reported. Here is the rationale. In the current status quo, Iran has full control over the world's most important energy waterway. But it's not keeping us straight entirely closed. It is allowing its own ships to go through, as well as ships from several countries like China and India, who have to cough up a toll. One estimate from Frontier Investments suggests Iran is making 150 million bucks a month from those tolls, a huge financial lifeline. With the US's planned blockade, which begins at 10am Eastern today, it's aiming to cut off that revenue source. As President Trump told Fox News, it's going to be all or none, meaning Iran will need to open the strait to all ships or the US won't let any get by into the open seas. The economic bricksmanship comes after a JD Vance led delegation to PA couldn't agree to terms with Iran on a resolution to the war, which is currently in a tenuous two week cease fire. Vance said the biggest hang up was Iran refusing to give up its nuclear ambitions, a nonstarter for the United States. So now we're staring down a double blockade of the Strait of Hormuz that won't make oil markets happy.
- [04:20]
Toby Howell
A double blockade. Who could have seen this coming? Actually it was Telegraph because the US has used a similar approach against Venezuela earlier in the year and this was, you know, definitely in the cards. A lot of energy experts were, as you said, pushing Trump in this direction, because a, essentially you can set up a blockade out of range from Tehran's weaponry, and then you can also do it with less risk than going after something like Kharg island, which is where Iran kind of uses exports most of its oil from. So if the options on the table were, you know, strike Iran's critical energy infrastructure or set up another blockade. We've already done a blockade, we being the US Of Venezuela. This is just another attempt at that. So it sounds crazy on the surface to blockade a blockade, but again, this is how you return leverage to your side, is by, you know, choking off their exports.
- [05:15]
Neal Freyman
David Ignatius at the Washington Post, who has kind of a line into what discussions are happening in the White House, said the strategy here is a quote credited to Eisenhower. If you cannot solve a problem, enlarge it. So this is the, this is the way the US Is trying to just tighten the economic screws from Iran, because as I mentioned, they're making about $150 million a month from these tolls as well as selling its own oil out into the open market. Oil prices are above $100 a barrel, but Iran can actually fetch around $140 per barrel for these, for this actual physical crude. So it's making now annual run rate, we're talking like in software terms, but of billion dollars a year in selling its own oil. What this also will do, though, is, is test how much pain, economic pain, America and the rest of the world will take, because right now there's going to be no oil or no fertilizer or any other sort of these key raw materials flowing from the Persian Gulf out to the rest of the world. And that's why you're seeing oil markets actually react very significantly this morning. They're up 8% to about $105 a barrel.
- [06:17]
Toby Howell
Yeah. Trump conceded that energy prices may not fall soon and maybe higher as we roll into midterm elections. He's trying to suggest that the economic pain right now is worth it in the long run. We are seeing just the economics of this blockade and now double blockade filter through the American economy. We've seen EV interest pick back up. This has been a side effect. Edmunds, which is a car shopping platform, said that we're seeing interest rise to nearly what it was before the tax incentives ended last year. Used EV sales jumped 12% in the first quarter, according to Cox Automotive. So basically people are looking at their gas bills and looking at the pump and saying, actually, it does make sense to transition to electric vehicles because of just how elevated Gas prices are.
- [07:06]
Neal Freyman
Energy prices are absolutely skyrocketing. I know. We previewed the inflation report on Friday. It came in at 8:30am Eastern after we were done recording. It showed that consumer prices were up 3.3% in March from a year earlier. That's up from February's gain of 2.4%. It's the highest reading in two years. It is because of gas prices. Energy prices are up 12.5% from a year earlier, up from just 8.5% gain in February. So the rise in whatever is happening in the Middle east is absolutely filtering. I mean, everyone can see it on gas station prices every single day through March and into April. But yeah, huge uptick in inflation. The fastest pace in two years because of what's happening over in the Strait of Hormuz.
- [07:48]
Toby Howell
The Mythos around Anthropic's new model. Mythos is only growing. According to a report. Treasury Secretary Scott Besant and Fed chair Jerome Powell summoned major bank CEOs to Washington last week to discuss the model that has been compared to a dangerous cyber weapon. Anthropic has held back on releasing Mythos to the public, which it says can kneecap much of the modern web by finding undiscovered vulnerabilities at a unprecedented rate. The cybersecurity chops of Mythos affects banks, so the government wanted to make sure Wall street is aware of the possible risks. So they called the meeting to ensure everyone is adopting the proper precautions to defend their systems. According to Bloomberg. Remember, Anthropic distributed mythos only 40 or so organizations ahead of a public forming a sort of cybersecurity brain trust called Project Glasswing. The company also briefed government officials on its capabilities before release. The goal is to let big enterprises get ahead of bad actors who could use the new model to penetrate secure software. Neil, we keep hearing Mythos framed in this all powerful light. Some say its capabilities have been overstated in the fear mongering only helps Anthropic. But the last minute meeting shows that Wall street is clearly talking about it.
- [08:59]
Neal Freyman
This is a meeting I would have loved to have been in. I mean, look at the people in this. Goldman Sachs CEO David Solomon, bank of America's Brian Moynihan. Well, as far goes Charlie Scharf, Morgan Stanley's 10 picks, Citigroup's Jane Frazier, and then also you have Scott Bessant and Jerome Powell. The one person who couldn't make it apparently was JP Morgan. JB Diamond. I don't know what he was doing that was more important than this particular thing. But I want to focus on one person in this meeting. That's Jerome Powell, because in the past few weeks, he has spoken a lot about cyber attacks against the financial system. And think about the banks that I was just talking about. Who was represented there. Bank of America, Wells Fargo, Goldman Sachs, Citi Morgan Stanley. These are systematically important financial institutions to the United States. Essentially, these are too big to fail. And the fact that the Federal Reserve is there, they deal with systemic risk. And that's why I think this is a very important meeting to talk about.
- [09:50]
Toby Howell
It is important. But also after we kind of covered this story last week, when Mythos came out and Project Glasswing was announced, a lot of people said, how real are these vulnerabilities that Mythos so apparently uncovered? In an analysis from John Martindale for Tom's Hardware found that some of the bugs that they kind of highlighted are not as bad as they think. They flagged one vulnerability in a software called FF MPEG. That vulnerability had existed for 16 years already. No one knew why they included it in the report. There was another one around Linux that said that a lot of them had been recently passed. They are less severe in terms of how bad the vulnerabilities actually were. So another separate kind of analysis found that of the exploits found, they found 600 examples, but only 10 were serious, severe vulnerabilities. So some of people from, you know, the tech circles are saying that, all right, anthropic, you put out this messaging that Mythos is this all powerful thing, but maybe these devastating exploits that you're highlighting are not so devastating and not so pressing as you might have portrayed them to be.
- [11:00]
Neal Freyman
Welcome to winners of the weekend. The segment where we pick two things from the news that are getting fitted for their green jacket. I won the pre show triathlon, so I get to go first. And My winner is Artemis 2 for successfully completing their mission to the moon and back. But maybe more importantly, for getting people excited about human space travel again. On Friday night, the crew of four astronauts splashed down in the Pacific Ocean and have since been reunited with their families. These folks now hold the record for the humans who've traveled furthest from Earth. More than a quarter of a million miles away, around the backside of the moon. As NASA administrator Jared Isaacman said, it was a mission well accomplished. The goal was to test out the Orion spacecraft ahead of a future lunar landing, and that spacecraft performed remarkably well. There were a few issues that NASA will have to fix ahead of upcoming missions, most notably the malfunctioning toilet. But Other than that, things went according to plan. So according to plan, in fact, that the astronauts were scheduled to splash down on Earth at 8. 7pm Eastern Friday night and they landed exactly at 8:07pm Google Maps can't even get that right when I'm driving 15 minutes away, let alone hurtling back to Earth after 10 days in outer space, piercing the atmosphere at 25,000 miles per hour. Toby it's all smiles in Houston after Artemis 2, but now the attention turns to Artemis 3 and Artemis 4. Can NASA keep up the momentum?
- [12:18]
Toby Howell
It was all smiles in Houston, but there is some tears actually being shed in the living room that I was watching with my fiancee, say, his family, because there is just something about astronauts returning home that it hits you in the field. You're just so happy they're safe. They went through so much and I just want to read some of the quotes from the crew. Victor Glover said, I have not processed what we just did and I'm afraid to even start trying. Jeremy Hansen said, when you look up here, you're not looking at us, we're a mirror reflecting you. Christina Koch said, earth is just this lifeboat hanging undisturbedly in the universe. And Reid Wiseman, the captain of the mission, said, I have two Microsoft Outlooks and neither one is working right now. The memes from this trip were very funny, as was the heartfelt, you know, feeling that, man, humanity is just this very unique species sitting on a rock in space.
- [13:05]
Neal Freyman
They absolutely won the PR battle with this because, I mean, NASA is competing for our attention just like Justin Bieber and YouTube, just like TikTok. They want to show. They want to prove that space flight is cool because they're fighting for dollars from the federal government. They want to, they want to build up the political support for going back to the moon because it's a huge endeavor and, you know, the support for space travel had been waning over the past few decades. But I think what they've done is very smart. They actually hired someone called an imagery czar is a Zeblin Scoville a couple of years ago. And what he did is he put a bunch more communications apparatuses on these particular spacecraft so we can beam down high quality video and they can FaceTime with people. And that sort of communication strategy worked admirably well. And I think it really helped that these poets were. Or not. I said poets. These astronauts were basically poets and they seem like the best people that you could possibly have as emissaries from space. So I think they absolutely had a huge PR Victory here as well, which was maybe even more important than the technical aspects of the. Of the mission.
- [14:08]
Toby Howell
Not just poets, photographers too. Because the Artemis 2 team did photography training before they went up in the capsule because they said they wanted to tell a story. They wanted to capture the awe and grandeur. You can't just do that. Like, if I just went up there with my iPhone, I'm not taking the pictures that they did. So that was one awesome thing. And then one final thing I want to leave people with is there is this space simulator game called Kerbal Space Program. It's. It's pretty niche, honestly. It's about building and flying rockets for a species of green aliens called kerbals. But after Artemis 2 landed, the player count hit an all time high, which just shows that the next generation is excited about space travel. They want to go build rockets in this weird little space alien game. But that is kind of what a lot of astronauts think about when they land on their mission, is how are we inspiring the next generation? I think Artemis 2 absolutely did that.
- [15:01]
Neal Freyman
We did promise what Artemis 3 and Artemis 4 to preview what they're going to do. So Artemis 3 is set to launch next year and that's going to test whether the Orion spacecraft can dock with the lunar lander. And this is where the private sector comes in. Because right now we got Jeff Bezos with his Blue Origin and Space X by Elon Musk competing for that lunar lander contract. So it'll be very interesting to see who ends up actually serving as the lunar lander for Artemis 4, which is expected to land astronauts back on the moon in 2028.
- [15:32]
Toby Howell
Let's do it. All right, we're going to take a quick break and come back with my winner of the weekend right after this.
- [15:39]
Neal Freyman
Not working with a financial professional is one of the biggest mistakes you can make.
- [15:43]
Toby Howell
Yeah, that and sneaking up on a miniature horse.
- [15:46]
Neal Freyman
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- [15:59]
Toby Howell
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. I hear we're talking about acting today.
- [16:15]
Neal Freyman
No, we're talking about tax act.
- [16:17]
Toby Howell
Then why did I bring a skull?
- [16:19]
Neal Freyman
I have no idea. But the reason we're talking about tax act is they help small business owners get their taxes done. They make it easy by providing the only online DIY filing software for small businesses.
- [16:31]
Toby Howell
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- [16:38]
Neal Freyman
Just head to taxact.com business-returns to get started. That's taxact.com business-returnS Toby, you ever found a big problem with a teeny tiny solution?
- [16:52]
Toby Howell
Yeah, locked doors.
- [16:53]
Neal Freyman
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- [17:04]
Toby Howell
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- [17:10]
Neal Freyman
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- [17:27]
Toby Howell
My winner of the weekend is a guy named Adam Jacobs who has secretly recorded over 10,000 concerts spanning four decades, creating a heck of a music archive in the process. This story went viral over the weekend. Jacob started this side project in Chicago back in 1984, and a few years later snuck a Sony cassette recorder in to go see a little band from Seattle play their debut show. His surreptitious recording of Nirvana predated their global breakthrough and set Jacobs on a path towards becoming an unexpected music folk hero. Over the ensuing years, Jacobs amassed a enviable archive of indie and punk rock recording concerts from REM The Cure, The Pixies, the Replacements, Stereo Lab, Sonic Youth, and more. Along the way, he became known in the scene. In the beginning, some venue owners gave him a hard time for sneaking in increasingly complex recording devices, but after a while, seeing that his intentions were that of a pure music lover, he became the taper guy and venue started letting him in for free. Now his archive is being digitized and hosted for free on the Internet archive, preserving the giant catalog of his live shows for future generations to enjoy. Neal so far, about 5,500 tapes have been digitized, with thousands more to go. Volunteers across the world are still hard at work doing just that. There's something in the way that this is bringing the music community together.
- [18:48]
Neal Freyman
Yeah, it's further evidence that you can just do things. You can go to over 10,000 shows over 40 years and record them for your own edification and leave the world with one of the most important musical archives in history. Because this hobbyist project turned into an absolute historical behemoth with over 10,000 recordings. And he is known. Jacobs is known around Chicago, so he has taken on this mythic status. There was a documentary about him in 2023. WBC, the public radio station there, did a story about him in 2019. So he is known around Chicago as the. As the taper guy. And I think more people will know him now that is is being helped on by other volunteers and being digitized. Because he has all these cassette tapes for everyone to listen. There needs to be a huge project around digitizing them. So the Internet Archive, which is this nonprofit that preserves sort of digital artifacts, has, has helped him with this huge push to digitize them. And so we're all going to be richer for it.
- [19:45]
Toby Howell
It is very interesting. Those capes that he got, the concerts that he got on tape. There's a 1990 fish show that was unreleased to everyone. And now that it's on the line, like fish devotees are going crazy for it. There is a 1988 concert from Boogie Down Productions that people had never heard before. So people are literally going crazy for the findings that are unearthed in this collection. Also, I found the equipment that he used to be. An interesting evolution to how recording has changed over the years. He started with a tiny Dictaphone recorder that he borrowed from his grandmother. He went through all the ensuing technological innovations that followed. Sony, Walkman style tape recorder, home console, cassette machine that he put in his backpack at one point. And then eventually he's moved to more digital mediums. But it was fascinating that it's not just a archive of music history, it's an archive of recording history as well.
- [20:42]
Neal Freyman
My first thought when I read this honestly was maybe it's just the business news aspect. I was like, so what do artists think? Like, is this top legging? Yeah. Are they going to. Are they going after him? What do they think? And he said that most of them are just very happy to have their early concerts preserved. He just said that two of the bands requested that he take it down. I guess it's technically legal that because these, these artists do own the original composition and the live recordings of what they're playing, but he's not profiting from it. So it seems like they just don't care and they look the other way. And even one band, the Replacements, incorporated audio from one of his tapes of a 1986 show to a 2023 live album that they released. So it seems like the artists are loving that this is being preserved as well.
- [21:24]
Toby Howell
That was my first thought as well, Neil. But yeah, since he is not profiting, there's unlikely to be lawsuits. And Jacobs, this is words to live by. I think. I think that the general consensus is it's easier to say I'm sorry than to ask permission. Always ask forgiveness, not for permission.
- [21:40]
Neal Freyman
So this archive is being updated by the day because there are volunteers literally driving to his house and then hauling trucks, trucks of cassettes to play them and then digitize them on the Internet archive. You can just go to Adam Jacobs, just Google Adam Jacobs collection. And one interesting quirk about his name is that his name, Adam is spelled a D a M. Gets him to the top of the dictionary three days. It's Monday. So here's what you need to know to stay ahead in the week ahead. Coming up on Wall street this week, the return of earnings season. I know how desperately you guys missed hearing about revenue projections and operating margins. Big banks kick things off early in the week with reports from Goldman Sachs, JP Morgan, Citi and Wells Far Fargo. So everyone in that meeting, the past quarter was pretty epic for them with all the market volatility. So expect booming profits. Some other companies to watch, Netflix, Pepsi, and Johnson and Johnson.
- [22:27]
Toby Howell
Yeah, just as a reminder, outside of the energy crisis that we are facing, corporate America is doing pretty well. If you take the overall performance of all the S&P 500 companies, earnings are expected to rise by 14% compared to last year. If that does happen, that would be the sixth straight quarter of double digit earnings growth. We haven't seen a streak like that since 2011. Again, it comes against a very shaky backdrop. But still, as of now, corporate America is doing pretty dang well.
- [22:56]
Neal Freyman
And banks specifically. They're expected to bring in over $40 billion in trading revenue because while you're watching the stock market go up and down, they're actually making money off of it. In sports, the slog of an NBA regular season has mercifully come to an end and the Play in tournament gets going tomorrow and runs through Friday. The actual playoffs will start on Saturday. The NHL is also wrapping up its regular season this week, and the chase for the Stanley cup begins on Saturday.
- [23:20]
Toby Howell
I will refrain from giving out any more predictions because my master's prediction, Jon Rahm, had an abysmal performance and it looks like the Toby Jinx is well and truly back. So again, submit the team that you want to lose in the playoffs and then I will shout them out on the show and they will inevitably lose the inverse.
- [23:38]
Neal Freyman
Toby is going strong. And finally, Wednesday is tax day, April 15, the deadline for individual tax return submissions. I didn't realize this, but a bunch of restaurants typically do food deals and discounts for tax day, so make sure you look those up before your celebratory burgers and fries for filling out your taxes on time.
- [23:53]
Toby Howell
What's tax day? Is that when taxes end? Yeah, I'm joking. I actually did get you there. Yeah, get your taxes in if you haven't already. You believe me?
- [24:06]
Neal Freyman
Okay, let's end it there. That is all the time we have. Thanks for starting your morning with us. Have a wonderful start to the week. If you'd like to reach us, send an email to Morning Brew daily at Morning Broadcom or DM us on Instagram at the Daily Show. That's good acting. Let's roll the credits. Emily Milian is our supervising producer. Raymond Lu is our senior producer. Our producer is Olivia Graham, and our associate producer is Olivia Lake. Eugenia Ogu is our technical director. Hair makeup is browsing the Adam Jacobs collection. Devin Emery is our president and our shows are production of Morning Brew.
- [24:36]
Toby Howell
Great show, Danielle. Let's run it back tomorrow.