Fed Holds Rates Steady & Disney Opening a Theme Park in Abu Dhabi
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Good morning, Brew Daily Show. I'm Neil Freiman. And I'm Toby Howell. Today, pray for Disney adults after the company announced it was building a new theme park in a surprising location. Then a single sentence uttered by an Apple exec shaved $150 billion off of Google's market cap. It's Thursday, May 8th. Let's ride.

It is a very special day for me and everyone else who is 5'8". May 8th, 5'8", is our height day. So happy height day to all the just below average kings celebrating today, including Zac Efron, Ed Sheeran, Eminem, Robert Downey Jr., and Tom Holland. What a crew. Neil, I could have sworn, at least according to your dating profile, that your height day isn't until tomorrow, though. Funny how that works.

But must be the shoes you're wearing today. Anyways, my height day isn't for a while. Cannot wait for July 9th, everyone. And now a word from our sponsor, Planet O. Neil, remember that game everyone would play in middle school where you'd plan your life out? Dream job, dream house, dream partner. Oh, yeah.

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You know when you're driving and it starts raining really hard, like enough so that your wipers can't keep up and you just pull over to the side of the road and wait it out? That is what the Federal Reserve is doing right now. The U.S. Central Bank held interest rates steady at their meeting yesterday. The same level rates have been at since December because Chair Jerome Powell says the economic picture is too foggy to do anything but hang on the sidelines.

We don't feel like we need to be in a hurry. We feel like it's appropriate to be patient, he said. And when things develop, of course, we have a record of, we can move quickly when that's appropriate. Powell and millions of U.S. businesses have been sent scrambling in the past few months after President Trump launched massive tariffs on the rest of the world to reshore manufacturing. Many of those tariffs remain in limbo, but 145% tariffs

on China are in effect and trade is plummeting. In a stark warning for the economy, Powell predicted that tariffs could drive up inflation and slow economic growth down the road. And probably the headline quote from his press conference, he said, if the large increases in tariffs that have been announced are sustained, they're likely to generate a rise in inflation, a slowdown in economic growth, and an increase in unemployment.

In other words, he's warning of stagflation, an unusual but noxious combo for the economy where prices are higher, but people are still getting laid off from work at the same time. Still, this is Powell gazing into his crystal ball because as it stands, tariffs have not yet significantly impacted the economy. And so Powell remains in wait and see mode.

I feel for him a little bit here, Neil, because how many different ways did the dude have to say, things are uncertain, we're going to have to wait and see, which is exactly what he did again yesterday at the news conference. He used some version of the word wait 22 times. 22 times. The costs of waiting to see further are fairly low, we think, so that's what we're doing. That was...

Another big takeaway alongside the stagflation quote. And I don't blame him either because things are uncertain. The Fed does need to wait and see because for every data point of weakness, you can turn around and find an equal data point of strength. For example, April's job report, strong exceeded expectations. The economy added 177,000 jobs.

But the latest GDP report, weak, ew, gross. The economy contracted 0.3% in the first quarter of the year, albeit with a surge in imports. So you are seeing so-called pieces of hard data, which is what Jerome Powell wants to look at, kind of contrasting each other, not even to mention

the bits of soft data that the hard data is also contrasting. And the soft data would be like plunging consumer sentiment and people generally feeling bad about the economy. And the reason that Powell is in this, you know, position of paralysis is that because their two goals are really intention right now, they're butting up against each other. Their two goals, the fed, this is their mandate. They want low unemployment and low inflation. But in the scenario that we, that he predicts this stagflationary scenario is,

that leads to very confusing moves with interest rates, because if the Fed was more scared by inflation from these tariffs, then they'd keep rates high because that brings down inflation. But if they were more scared by the job market cratering, which is economic

slow growth, then they'd cut rates. So there's two things that are being held in tension right now. It's like opening up your fridge and you see your three day leftovers and you also see like moldy carrots and you're just like, eh, I'm probably just going to go to bed without eating dinner because both these situations

And that's exactly what Powell is facing right now. I'm ordering out if that happens. But we're also seeing a divided monetary policy between the U.S. and the rest of kind of the U.S.'s peer groups around the world. For instance, the European Central Bank, they've cut rates seven times. April was their seventh rate cut in as many consecutive months.

meetings for them. So the divergence there is pretty stark and it's also pretty straightforward. You know, other economies are imposing this large tax on imported goods. So that's probably one thing that's diverging the U.S. from the rest of the world's monetary policy. And then let's look ahead into our crystal ball a little bit. We'll rely on what traders are expecting the Fed to do going forward. And right now there's a 76 percent chance the Fed holds rates

steady again at its next meeting in June. That is up from 69% chance yesterday and just 33% chance a week ago. So clearly, you know, stasis is the name of the game going forward. It looks like the market is not pricing in any other cuts in the immediate future. That can keeps getting kicked down the road as we hear Jerome Powell, you know, say wait 22 different times at his press conference.

Apple and Google's partnership, one of the most lucrative pairing in tech, is running into more issues than your summer fling. After a senior exec at Apple made some comments during his testimony in the DOJ's antitrust lawsuit against Alphabet, Eddie Q, Apple's senior VP of services, dropped a market-moving dagger as he spoke about the two companies' $20 billion a year deal that makes Google the default search engine for Apple devices.

Q said that Apple is, quote, actively looking at other providers to revamp the Safari search browser on its devices, name-dropping AI-first companies like OpenAI, Perplexity, and Anthropic as potential replacements for more traditional search engines like Google. He also added that searches on Safari fell for the first time last month due to users turning to AI.

Investors did not like the sound of that one-two punch at all, and Alphabet shares fell over 7% yesterday, wiping out $150 billion from its market cap. A quick recap of how we got here in 2023. Judge Amit Mehta found that Google had illegally monopolized the online search market, calling out its deal with Safari as an example of this. Everyone was back in the courtroom yesterday for the remedies portion of the trial, where Judge Mehta will determine the fate of Google's search business in the coming days.

Neil, if legal challenges compelled these two check giants to dismantle their decades-long agreement, it would be seismic. Google would lose a key distribution deal that would see its search engine pop up on more than 2 billion active Apple devices worldwide, while Apple would lose a $20 billion a year revenue stream. A lot on the line here. Huge deal. That one sentence, you know, is such...

a landmark moment perhaps in this AI revolution. Ever since ChatGPT was released in October, November 2022, we've been waiting for this moment. When would be the moment that AI search options would start to replace Google? For the past three years, Google has done just fine. Earnings report after earnings report, they said search traffic is up. Even recently, last week, they said, yeah, we're raking in the money faster

advertising money is flowing in. There's no problem here. There's no weakness. And then all of a sudden, Eddie Q gets up here in this trial and says, you know what? Actually, Safari searches are down because people are using AI. And going forward, we probably are going to consider using AI services like OpenAI and Perplexity in addition to Google, which threatens Google's dominance that it's, you know, had this huge

lord over this market for decades. And we're finally seeing maybe some dents in the armor. But I will say Apple is not necessarily someone who's going to come out unscathed from this either, because Q wants Google and believes Google should still remain the default search engine of Safari, because one of the remedies that the Justice Department is proposing here is that ban

they want to ban Google from paying companies like Apple to be the default search engine. And then Apple is kind of sitting there looking at it going, wait a second, why are we getting the short end of the stick on this punishment that is supposed to be given out to Google? The idea that Google did something wrong and now Apple is going to lose a $20 billion a year revenue stream is something that Q said just seems crazy to me and keeps him up at night. So it's not like

you know, Apple is saying these things to hurt Google, even though that one line did in fact hurt Google. Apple is trying to preserve a relationship that is incredibly lucrative for them as well. So that is the subtext of this thing is that, you know, Apple has some stakes in this as well. And that's why some analysts were theorizing that maybe Q is playing some 4D chess here by announcing that there was true competition to Google search and

And, you know, they started this trial. You know, they first launched this suit many years ago before AI was even a thing. So maybe, yes, they earned $20 billion a year from this, and Apple very well knows that. So maybe this was him incepting into the judge's mind that, yes, Google does have competition because it would be bad for both Apple and Google. Let's move on. Disney reported earnings yesterday, and that sound you're hearing...

It's their flywheel spinning. Yep, that's the sound of a flywheel. Revenue was up 7% as it relied on some old magic to drive new dollars. The theme park segment was once again the standout, with revenue in the parks experience in product segments rising 10% compared to last year. Though the sell America sentiment creeped into global markets a little bit and rained on Disney's parade abroad, Disney's outposts in Shanghai and Hong Kong saw lower attendance and increased costs, hurting operating income.

But Disney is unfazed by some international headwinds and dropped some pretty big news yesterday alongside its earnings. It's beginning work on a new theme park in Abu Dhabi that represents the company's first foray into the Middle East.

Once it opens, potentially amid the early 2030s, it will be Disney's seventh global property as it tries to milk more out of the park segment that contributed nearly 60% of the company's operating income in 2024. Elsewhere around the flywheel, its movie business is still humming along with the live-action blockbuster

Mufasa, The Lion King pulling in a very quiet $720 million worldwide contributing to this quarter's revenue as well. And Thunderbolts is still sitting as the top movie in the world. It's been a little bit of a rocky stretch for Disney, Neil, but it looks like it's got its emperor's new groove back. If you think Orlando is hot in the summer, oh boy, the misters are going to be purring in Abu Dhabi.

Let's talk about this new theme park. Very strategic location for Disney. It is the largest global airline hub between Abu Dhabi and Dubai. More than 120 million passengers travel through those two places each year. One third of the world's population lives within a four hour flight of Abu Dhabi and then.

A key flight here is the flight from Mumbai to Abu Dhabi. It takes just three hours and 17 minutes. India is the world's largest population. There's a growing middle class there. And Disney is moving into these markets to create the next generation of Moana fans. And this terms of agreement that they have with Abu Dhabi, I mean, they are putting up zero money at all.

Yeah, it's being constructed on a Yoss Island, which is basically just created specifically for this reason to host theme parks already. This island features Ferrari World, Warner Bros World, Sea World. So it's actually a little weird that it's not Disney World coming to this. I know it is Disney World coming. Disneyland. Disneyland. Yeah, so clearly this is kind of

the leisure center of the UAE's push to gain these tourists. And yeah, they are shouldering the entire cost of development and construction. Disney will just come in to oversee the creative design. They're putting their Imagineers on the ground there to try to cook up a good park over there. They'll also manage the park's operations and then reap royalties from it. But yeah, it does seem like a really good deal that Disney

You know, the Dubai is taking Abu Dhabi's is taking on all of the developmental cross costs while Disney just gets to sit back and, you know, make it look like how they want it to look up next. Let's talk about some more numbers and Neil's going to take over for Neil's numbers.

Toby, you ever get served an ad that just makes no sense whatsoever? Yes. One particular platform thinks I'm obsessed with Fabergé eggs. Maybe because we keep talking about egg prices. That also proves that a lot of the time the best B2B marketing gets served to the wrong people. I have purchased over 17 Fabergé eggs in the last two weeks. I, wow.

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Welcome to Neil's Numbers, the segment where I share three stats from the week's news that will have you feeling like the Knicks and your less informed friends like the Celtics. My first number is 12 years, which is how long it's been since Netflix's homepage got a wholesale makeover. Well, reset the clock to zero because Netflix is rolling out a brand new homepage. Some of you will see beginning next week as part of a campaign the company is calling the New X.

The new Netflix has come a long way from the old Netflix. Back in 2013, when Netflix first introduced its current homepage, it had just over 30 million subscribers, according to the New York Times. Now it has more than 300 million subscribers, giving its homepage more influence over content decisions than virtually any other entertainment platform. So,

So what is going to be different? For one, the endless tiles populating your screens with shows and movies are being vastly trimmed down with more video and animation taking its place. The display will also be way more responsive to what you're searching for. So for example, if you're searching for a war documentary, the home feed will almost instantaneously populate with more content from the same genre.

Exec said the change was a response to more people logging into Netflix and not knowing what they wanted to watch. So the platform's design needs to do more work in suggesting the right picks for them. Plus, they've got a whole lot of live programming now that they want to highlight. This is a big change because this is probably the most powerful page in all of entertainment just because of the

of the amount of subscribers that Netflix has. So there's major implications for the industry because over the past decade, almost every single streaming platform that rolled out copied Netflix's homepage because, you know, why not do what the market leader is doing? So the fact that it is changing now, everyone is going to be paying attention to what they're doing. That little algorithmic change that you mentioned is fascinating too and is kind of informed by TikTok a little bit, the same way that people go on TikTok and say, wow,

My algorithm really knows me. Everyone talks about their algorithm and how they built it brick by brick. Netflix wants that same experience to happen when you open their homepage where somehow it knows exactly what you want in real time. So it is a fascinating shift. Instead of just having these static tiles, they have more dynamic movies, more dynamic, you know, just...

feel and look in general with that algorithm powering everything. And that's not the only inspiration they're borrowing from TikTok because they also said they're going to be testing a vertical video feed in the Netflix app on mobile where you scroll TikTok style through their shows and movies. And they think that this is what

how people consume movies and TV. And I know you basically watch every movie in 60 second increments on Instagram. I've seen like all of billions without ever turning on billions on, yeah, on short form video. So that's something that some of you might see on your mobile Netflix app coming up soon. Okay, my second number highlights the breathtaking amount of front running going on to rush in products to the US before tariffs kick in, especially in the pharmaceutical industry.

Facing the threat of tariffs on foreign-made drugs, the U.S. imported an astonishing $20 billion more of pharma products in the first three months of 2025 than it did during the same period last year, $68.7 billion versus $48.7 billion in the first quarter of 2024. The record inflows came as President Trump on Monday threatened to unveil tariffs on drugs made abroad in the next two weeks, which would be an

unprecedented action intended to boost domestic drug production. Many of those drugs being rushed in are coming in from Ireland, where U.S. pharma companies have set up almost two dozen factories to make products like the weight loss drug Zepbound that contributed to the U.S.'s trade deficit with

Ireland more than doubling year over year in the first quarter. Toby, the level of stockpiling happening, especially in pharma, is just astounding. This data only goes up until March too, so that doesn't even include the frenzy that happened after April 2nd, which was Liberation Day, but March was an insane month. Total imports exceeded $50 billion, which was the equivalent of 20% of

all pharmaceutical imports in 2024. So just in one single month. Then how about this crazy sad Ireland that you mentioned, which is the top drug exporter to the US, actually had a larger trade surplus with the US than China did for the first time ever. So that just goes to show you the scale of this and how they were trying to get ahead of this tariff madness. Okay, my final number is 233%.

which is the number of U.S. cities where a typical starter home costs at least $1 million, according to Zillow. If that sounds like a lot, it is. 233 is nearly triple the number from five years ago. Meanwhile, million-dollar starter homes are creeping into areas that were once considered affordable places to live. Now, half of all states, 25, have at least one city where a starter home

with million-dollar starter homes, including Minnesota and Rhode Island. Five years ago, there were just 10 states on this list. Just to define our terms here, Zillow considers starter homes the least expensive houses in a given market and those in the bottom third of home values in the area.

So the fact that those are $1 million in a growing number of cities, it reflects a housing market that is increasingly out of reach for Gen Z and millennials who are starting families. And the younger folks have stayed on the sidelines. Get this, the median age of a first-time home buyer reached 38 last year, the oldest on record, and their share of total home purchases dropped to 24%, also a historic low. I mean, these are not luxury listing here. I mean, bottom third, these are not

the top properties, these are supposed to be starter homes. And it is just crazy to see some of these names pop up on the list. I mean, Nevada, Utah, Missouri, Michigan, Minnesota, New Hampshire, even Kansas is on this list, which just seems wild to think that there are places, there are pockets within Kansas that

that have million-dollar homes as the baseline, as the bottom third percentile. And you are seeing that manifesting in young people. A lot of young people are saying, we're just skipping starter homes altogether. Roughly two in three Gen Z renters say buying a starter home and upsizing later makes no sense anymore. Three in five millennial renters say the same. So we are hearing that from young people. Starter home is almost not even a thing anymore because in what

What world is a million dollar something that anyone can afford as their first home unless you're doing quite well for yourself? Now let's sprint to the finish with some final headlines. MrBeast is doing his part to raise literary rates in America by releasing a novel with one of the more prolific authors of our generation, James Patterson. The biggest YouTuber in the world is hoping his viral instincts and massive following can power as many book sales as video views.

and publishers certainly think he's got what it takes. The New York Times reported that there was a heated bidding war to land this collab project, with offers pouring in in the eight-figure range. As for what the book is going to be about, it's about the most Mr. Beast-sounding thing you've ever heard. According to the New York Times,

The novel will center on an extreme global contest in which 100 players compete to prove their skills by surviving life-threatening tests in dangerous locations around the world. Neil seems like he's literally copy and pasting the core themes of his videos, big prizes, crazy challenges,

into book form and letting it rip. - I literally couldn't believe that this was the plot of the book, was basically his videos, but then when you think about it, this is what he does. He knows the formula. He has 390 million YouTube subscribers from this formula, and he thinks that it will port over to the book,

world. So I can see why all of these publishers were scrambling over this deal. Like it was a Mr. Beast challenge because yes, Mr. Beast, most followed YouTuber in the world, James Patterson sold more than 400 million copies. You put them together. I mean, if this doesn't go to the top of the bestseller list right away, something's wrong. Yeah. Patterson is almost the Mr. Beast of the book selling world. And I mean, you could take that derogatorily or you could take that like, man, this dude moves a lot of books because he's

He does have this model where he's more of an outline guy at this point than actual author. He works with co-authors and he kind of acts as almost a director or a showrunner. He doesn't do much of the writing himself. So he's got his formula paired with Mr. B's formula. That is a lot of formulas doing their thing. That's what I would call myself in all the group projects in college. The outline guy. I'm just the outline guy. There you go.

Neil, it's time to start picking out our tuxedos because the Golden Globes is officially adding the best podcasting category next year. The awards show that has long focused on more traditional entertainment categories of film and television are branching out into podcasting. The category will feature six nominees chosen from the top 25 most listened to podcasts. So we've got some ground to make up.

We just came off an election cycle where podcasts played a major role in shaping public opinions about the candidates. So maybe it was time for the audio medium to make its way into the big leagues of award shows too. Very cool. I mean, not just that we're in podcasts, but it's just a sign that this industry is really growing up. There was a new report out yesterday that showed that the industry sales total was more than double most estimates. Alan Coe reported that the global podcast industry generated $1.

$7.3 billion in sales last year. And I remember when I started at Morning Brew in 2017, that number was like $300 million. So this medium has exploded. It's gone into video with Spotify and YouTube. Now the number one and number two platforms really leaning into video. So we'll see who wins in 2026. We do have to, we have to get into that top 25 before then. And finally, Utah's hockey team is getting a permanent name, Utah Mammoth.

During the franchise's inaugural season last year, it was known as Utah Hockey Club, but that was just a placeholder. The owners held four rounds of fan voting on a new name and even potential logos, and yesterday they announced the Utah Mammoth won,

Why mammoth? Because more than 10,000 years ago, herds of mammoths set up shop in Utah, presumably because of the delicious dirty sodas, and lots of fossils have been found since. Plus, according to the team, evidence suggests mammoths charged in herds at speeds exceeding 25 miles per hour, comparable to the speeds reached by the fastest skaters in the NHL.

Sure. Either way, Toby, Tusks Up, what do you think of the name? Tusks Up, I like it mainly because this was just a very long process for the club. They had four rounds of fan voting, 850,000 ballots cast, and they kind of had narrowed it down to a few names. One was the Venom, one was the Yeti, and it looked like the Yeti was getting a lot of momentum, but they ran into some trademark and copyright issues because of

of Yeti coolers actually. And they were trying to work with Yeti a little bit, but it just didn't come to fruition. So they landed on a mammoth, which is interesting because Cronky of Cronky sports and entertainment who owns the LA Rams and also the national lacrosse leagues, Colorado mammoth was very supportive of it adopting its name as well. They've been trying to, you know, find a way to, you know, create a new brand in a world where

a lot of brands are already taken. So it is interesting that if you are a mammoth fan, that doubles across the National Lacrosse League and now the NHL as well. One of these days, you know, there's going to be a very literal name that sticks. This was, they were Utah Hockey Club for a year and then they became the Utah Mammoth. We also had the Washington football team before they became the commanders. At some point, I hope someone just

sticks with the very strict literal name of just saying the sport and then team like they do with soccer in England and in the MLS, I guess. Okay, that is all the time we have. Thanks so much for starting your morning with us and have a wonderful Thursday. If you have any thoughts on the show, please reach out. Send an email with any questions, comments, or feedback to morningbrewdaily at morningbrew.com.

Let's roll the credits. Emily Milliron is our executive producer. Raymond Liu is our producer. Our associate producers are Olivia Graham and Olivia Lake. Scoop Stardaris is on audio. Hair and Makeup is also writing a book with James Patterson. Devin Emery is our president, and our show is a production of Morning Brew. Great show today, Neil. Let's run it back tomorrow.