Morning Brew Daily
Anduril Scores $22B US Army Contract & Inflation Sours Rate Cut Hopes
Thu, 13 Feb 2025
Episode 518: Neal and Toby talk about the latest inflation report that came in hotter than expected, tossing high hopes of more Fed rate cuts. Then, Palmer Luckey’s defense-tech startup scores a big contract with the US Army, courtesy of Microsoft. Also, Olipop is leading the pack in the prebiotic soda category as it raises $50M in its latest funding round. Meanwhile, Neal shares his favorite numbers on YouTube, GoFundMe, and Valentine’s Day flowers. Finally, a recap of the biggest headlines from the day. 00:00 - Denmark wants to buy California? 2:40 - Inflation gets hotter 8:00 - Anduril scores US Army contract 12:00 - The prebiotic soda wars 18:00 - More YouTube on TV than on mobile 20:00 - GoFundMe raises record funds for LA fires 22:00 - Miami Flower Gateway 24:50 - Sprint Finish Subscribe to Morning Brew Daily for more of the news you need to start your day. Share the show with a friend, and leave us a review on your favorite podcast app. Check out https://wise.com/business for more! Listen to Morning Brew Daily Here: https://link.chtbl.com/MBD Watch Morning Brew Daily Here: https://www.youtube.com/@MorningBrewDailyShow Learn more about your ad choices. Visit megaphone.fm/adchoices
Chapter 1: Why is Denmark interested in buying California?
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Chapter 2: How is rising inflation affecting Fed rate cuts?
Good morning, Brew Daily Show. I'm Neil Freiman. And I'm Toby Howell. Today, a TikTok war has broken out between prebiotic soda brands, and the only winner is gut health.
Then inflation heated up in January, which cooled off the Fed's future rate cut plans. It's Thursday, February 13th. Let's ride.
Get ready for a whole lot more Legolands in California. In response to President Trump's efforts to buy Greenland from Denmark, a satirical petition has been set up to raise money for Denmark to buy California. And as of yesterday, it's gained over 230,000 signatures.
The goal, according to the petition's Swiss-French organizer, is to raise $1 trillion, give or take a few billion, to purchase California from Trump. and comment on the absurdity of the US wanting to buy Greenland. Toby, are the people ready for Disneyland to become Hans Christian Andersen Land?
I was just thinking California could use a little more Hygge in their life. But seriously, Neil, think of all the cross-cultural combinations that could occur. A California burrito with traditional curd herrings in it instead of french fries. A California club on s'more broad instead of multigrain. The possibilities are endless and honestly very hard to pronounce as well. Why stop there though?
Let's toss in Florida while they're at it. Now a quick word from our sponsor, Wise Business. Neil, you ever get overwhelmed by all the paperwork involved in modern life?
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Chapter 3: What is Anduril's new contract with the US Army?
I went to the dentist the other day, five forms, and don't even get me started on tax season.
Now imagine you're an international business owner. It's like a never-ending game of where's Waldo with all the fees and paperwork.
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Chapter 4: Why is Olipop leading the prebiotic soda market?
Yesterday's CPI reading for January came in hotter than expected with prices jumping 0.5% from December pushing the annual inflation rate up to 3% from 2.9% last month. The Fed has been doing everything it can to try and guide that number closer to its 2% target, but inflation is ignoring all road signs and driving the wrong way down a one-way road.
It was the sector's most watched by consumers that led the charge, with price rises from groceries to gasoline, offsetting declines in clothing and furniture. Egg prices especially need to slow their ovular role. The egg shortage caused by a bird flu outbreak has pushed prices up 15.2% over the past month and 53% since last year.
That contributed two-thirds of the total increase in grocery prices alone since December. Neil, that sound you're hearing is J-PAL and the Fed doing absolutely nothing, and you'll probably hear it for a while longer.
Due to stubborn prices, the market now expects the Fed to keep interest rates at their current levels until December, a huge shift from last year where traders penciled in four rate cuts in 2025. 30% believe there's a chance that there won't be any rate cut this year, up from 20% earlier this week. Needless to say, this was not a great inflation report.
No, this is like the end of a Marvel movie where you think everything's going fine and then you see the next villain for the next movie and our heroes have to battle it out over the next installation in the franchise. And that's exactly what's happening here with inflation. The biggest monthly increase in one and a half years. You're right. Jerome Powell is like, well...
Hell no, I'm not cutting rates into this environment. We have strong job growth, low unemployment and really hot, hotter than expected and hotter than comfortable inflation. So the Fed is absolutely going to stay put and consumers are feeling the pinch right now with, you said,
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Chapter 5: How are YouTube viewing trends shifting?
pretty much every category across the board, especially those consumer ones, groceries, gas, airfares, prescription drugs, all went up significantly. And so this is what we're living with. There's no, the disinflation that has occurred over the past year and a half has hit a wall.
Absolutely. And the kind of underlying outlook for the economy is also very uncertain due to a lot of these Trump era policies, tariffs, deportations, tax cuts, deregulation. All of those are expected to have some sort of economic impact, likely an inflationary impact.
Chapter 6: What is the impact of GoFundMe's fundraising for LA fires?
We already know that tariffs could increase the price of goods, but even stuff like deportations that may limit the labor supply at a time of pretty low historically on U.S. unemployment, which could put upward pressure on wages, which could put upward pressure on prices.
So that is kind of the fear alongside this inflation report is that we haven't even necessarily entered into these potentially inflationary policy period that it looks like we are heading towards.
Chapter 7: How is Miami becoming a flower gateway?
But just the expectation of inflation coming up could spur inflation itself. It's that self-fulfilling prophecy that economists warn about because say you're expecting inflation in the future, which we know U.S. consumers are. There was that big consumer expectation reading last Friday that showed a huge jump in inflation predictions because you're going to start
buying stuff now because it's only going to get more expensive. That drives more demand, that drives price increases. You're seeing this in the auto industry already. Trump has threatened tariffs, 25% tariffs on Mexico and Canada, which would, according to the Ford CEO, cause chaos.
Chapter 8: What are Neal's favorite numbers this week?
in the auto industry, people are going to buy that car now if they're thinking about it over a three to six month span. You're like, why would I wait until maybe these tariffs come in and the price of a car is going to go up $3,000 on average. So just the expectation of inflation creates inflation itself.
Yeah, and I do just want to talk about eggs one more time. We've talked a lot about eggs, but I saw a few people yesterday because the market, when the inflation reading came out, took a little bit of a red turn.
Everyone's like, basically, you know, billions of dollars in equities are being destroyed because egg prices are too high right now because 15% was doing a lot of the heavy lifting in this report. But... The egg shock, whatever you want to call it, filters through to a lot of other items in the grocery store. Think stuff like baked goods that actually take eggs as an input.
But there's also the substitution effect. So when you see eggs going up in price, you might opt for another source of protein like beef or chicken. But then you see those prices going up as well. So even though it is just one little source of white or sometimes brown protein, it does filter through a lot of other parts of the economy and other parts of especially the grocery store.
Yeah, that 15 percent increase was the biggest monthly increase since 2015. And you already see large grocers like Costco, all these Trader Joe's limiting the amount that people can buy. So we really are in an egg shock, egg crisis right now. Startups named after things in the Lord of the Rings are upending the existing order in the U.S. defense industry.
You already know that Palantir, the military-focused data analytics company, was the best-performing stock in the S&P 500 last year. Now, Anduril, named after the sword that was reforged from the shards of Narsil in Rivendell, is making its move. The defense upstart is taking over Microsoft's $22 billion contract to make high-tech goggles for the US Army.
Known as the Integrated Visual Augmentation System program, it was supposed to equip soldiers with mixed reality headsets for things like identifying drones quickly or night vision capabilities. But Microsoft fumbled the bag over the past few years and now, pending Pentagon approval, will take over the project.
It's a breakthrough for Andrew Riel and its CEO, Palmer Luckey, who you maybe remember from founding virtual reality headset company Oculus and selling it to Facebook for $2 billion. In a blog post, he wrote that everything in his life has led to this moment, saying that he first recognized the combat potential for high-tech goggles when he was a teenager.
If you think that sounds crazy, Lucky would agree with you. He wrote, Gandalf's hair just went from gray to white.
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