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US Railroad Mega Merger is On Track & Google Fends Off AI Search Rivals
00:28:52
Railroad mega merger & Google isn’t too worried
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- [00:00]
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- [00:40]
Neal Freyman
Good morning, Brew Daily Show. I'm Neal Freyman.
- [00:44]
Kyle Hagee
And I'm Kyle Hagee.
- [00:45]
Neal Freyman
Today, Meme Stock Mania has a new champion, Sydney Sweeney.
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Kyle Hagee
And we'll take a look at the birthday plans for an iconic American institution that is turning 250 years old. Today is Friday, July 25th. Let's ride.
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Neal Freyman
Yesterday brought us one of the most indelible images of the year. And if you don't know what indelible means, neither do I. But it sounds right. Anyway. The photo shows a cop arresting Chuck E. Cheese and escorting him out of a Tallahassee location in handcuffs. Apparently, authorities got a tip that the guy under the mascot had been stealing a customer's debit card and had used it six times to buy things at a smoke shop, meat market, and whataburger. In the police report, Tallahassee officer Jarrett Cruz explained how it went down. I grabbed his right arm while giving the verbal instruction, Chuck E. Come with me, Chucky. Meanwhile, there were kids in the Chuck E. Cheese's watching, mouths agape at their hero getting cuffed. That's the kind of image that haunts you forever.
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Kyle Hagee
Yeah, this. I saw a tweet under this image that said, we now know what the E stands for. Embezzlement. Which I thought was hilarious. I need the ACLU all over this. I want to make sure they had a warrant. I want to. We have to protect Chuck E. Cheese, an iconic American. We have to save Chucky.
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Neal Freyman
And now a word from our sponsor, Amazon Ads. Kyle, have you ever had to measure the success of an ad campaign?
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Kyle Hagee
No, I just talking to the mic.
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Neal Freyman
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Kyle Hagee
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Neal Freyman
You don't even need to sell on Amazon to be a part of it, but your Ads are right there on your audience's favorite content like Prime Video, Twitch and top third party tv.
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Kyle Hagee
Publishers gain the edge with Amazon ads by going to advertising.Amazon.com/start now that's advertising.Amazon.com/start.
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Neal Freyman
Now a potentially historic rail merger is in the works. One that would connect the west coast and the east coast with a single railroad for the first time in American history. Union Pacific, the West coast giant and biggest US Railroad by sales, said it was in advanced talks to merge with Norfolk Southern, which which dominates the eastern tracks. If this deal came to fruition, it would create a $200 billion freight behemoth and revolutionize the way all types of goods move around the country. Right now if you try to ship something from an L A port to New York, you won't find any nonstop routes, which as you know someone who browses on Google flights, can be frustrating. Cars crisscrossing the continent have to be moved from one railroad to another at clogged handoff points in cities like Chicago, Memphis and New Orleans. A Union Pacific Norfolk Southern marriage with new be transformative as the first coast to coast single line railroad, potentially delivering faster shipments, lowering costs and unclogging choke points. However, a deal could run into heavy opposition because right now the rail industry is less competitive than your family's weekly game of ticket to ride. The number of major railroads in the US has dwindled from more than 100 in the 1950s to just six currently, and bringing that six to five would raise concerns that this new company would have too much power, squeezing customers with price hikes and degrading service. Still, the companies seem prepared to fight those regulatory battles. When Union Pacific CEO was asked about the merger yesterday, he said if you stand still, you get left behind.
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Kyle Hagee
Yeah, this would be a major deal. It would create 90,000 miles of track and it would be the first coast to coast railroad. As you mentioned, we tried to do this in the past. George Jay Gould, going back to the Gilded Age came close to creating this, but the 1907 financial panic stopped his plans. Amtrak also runs coast to coast, but it's not technically all on their own track. So this would be a really big deal. I want to look at the regulatory approval. You had mentioned this briefly. There currently is two Democratic appointees and two Republicans on the Surface Transportation Board. That is the group that would have to approve this. It's chaired by a Trump appointee, Patrick Swift Fuchs, and he is seen as a proponent of industry consolidation. And so I have a sense that this would go through. However, it is likely going to be a long process. In 2023, Canadian Pacific closed a deal for the Kansas City Southern Railroad that was valued about $31 billion. The board took nearly 17 months to approve this merger. So even if this does happen, it's not going to happen tomorrow. It'll be really interesting to see how this plays out.
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Neal Freyman
And the reason for all that scrutiny is you have a bunch of trained customers like retailers, manufact manufacturers, suppliers of everything from coal to oil. They love to play railroads off of each other so they can get the best prices. Oh, Norfolk Southern, you know, I want you to come down because I got CSX over here and I got Berkshire Hathaway's BNSF over here where I can sort of solicit deals from everyone. If there's only a smaller amount of players, then you have just less negotiating power, less leverage, and those prices could go up. Norfolk Southern has also been talked about as a potential, potential target for a while now. You might remember their name because they were the railroad that had that big derailment in East Palestine, Ohio, that led to all sorts of contamination and the residents having to evacuate for a temporary amount of time. And they had kind of a cold plate Coldplay concert thing go down with their CEO last year who resigned after allegedly having an affair with the chief legal officer. So, so Norfolk Southern is not in a great spot. So it might, it might a bigger player like Union Pacific to come in and, and do a little rescue mission. But this would be a huge deal and I just want to put a point on the historic nature of it. It would be the largest ever buyout in the railroad sector and would also be the biggest transaction of M and A anywhere this year. And speaking of that, this wasn't the only big dealmaking news yesterday. We also had the Federal Communications Commission approving Skydance Media's $8 billion acquisition of Paramount, the owner of CBS, Paramount Studios Central and more. The steal, which had once seemed like a routine media merger, has become a flashpoint for politics, power and free speech in Trump's America. Brendan Carr, the Republican FCC chairman, said he greenlit the deal only after Skydance, which is run by Larry Ellison's son David, made commitments to offering a diversity of viewpoints across the ideological spectrum at CBS News and pledged to not implement any DEI programs going forward. Critics of the deal said these string strings attached sets a new alarming precedent for media mergers, or M and A of all kinds, that a president can wield his power over corporate dealmaking to stifle unfavorable coverage. Remember, Trump sued CBS 60 Minutes for an interview with Kamala Harris, which Paramount recently settled for $16 million. That settlement was bashed as Paramount paying Trump an extortion fee to secure deal approval by the company's leading stars, including Stephen Colbert, whose show was canceled earlier this week and what Paramount called purely a financial decision. The only member of the FCC committee to vote against approving the Skydance Paramount deal was Democrat Anna Gomez, who said in a statement that the agency was, quote, imposing never before seen controls over newsroom decisions and editorial judgment in direct violation of the First Amendment and the law.
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Kyle Hagee
That's right. And if you're on the Internet yesterday and felt like you were back in fifth grade because you kept seeing south park everywhere, you're not alone. Google searches for South park surged over 600%. They dropped a new episode. And south park, for context, was part of this big deal with Paramount. They signed a five year streaming deal, including 50 new episodes. The issue for Paramount is South park is not pulling any punches and they're actually going after the streaming service for their quote, unquote dealings with the president. And so Paramount got the deal they wanted, but their crown jewel of content is making fun of them. And south park is back in the news.
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Neal Freyman
It really is. It's everywhere. Okay, moving on. It's Friday. You know what that means? Stock of the week, Dog of the week, where we pick one stock that harmonized like CSNY and another that was pitchy like Bob Dylan. But with Kyle here, he's just so joyful and optimistic about everything. Picking a dog just doesn't feel right. So we've got two stocks for you today. And my stock of the week is Google. Remember, I was widely predicted to be Google's kryptonite. With the growing number of chat bots dethroning the Internet king by providing a more helpful and efficient search experience. Well, Google's proving harder to take down than most thought. Shares climbed nearly 4% this week to nearly an all time high after the company reported an impressive quarter that showed not only has its search business not been weakened by AI, it's only growing stronger. Search revenue grew 12% annually to $54.2 billion. A new record and much higher than expectations. Like a chess player under attack, Google has been deploying a variety of defenses to thwart its opponent's advances and even turn defense into offense. It rolled out AI overviews that gives you the information you want at the top of the search page without having to scroll through hyperlinks. It also launched AI Mode for search, a more direct rival to chat bots like OpenAI's ChatGPT. Those strategies seem to be keeping users on search and just as importantly for its business, keeping advertisers happy. According to SEO firm Bright Edge, Google Search Impressions, which is the number of advertiser links that appear in searches, grew 49% since AI Overviews was launched. Launched Kyle as they say, you come.
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Kyle Hagee
At the king, you best not miss. And with Google's surging stock price, I think we need to congratulate Sundar Pichai because he can finally join the billionaire club. I know he's missing out on those parties. His net worth is now estimated to be 1.1 billion. So he's finally eclipsed the Billy Mark. And the interesting kind of broader story here is we thought I was going to be very disruptive to search. It might actually just be expanding the amount of time that we use on the Internet. And you know, AI is pretty interesting. Normally innovative technologies disrupt the incumbents, but in some ways the amount of capital you need, the amount of talent you need, gives benefits to the incumbents like Google, who have the resources to drive AI across their whole product suite and to like Mark Zuckerberg, pay top talent, you know, sometimes hundreds of millions of dollars to come join them. And so while we thought I might be disruptive to Google, it might actually boost it into the coming years, the company is also just incredibly diverse. They have hardware, they have YouTube, they have Google cloud. So you know, I wouldn't bet against Google. And again, congrats to Sundar and you're.
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Neal Freyman
Very happy that he's a billionaire. But it is very rare to see a non founder be a billionaire. I mean, Jensen Huang, Mark Zuckerberg, they all founded the company as soon as Jeff Bezos. Jeff Bezos, he came in as a non founder and has just kind of grinded for now. He's the longest tenured CEO in Google's history. There's a lot of chatter about Google stocks specifically because it's really cheap compared to its peers. It's priced at about 18 times estimated earnings. That's by far the lowest of any company in the Magnificent Seven. The second lowest is a Microsoft at 33 times estimated earnings. So if you are on stock, Twitter or other forums that talk about stocks and which are the most undervalued stocks, there's a lot of talk about Alphabet because of how well it's played defense in the AI game and how cheap it is.
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Kyle Hagee
Sydney Sweeney has landed her toughest role yet. In this new role, she'll be playing herself as someone trying to convince the public that American Eagle is cool again. And so far she is crushing her role. That's right. My stock of the week is American Eagle who landed Sydney Sweeney as the main brand ambassador and launched its most expensive ad campaign to date featuring her activating on social CTV out of home, including Times Square, in the sphere and in their more than 800 stores nationwide. Now. Shares of the casual wear retailer rose 6% during Wednesday's session. Then the stock popped 17% in after hours trading. The ads put Sydney Sweeney front and center around the theme. Sydney Sweeney has great jeans spelled J E A N S. It feels like it's Sydney Sweeney's economy and we're just living in it. Neil. I feel like I've been transported back to seventh grade because is American Eagle cool again?
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Neal Freyman
American Eagle is certainly cool as certainly also a target of meme stock media had all of the features that have come to be characterized by these particular companies over the past week that we've seen shoot up in price for no apparent reason as high short interest. There's that brand recognition, there's that hint of nostalgia. Combine that with this super buzzy Sydney Sweeney campaign and yet a lot of people talking about it on WallStreetBets and other stock forums where these other companies have shot up recently. Now, earlier in the week we saw other kinds of meme stock mania. It was a little different than the Sydney Sweeney version because that was called dork companies. And I don't think Sydney Sweeney has anything to do with door companies. But those D O R K was Krispy Kreme which has the ticker don't D Nutty Open Door Rocket Mortgage and Kohl's were all part of this meme stock frenzy that happened earlier. It kind of fizzled out. But it seems like every day the torch is handed to another company and and yesterday the torch was handed to American Eagle with this hugely expensive, hugely visible marketing campaign with one of the biggest stars on the planet.
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Kyle Hagee
Yeah, the marketing meeting must have been like five seconds long where they're just like Sydney Sweeney and they're like, yes, book it.
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Neal Freyman
All right. Don't go anywhere. We'll be right back with a birthday toast to the U.S. postal Service.
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Toby
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- [15:18]
Neal Freyman
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- [15:21]
Toby
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- [15:25]
Neal Freyman
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- [15:43]
Toby
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- [15:54]
Neal Freyman
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- [16:00]
Toby
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- [16:17]
Kyle Hagee
The service you use to send birthday cards to friends around the country is having a birthday itself. That's right, the United States postal service turns 250 years old this Saturday, which means it was Originally established in 1775, a year before the colonies declared their independence from the British crown. Now, in modern times, you may be most likely to hear about the USPS from your grandma complaining about the price of stamps. However, it is seen by historians as crucial to the nation's independence and to keeping the young country unified in the late 1700s. In fact, it is the in the Constitution itself, specifically Article 1, Section 8, Clause 7, which grants Congress the power to establish post offices and post roads. Now, like any proper birthday, it's important to send some compliments to whoever is turning another year old. And the USPS truly does not get enough credit for its impact on the country and technological innovation. So I want to share a few things here. In 1918, USPS introduced airmail. They worked with the Army Signal Corps to use Leftover World War I aircraft to launch the service. Think about this. There was no commercial aviation, no airports, no radio, no navigation. And these efforts laid the groundwork for the major airlines that we know today. American Airlines, United Airlines, and a much more robust commercial airline industry. In 1963, they weren't done. They hit us with might be what might be their best performance to date? The zip code. And for the first time, mailing list could be digitized in computers and sorted in new ways. And then in 1965, they began to send large volumes of mail through OCR machines, which are basically a digital eye that would recognize addresses and make sorting mail much more efficient. Today, 98% accuracy for handwritten addresses and 99.5%.
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Neal Freyman
I do wonder how they can read my hand.
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Kyle Hagee
You might be in the 2%. Neil Neal, I think it's easy to think of government as non innovative or kind of technologically backwards. But for 250 years, the USPS has often been on the cutting edge of new technologies and found ways to kind of practically apply them. The question for you. Yeah, what are you getting the USPS for their birthday?
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Neal Freyman
What am I getting the USPS for their birthday? I am probably just going to send them a check because they need it. You know, you heap praise on USPS and the fact that they've been around 200 for 49.99 years is very impressive. But there's no birthday party without a little roast. And that's where I'm going to go. This service is in some financial dire straits. It's operated at a deficit for at least 15 years, losing $100 billion since 2007. There's no mystery why people don't send letters anymore. There's been a huge drop in that. And this service has come under a lot of criticism in the past about ways to shore up its finances, cut costs, figure out ways to make more money. There's been talk in the Trump administration of privatizing it. That's got a lot of pushback. There's a new Postmaster General, which is an exceptional name for a leader we got. David Steiner came in. He was the CEO of Waste Management for 12 years. He's pushed back against those privatizing calls. He said we need to keep USPS a public service because at its core, from its very beginning, it does things that are not economically sound. And that is the reason why it exists. It delivers mail to you, whether you're on the plains of Nebraska or the foothills of the Rockies or New York City, it will deliver mail to you, even if it's much cheaper to deliver mail to, you know, higher population centers than those rural areas. That's why USPS exists as a public agency. And David Steiner, the new guy, wants to keep it that way.
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Kyle Hagee
Yeah, Neil, you said you were going start with the roast, but it sounds like you came around to the USPS there by the end.
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Neal Freyman
Let's sprint to the finish with some final headlines. Hulk Hogan died at 71 yesterday, leaving behind a legacy as one of America's greatest entertainers and its most famous wrestler. Hogan by sheer showmanship is credited with helping transform pro wrestling from an under the radar regional circuit in the 80s into the multibillion dollar industry we know it as today. He squared off with the Rock. He toppled Andre the Giant. He teamed up with Mr. T at the first, first WrestleMania event ever put on. If there was a newsmaking wrestling moment, Hogan and his 24 inch biceps were at the center of it. Kyle. First Ozzy, then Hulk Hogan. The stage lights got a little dimmer this week.
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Kyle Hagee
Yes they did. And you mentioned onto the giant. 33 million people tuned in to see the fight between Hulk Hogan and Andre the Giant. And with today's media landscape, we just will probably not see those numbers again. So he was truly this iconic wrestling star that kind of transcended the sport and became an American icon. For all the kids who grew up going to a fast food restaurant, getting a large soda, going over to the soda founding and mixing God knows how many sodas together into the craziest drink of all time, I have good news for you. Your strategy has gone corporate. That's right. McDonald's plans to test to launch a range of refreshers coffees and dirty sodas which are spiked with add ins such as dried fruit and flavored syrup. Now beverages one of the hottest growing growth businesses for US restaurants providing kind of a bright spot as restaurants seek to attract inflation fatigued consumers. Sales at beverage and snack focused restaurant chains grew 9.6% in 2024. McDonald's will introduce these roughly 10 drinks in 500 McDonald's restaurants concentrated in Wisconsin and Colorado. So congrats if you live in either one of those states. I guess the McDonald's has decided you're crazy enough to try these drinks if you live there. Neil, would you try a McDonald's dirty soda?
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Neal Freyman
I don't quite get this trend and maybe it's just me being older and because as, as the beverage and dessert head of McDonald's said, the trends are all pointing in the same direction and we can say that's driven by Gen Z. So Gen Z is obsessed with these refreshers, these really, these iced, these very colorful drinks and every single fast food chain is rolling these out. Taco Bell unveiled a refresco's lineup. They sponsored this show and we promoted that refresco's drink, Wendy's has new sour Powerade options. And KFC is partnering with Mountain Dew on a dirty soda made with sweet vanilla cream. They expect this to be $100 billion market. You're starting to see fast food chains like burger King and McDonald's and Taco Bell start to compete against Starbucks, Dunkin Donuts and Dutch Bros. They're all kind of converging because people are buying so many drinks and specifically young people are buying these refresher drinks.
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Kyle Hagee
Yeah, I mean, I'm a big Bevy guy and also, I hate to admit on the show, but I drink energy drinks, so I feel like this is targeted exactly at me. So I will go try the McDonald's Dirty Soda and I will report back.
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Neal Freyman
All right, let me know. Let's say you have to fly there.
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Kyle Hagee
Yeah, we'll go to Wisconsin.
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Neal Freyman
Okay. It's a Friday in peak summer, which means some of you are listening to this from a vacation home. Is anyone perhaps listening from a vacation home in Maine? If so, you are currently in the state with the highest share of vacation homes in the United States. And Brian Potter's analysis of vacation homes on his substack. He looked at the geographic distribution of these houses across the country and found that rugged, beautiful Maine was the state with the highest percent of housing units that are vacation homes, with a share of 15.6%. Vermont was not far behind at 15.1%, followed by neighboring New Hampshire at 10.2%. Think you can guess the state with the lowest share of vacation homes? It's Illinois at 0.8%. As someone pointed out, that's probably because once you see Peoria, you never want to leave.
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Kyle Hagee
I love this article. I do encourage everyone to go check it out. It's just someone getting super nerdy and going deep on a topic that they're clearly passionate about. The conclusions were pretty funny. Americans like vacation homes on the beach, on the lake, near skiing and near amenities, so it kind of plays out. I want to give a special shout out to the upper Midwest. I'm from Minnesota. That was also a main area where people had a ton of vacation homes. I grew up going to lake houses all the time in Minnesota, so that was really fun to see.
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Neal Freyman
It's a really underrated vacation destination. There are memes all the time circling the Michigan area around Traverse City up there and being like, this place is so bad, you don't want to go here. And the thing is, anyone who's actually been there knows that it's a really incredible place. Finally have you ever looked at America's $36 trillion in debt and thought, I'd love to help chip away at that? Well, you can. In a post on X that went viral, NPR's Jack Corbett noticed that the U.S. government allows you to Venmo it to pay down the debt. If you go to the Treasury Department's website, there's a page called Gifts to Reduce the Public Debt that lets people donate through bank transfer, credit card, PayPal or Venmo. This program has been live for decades, just under the radar. And since late 1996, over $67 million has been donated. Even crazier than people donating money to the government to pay down debt besides taxes is how little that makes an impact in the grand scheme of things. With debt rising about $55,000 in a second, the total amount donated since 1996 is about 20 minutes worth.
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Kyle Hagee
Yeah, the real question is, what emoji do you put on the Venmo transaction when you Venmo the US Government? But I have an idea to solve the US Government debt right here and right now. I am going to Venmo them $40 trillion. That takes care of their debt. Put it all on me as my cross to bear. But we're debt free now, Neil.
- [25:47]
Neal Freyman
The problem is, Kyle, there is a maximum donation of $999,999,000. So you'd have to make that donation in 18 seconds or less just to keep up with the debt that's spiraling. So this is a little bit insurmountable. But hey, if you want to help out, I'm sure they would want you to chip in any way you can. You can go to that website probably just to laugh at the idea. Okay. That is all the time we have. Thanks so much for starting your morning with us. Have a wonderful Friday and an even better weekend. Kyle, thanks so much for joining us as well these past two days. Toby will be back on Monday, maybe. If you have any thoughts on today's episode, send an email with questions, comments or feedback to Morning Brew Daily at Morning Broadcom, you've made it to the last day of Password, where we'll reveal the fifth and final clue to the game, asking you to find a secret word from a series of hints. So if you haven't responded with your answer yet, open up your notes app with the clues from the past few days and write down this one. The password means to pick up the pace. The password means to pick up the pace. When you've got it, head to the form in our show description to submit for a chance to be the winner, which will reveal early next week. Okay, let's roll the credits. Emily Milian is our executive producer, Raymond Lute is our producer. Our associate producers are Olivia Graham and Olivia Lake. Hair and makeup is summering in Kennebunkport, Devin Emery is our president and our show is a production of Morning Brew.
- [27:14]
Kyle Hagee
See y' all on Monday.
- [27:23]
Neal Freyman
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- [27:29]
Toby
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- [27:31]
Neal Freyman
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- [27:40]
Toby
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