Good Morning Brew Daily Show, I am Neal Freyman. And I'm Toby Howell on today's pod. American credit card debt hit a milestone
that has got to be freaking out. Dave Ramsey and we were a roller coaster
ride over the past few years. Just took a major turn. Then ESPN is finally jumping
into the sports gambling world in a drama filled deal
that leaves Barstool Sports out to dry. Plus, a game designer is opening a new
Holocaust museum in a surprising place. The battle Royale game, Fortnite. It's Wednesday, August 9th. Let's ride. Okay. So I played a board game. It was Settlers of Gatton
against Toby last night. And let me just say, if you want a calm, relax and game night,
Toby is not your guy. I mean, this was the most intense board
game experience I've ever had. You could see this kid's competitive genes
kick in. There was pacing, there was yelling. I think there was even a little foaming
at the mouth.
It's Neal's being so mean to me. That's why Sellers of Catan
allows you to target certain players. And I felt like I was being unjustly
targeted by you and your brother. So I'm surprised we're sitting here together today
because I didn't think we were going to make it into the studio
this morning. It got intense for sure. Neal ended up beating me so big. Congrats of a Toby. Oh, honestly, Toby is way better,
and he was guiding me along. So thank you for your for your guidance
and your mentorship I've just gotten. Toby's really good.
He plays, he plays online a lot. So if you want to play Toby,
do you have like a username or something? I'm going to keep that username.
Oh, great. Because I don't want people targeting me,
you know? Got it, Got it. I maintain my competitive advantage. Congratulations, Neal. That's. That's what we'll leave it at. Everyone give Neal congratulations.
Thank you. Well,
we'll pause there and let everyone do it. Now we're done. All right. Let's jump into our top story, where we have big news
at the sports media world. Last night, the gambling giant Penn
Entertainment and the media company Barstool Sports announced
they were splitting up. And yes, Neil, there is drama
because Penn dumped Barstool for another suitor,
the worldwide leader in sports, ESPN. So remember, Penn took a stake in Barstool
back in 2020, valuing the company at around $551 million
with the idea of merging its presence in the gambling world with barstools presence
on every frat bro's Instagram page. The marriage got a little rocky over time
as Barstool and Penn tried to roll out the barstool sportsbook nationwide,
but was often met with regulatory resistance due to bar stools reputation
in some cases. So enter ESPN, though they provide a much bigger reach,
some barstool with a squeaky clean image. Penn is paying ESPN $1.5 billion over the next ten years for the right
to be its sportsbook provider.
With the pair rolling out ESPN
bet in 16 states this fall. Neil pretty seismic deal
not only for barstool is left out to dry, but it's wild to see. espnW Finally fully embracing gambling. Right. So Bob Iger, who's the CEO from his previous stint as CEO, he was like, We are not getting into gambling
because we are the house of mouse.
We are this family friendly institution
that you come to for your kids entertainment,
and we do want to be associated with those, you know, and save
those unsavory bettors over there. But it's just crazy how the tide has turned since the Supreme
Court allowed states to legalize sports gambling. I think about 30 states now offer
legal sports wagering. And ESPN is in some dire straits
right now. It used to be Disney's cash cow. But as users have cut the cord on cable,
ESPN is looking for new revenue streams.
And this seems like
a pretty natural extension. And Bob Iger has kind of changed his tune. Yeah, absolutely. And you know, what I think
is kind of funny, too, is Bob Chapek, which was the CEO in between Bob Iger
since his thing, he's like, I'm kind of want to do sports gambling
and Bob Iger is always against it. But this was like the one thing that Bob Chapek did
that Bob Iger was like, All right, fine. I'll give you this one. Bob, but I would like to call out. It's not a sure thing that this is
definitely going to succeed because Fox Corp. and Flutter Entertainment,
they created Fox Bet a few years ago,
and it's barely made a dent in the U.S.
Gambling landscape. It's under 2% market share. So it's one of those things where on paper
it makes a ton of sense, like ESPN is by far the biggest sports
provider on the Internet. So it probably should succeed,
but it's not a guarantee that it can just break into a market
that's kind of dominated by FanDuel and DraftKings, right? We put up a chart on our YouTube page
right now that says that shows
how dominant FanDuel and DraftKings are. Looks like FanDuel has 37% of the market
and DraftKings is almost 25%. And the analysis here was that FanDuel
and DraftKings don't really need ESPN. Why? Like, why did Penn is a
is a quite a small player in the US market
as we're looking at this chart. And it's like, why didn't they you know, why didn't ESPN partner
with someone bigger? Why did they go with someone who's more
a regional player who's smaller? And that's because DraftKings and FanDuel
are doing just fine on their own.
They don't think they need maybe,
you know, you said ESPN has a pristine reputation and all of that,
but their reach is kind of lessening in this new age where sports
media is a little more fragmented and going into places like Barstool, that people are just like,
I don't really need ESPN as my news provider anymore for sports, except
they do carry a lot of the live games. They have a lot of those rights
that we talked about yesterday. So I'm just nervous about the Journal,
this thick integrity associated with this deal, too,
because now that ESPN's incentives are aligned
with the gambling market, anything that they report on that moves
a line in either direction ends up benefiting them in some way. So I'm sure they will take
a lot of necessary precautions, say all the disclaimers that like their editorial initiatives, are separate
from their gambling initiatives.
But I do just part of me is a little sad
and a little nervous that like this reporting is going
to directly influence ESPN's Ball. You already have gambling shows. You have gambling shows,
but now they are directly profiting off of because they own their own sportsbook
at this point. Let's quickly touch on the barstool thing
because Penn bought Barstool in 2020, paid
over 500 million in total for a stake. And now, according to reports, it's
kind of just giving it up for nothing. Back to the founder, Dave Portnoy. It's kind of a sign that this deal
did not work out for Penn at all.
It thought it could use Barstool
as leverage on digital platform seems to as a use for acquisition
for its sports books. But it just did not work out. And it's kind of saying I parcel,
let's just go our separate ways. You weren't exactly what we needed
to grow our gambling presence in the US. Yeah, and you kind of see Penn Stock
jumped at one point.
It was up 30%. It settled around 10% by market close. So people clearly see this
as like a positive. I mean, ESPN is bigger than Barcelona,
no matter which way you cut it. Yeah.
And I mean, the reports were that Dave Portnoy was getting his stake
in Barstool back for $0. There were some stipulations
that went on top of it. If they eventually do sell again, Penn would receive 50% of that
like, liquidation event. So but so a lot of people are saying like big win for Barstool
because finally they have control. They don't have like these regulators
breathing down their neck again. So they got in a lot of trouble
over stuff. They said, yeah, it stopped them from getting gambling
licenses in certain states for sure. All right, moving on. I've got a big round number alert, which
I feel like we need a sound effect for. Do, do, do, do go. Anyway, last quarter, American's credit
card debt shot up to more than 1 trillion for the first time ever, according
to numbers released by the New York Fed. That's 193 billion
more from the start of the year and 264 billion above April 2021 levels, which was the lowest point
since the beginning of the pandemic.
So what's going on? Well, everything is more expensive. Inflation has made things cost more and rising interest rates
have only made things worse. Plus, more
people are just getting credit cards. So it stands to reason that more credit cards
in circulation will lead to more debt. There are 70 million more credit card accounts open
now than before the pandemic in 2019. So this might all sound like a three alarm
fire for the economy.
1 trillion in credit card debt. But it really isn't. Context
is everything. And as a financial advisor, Josh
Brown points out, the economy, household net worth and home equity have all grown
much faster than credit card debt since the pandemic started. As it stands now, credit card
debt is just 6% of the total deposits. Households have in the bank,
which is about the lowest percentage in two decades. So certainly a milestone
you don't really want to hit. But I don't think this as bad as that $1
trillion. Yeah, headline suggests
it does make me nervous.
That is like that is just so much debt. But yeah it's a it's a weird thing
we're like this debt is a sign of a relatively healthy economic environment
because as long as consumers have enough money in the bank
to kind of service that debt, pay off that debt,
then it's not a bad thing. The one thing that is on
the rise is delinquency rates, which are up to 3.18% from 3%, which honestly is kind of in line
with historical norms.
But delinquency rates
fell a lot during the pandemic because we got stimulus checks,
stimulus checks, which put a lot of money in the bank
for people. Plus, no one was buying anything either, like a lot of economic economic activity,
ground to a halt. So that was definitely like a magical time
where delinquency rates fell and now we're seeing it return
to kind of normal levels.
Yeah. And I want to talk about the
fact that other kinds of debt Americans are in a really good position
for because of low interest rates and they locked in those low
interest rates in 2020 and 2020, 2021, specifically, you know, mortgages,
I mean, 73% of outstanding mortgages in the US have a rate below 4.4% right now
because everyone refinanced back then. And that is lower than most
savings accounts that you can get. So other kinds of debt
besides credit card debt, we can there are these fixed rates
that people locked it locked themselves
into a couple of years ago, and they're sitting really pretty over
the next few years. We should have bought a house.
Neil,
what the heck were we doing? Well, we had three months in 2020, right? Like March, April, May and June in 2020. You could have bought a house
for really cheap then at a rock bottom interest rate
and feel really good about it. I know we didn't
we didn't have the cash flow at the time, but we if we have a time machine,
let's go back and grab ourselves a house. So definitely the Fed was like,
so far consumers have withstood the economic difficulties
and they're super resilient. There are some warnings, as you mentioned. I mean, there there is there was a report
yesterday from Bank of America that more Americans are tapping there
for one case for emergency savings. And you have these student
loans coming due. Finally,
after more than three years in October, we've been saying that that is coming. And so there does seem to be increased
stress on households, but maybe not the super alarming three alarm threat, the three alarm fire
that the 1 trillion suggests for sure.
All right. Now let's move on to our next story,
where we go to the ultra hyped anti-obesity drug is demonstrating
it has rains that would make Joaquin Phenix proud. Yesterday, results from a late stage
clinical trial showed that it cut the risk of major
cardiovascular episodes like a stroke or heart attacks by a whopping 20%. Wegovy was originally so only supposed to treat weight loss
and it is very good at that. Helping people lose 50% of their body
weight over the course of 6 to 8 weeks. And now we get news that it also helps
treat the number one cause of death in this country, which is heart disease
to truly the Bo Jackson of drugs. Now, the study is not peer reviewed yet
and Wegovy is not ready for mass distribution as of now.
But Neil,
what can't this drug do? This one? This is a blockbuster result. If you just look at what the analysts had to say, what was it
like if they played baseball in Denmark? We'll go v just hit a home run, which I don't know why
you go with a baseball metaphor. If you know that
they don't play baseball in Denmark. I went with the baseball medicine
for to that with Bo Jackson. So it clearly lends itself
to some sort of a yeah. Baseball metaphor. And then Barron's was like,
without a doubt, this makes Wegovy and Eli Lilly's similar drug. Munjal Without a doubt. This is their fate
as the bestselling drugs of all time because expectations were on the high
end of the range that this would reduce risks of these major cardiovascular events
by 15% the most, and this came in at 20%. And so this sent their stocks absolutely flying
and they were already crushing the market. But Novo Nordisk,
who makes Wegovy and Eli Lilly, just absolutely rampaged
over the market yesterday.
Yeah, Novo Nordisk jumped 17%. That equated to a gain of $60 billion
in market cap. And this is a race to watch. It's closing in on LVMH as Europe's
most valuable company, which at the start of the year,
like a lot of people, never probably you've never heard of Novo Nordisk
and now it's breathing down. LVMH is now quite, quite the rise. And yeah, you're totally right. It's a rising tide
kind of floated all boats because a lot of these drug companies
have similar drugs to each other. So Eli Lilly jumped 15%. So did Weightwatchers. Actually, that jumped 13%
because a lot of people thought these drugs
would be bad for Weight Watchers, but they're incorporating it
into their weight watching program. So, again, like these stocks were just up
and to the right yesterday. And one thing we really should mention
why this is a really important result is because it will put pressure
on insurers to cover this, because previously these drugs, you know,
an anti-obesity drug is considered a lifestyle drug.
It's not a need to have thing. But now that it reduces heart risk
or it's been shown to reduce, you know, heart risks,
then this is an overall health issue. And insurers will start covering this,
maybe not tomorrow, but in the next few years,
Medicare will cover this. And these things are super expensive, 1300
dollars a month for weekly injections. So that is one of the major consequences
of these findings, is that we're going to start
getting insurance for this. Yeah, it is crazy. We get news every single week
that these drugs do something, something better
or some additional effect. And yes, there
we do have to say like this study wasn't peer reviewed yet,
but it included 18,000 adults. And Novo
Nordisk says they're going to present more in-depth
findings at a conference later this month. So, honestly, 20% reduction
in cardiovascular events is going to be good news no matter which this story
going forward here will be production.
Yeah, if they can. They can they build enough factories
to make the to meet the demand here or else you're going to see
supply shortages for years, for sure. All right. Now, before we jump into our next story,
we're going to take a quick break. All right. I want to take us to the offshore
wind industry, which is currently facing 40 mile per hour gusts as projects
get delayed and canceled on both sides of the Atlantic In recent weeks,
at least ten offshore projects, amounting to $33 billion, have been pushed
back or stalled in the US and Europe, which are counting on wind power
to meet their aggressive climate goals.
Exact say the industry is facing its
first ever crisis, so why aren't these things getting built? First of all, cost like we talked about
with the Georgia Nuclear reactor last week, these projects,
these power projects are hugely expensive, costing tens of billions of dollars,
and many wind companies are just finding it just won't be profitable
to continue spending money on building offshore wind farms,
especially as costs for materials like steel and label
labor and labels have soared. And then this is what I really want
to talk about. There is fierce opposition
by local governments in the US who are making the permitting process
a living hell. Despite a big push by the Federal
government to build offshore farms, cities and towns across
the US are saying Not in my backyard. Also known as NIMBY. According to the National Renewable Energy
Laboratory, 461 municipality has put zoning
restrictions on wind wind turbines as of last year, which is quadruple
the number from 2018.
These offshore wind farms are just running
into all sorts of problems. Yeah, it's tough. And the one that people have kind of been
keen in on is it's called Ocean Wind One, which is the largest offshore wind project
to clear a federal regulatory hurdle that's happening about 15 miles
offshore of New Jersey. And that's what was crazy to me
is that there's all these not in my backyard, all these NIMBY saying
it's bad for property values, it's bad for tourism, it's
bad for the environment. But the thing I looked up is how far
can the human eye see on a clear day? The human eye can only see three miles
and this is 15 miles offshore.
So I don't buy the not my back yard
argument. It's so I mean, I understand
where they're coming from, but I looked it up like we could only see
three miles and that's 15 miles offshore. This is an ocean City, New Jersey. And a lot of us on the podcast
have been to Ocean City, New Jersey. You're underestimating how
crystal clear those waters and that sky. It's man, it is beautiful down there.
But yes, this is there's been a huge mounting opposition
to it down in Ocean City. And this is seen as a proxy
for battles up and down the East Coast. There are 31 projects in development
from Martha's Vineyard, Cape Cod, all of these beach towns.
And a lot of the residents
there are saying this is over industrialization of our area. We want to keep our beaches pristine. They are employing tactics
that some would say are not so accurate. Like you just mentioned there. A big thing has also been the fact that surveys for wind
projects are going to kill whales. And experts say marine experts say that
that is just simply not true. And they've kind of lobbed
all the a bunch of other false accusations in their campaign to stop it. But they filed the lawsuit
and they could very well win.
And, you know, you can tie up companies
with a local permitting process. It is I'm not going to say the word,
but a B word on for for any developer to do anything else. Local government. Yeah. As anyone who's on like a zoning planning
or signing or planning board knows,
I think it is just the double. They're just getting caught in
between angry local governments. And just like inflation has been destroying these wind farms
because I mean, one Swedish developer had to sell the project
off the coast of Britain because cost between 40% to $16 billion
like we're talking in the billion range. It is very similar
to the nuclear power plant we mentioned in that
just opened in Georgia.
Like these things. Over the long run, they're net positive like they are
a more renewable energy source. But in the short term, like, dang it,
it hurts. It hurts the wallet. You're seeing local. You know, America has a very strong
local rule, right? Like we love our state governments,
we love our local governments. We don't want the federal government
telling us what to do. And you're seeing that play out with wind
farms here because the federal government I mean, Biden has has offered
a $1 trillion in subsidies and tax incentives for renewable energy
through the Inflation Reduction Act.
So there's this big push
from the federal government, and then you have local government
meeting it with a ton of opposition. It's getting tied up in a lot of stuff
isn't happening. Yeah, and you saw this when a lot of cell
towers went up in the nineties when, you know, mobile phones turned out
and the federal government through telecommunications companies was like, we need to get these cell towers up
So you have service and then local, local governments
were like, absolutely not. We don't want big cell towers
ruining our property values or looking like, you know, weird
in our local stage, our VU all over again.
And what happened
there is the federal government kind of Congress passed an act that said
that kind of stripped a lot of power away from local governments
to stop these projects from happening. And maybe it'll do something here
that would be very contentious. So we will see. All right.
Moving on to our next story. I said it on a podcast on Monday. You can't beat a comeback story. We were just kidding. There is no comeback story here. The struggling co-working
co-working company warned yesterday that its future is in substantial doubt
and that it could soon file for bankruptcy as its financial position
dwindles from bad to bankruptcy level. Bad It is a remarkable fall from grace
for a company that just 40 years ago was one of the most valuable startups
in the world. At a valuation of $47 billion. At one point in 2018,
York was the largest Occupy buyer of office space in New York City,
topping JPMorgan. But just like Icarus, we were soared too
high, too fast, and it got burned.
CEO Adam
Neumann left the company in disgrace. Its valuation plunged. It scrapped its planned IPO, and then COVID ripped out the office
market from under it. There are so many documentaries
you can watch to understand this story, but it's truly
not in a good place right now. Yeah, it's down 96% and stock is down
96% over the last year. To me, though, it's always
been a little confusing because we work has said that their offices are back to what
their pre-pandemic occupancy rates were.
They're 72% full. So the company technically did recover
to where it was pre-pandemic. And that was the other thing
is that a lot of analysts and a lot of at least the narrative within we work
was that the pandemic and remote work and this move to
hybrid work was actually going to help. We work because people wanted more flexible
working arrangements, but I guess that just hasn't come
to fruition and their debt load is just to be,
I think I think they they say they saw a lot of churn
from membership, so people were going into works but maybe
not finding it valuable enough for them. So they canceled and they saw net loss and total occupancy
and memberships over the last quarter.
But I was one of those people where
I'm thinking I'm a CEO, I have employees in maybe six different cities
across the US or the world, and I want them to get a little office
environment and maybe a few days a week so they can meet each other
and work on projects. Why not get a we work in L.A., Chicago, Salt Lake City, wherever you are,
and bring your employees back there. And I was like, Oh, this is going to be
great for we work this new hybrid working arrangement, this gradual return
to office a few days a week. Yeah, but it's just too expensive,
I think. Yeah, like that may be working for them,
but they just have too much office space that they built up during that. Adam Neumann era that they are. It's just like their, their profitability
is just not going to work out even if they get more people back.
Yeah, and here's the other thing too,
that confused me is Iwg is another flexible office lease company
that actually lets building owners and floor owners
lease out their desks to workers. They're killing it like they had a 48%
surge in profits for the half year. They made $252 million in profit
in the first six months of this year. So clearly the flexible office model can work as long as you like,
structure the economics correctly. It's just we work in too big, too fast,
like zero interest rate phenomenon, bought too much office space. So I guess our IP, we we can't say RV, we
know that but it's it's teetering first.
I know in a few weeks
I'm going to actually say a comeback story about WeWork and not
and it won't be a joke. All right, Neil, let's move on to our last story,
which takes us to the world of video games where Fortnite maker Epic Games
just made a bold decision to open a virtual Holocaust museum
within the game. So why is this a bold decision? While Fortnite is not exactly
a serious place, you can hit emotes
players characters like a humanoid banana and it's more known for its
no scoping than its introspective content. But the game designer Luc Benard behind
the project is all aboard the Fortnite hype train. That's because the game has over
239 million monthly active players, giving Bernhard's museum a much larger reach
than an IRL museum could ever hope for.
And with a 2018 study finding
that 80% of Americans have never visited a Holocaust museum in person,
it could be a powerful way to educate people who would have never
otherwise had the experience. What do we think about this
move from Epic games? Yeah, I mean, when you first hear
that news, you get like this. You're like,
wow, this is this is going to be weird. But the more you read about it,
the more you read about the intention behind the project
and the thought that went into it, you're like,
Damn, this is actually awesome because not like 80% of people
are going to a Holocaust museum, of course,
because they're only in certain cities. You have to pay to go in.
And the fact that you can get going on Fortnite, where people already
are, I'm not I don't know whether if you're in Fortnite, you're like, well,
you know, I'm done battling. I want to go look at a Holocaust museum. Fortnite has expanded to have these
creative modes of not actually fighting and Fortnite did are epic
learned its lesson too because they hosted Epic 2021 in-game event
that was celebrating Martin Luther King. And during the event
everyone was dancing like they were being just what you do in Fortnite,
which is it's an unserious place to be. And so this time around, they're not
allowing you to bring weapons in. You can't break anything.
You can't dance in the museum. So they are trying to infuse it
with as much decorum as you can in a virtual space with these characters. But yeah, I'm on board
with like creating further interesting. I think virtual museums in general
kind of suck.
Like, remember during the during
the pandemic, you know, the MoMA and all of these art museums had like
come visit a virtual gallery. And I was like,
I went online for like 5 seconds. I was like, This is super boring. But Fortnite is definitely more immersive. And the thought that went into
this is really interesting because he is Luke Bernard,
the designer, is trying to tell stories that really haven't been told before
and that might be appealed to a younger audience like what happened
to Sephardic North African Jews, which, you know, I would say
if you go into a regular Holocaust museum in real life,
you wouldn't see a lot about then and maybe the Black Panther tank battalion
that liberated a concentration camp.
So I think this is pretty cool. Yeah, I'm I'm bullish on virtual spaces
because you got to meet the kids where they are these days. And the kids are increasingly
the youth are increasingly playing Fortnite, playing
Roblox, playing Minecraft. So overall, I think I am bullish on this
trend of creating like these virtual spaces for for people to enjoy things
they wouldn't otherwise enjoy. I need some guardrails,
but it looks like they're doing that all right. That is our show. I forgot
I was the guy that wraps up the show. I hope everyone has a great Wednesday. If you want to write in and let us know
whether you'd want a wind project in your backyard, our email is Morning
Brew daily at morning become.
Emily Milian is our editor and producer
Samantha Velez and Raymond Liu, our associate producers. Ray flew in from California yesterday. We actually met him in the flesh
for the first time this morning. Can confirm
he is a real person. Real person. Real person. You, Shinhwa Ogawa, is our technical
director. Billy Menino is on audio. Hair and makeup is staging a boycott
because no one acknowledged my haircut. Devin Emery is our chief content officer
and our show is a production of Morning Brew. Great show,
Neil. Let's run it back tomorrow..
