Disney Goes to War Against the FCC & People Can “Rent Now, Pay Later”

**SPEAKER_1** (0:01)
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**Neal Freyman** (0:28)
Good Morning Brew Daily Show. I'm Neal Freyman.

**Kayla Lopez** (0:31)
And I'm Kayla Lopez.

**Neal Freyman** (0:32)
Today, Disney goes to war against the FCC.

**Kayla Lopez** (0:35)
And people are using Buy Now, Pay Later for rent. It's Wednesday, August 19th. Let's ride.

**Neal Freyman** (0:51)
A busted cocaine drug ring at Penn State might have brought us one of the best nicknames in recent memory. So this week, the Pennsylvania AG charged 14 people, including current students, with running a major drug ring at two off-campus frat houses at Penn State, where pledges and members were made to cut and package coke in what officials described as an upper-level trafficking organization for this region in Pennsylvania. The ringleader of the scheme, Agostino Abbottiello, has been dubbed Pablo Pledgskabar. And despite the seriousness of the allegations, you have to admit that this is an incredible nickname. The internet had a field day with others wondering whether Austin Powders was an accomplice or Nostral Domus should have seen this coming.

**Kayla Lopez** (1:33)
Gosh, those are funny. I didn't see those last two. I really love that. Honestly, I've heard of some crazy hazing stories in my day, like cleaning the entire house with a toothbrush while listening to Hilary Duff, but making your pledges cut and package cocaine for your high level drug organization is pretty crazy.
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**Neal Freyman** (1:56)
Did you get hacked again?

**Kayla Lopez** (1:57)
No, I learned my lesson after the 11th time. And that lesson was cybersecurity as we know it is dead. The truth is the old model was built on protection, safety nets, recovery plans, systems designed to withstand the last era and maintain the status quo.

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**Kayla Lopez** (2:20)
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**Neal Freyman** (2:29)
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We have a saying here at Morning Brew Daily, whenever you hear about bonds on this show, it's usually not great news. And so it is again today. Surging bond yields have hit historic milestones this week. Jacking up borrowing costs and signaling something, several things, might be a little rotten in the economy. First, the numbers, then the reasons behind them. This week, 30-year US Treasury yields hit their highest level since 2007, 19 years ago, while French long-dated yields are the highest since 2008, and Germany's the highest since 2011 Remember, yields rise when prices fall, so this jump indicates demand for sovereign bonds has fallen. It's been really rough on governments which issue these bonds to fund their spending plans, but now must pay a lot more in interest. I promised the reasons, so here goes. It seems like bond yields are rising due to a mix of factors. One, concerns that inflation will heat up and central banks will have to raise interest rates. Two, deteriorating government finances, widening deficits and ballooning debts across many countries. And three, competition by corporations, which are issuing bonds in record amounts. Wall Street is divided on whether it's time to be super worried or not. Some say the bond market is sending a clear warning about rampant inflation and government overspending. Others say we've seen a rise like this before and weathered the storm perfectly fine.
Overall, though, it does mean that it's going to cost more to finance anything you'd want to buy.

**Kayla Lopez** (4:07)
Yeah, first, I'd like to point out that it is really scary and shocking that 2007 was 19 years ago. I don't like that time is moving too quickly. But I'd like to dive a little bit more into one of the factors that you mentioned, which is corporate bonds. So what could be causing additional pressure on yields? Well, corporates are looking to borrow more money for, surprise, surprise, AI.
As they're trying to build out AI or increase their spending and computing power, they are turning to the bond market at near record levels. Basically, they're asking the market for huge loans to help finance their investments in AI technology. According to Bloomberg, so far this year, investment grade companies have sold about $1.5 trillion with a T of bonds, which is up 36% from last year and is on pace to be the 2020 record. So how is this impacting government bonds? Why does this matter at all? Well, Bloomberg outlines something here called the crowding out theory. This is basically the idea that when governments borrow a ton of money, it actually crowds out corporations, basically means companies don't have a ton of flexibility to borrow money at cheaper levels so they have to increase their yields in order to be competitive. Well, this is actually the opposite of that. It's the reverse crowding out theory. This is basically saying that companies are asking investors to finance their debt and people are so interested in AI investments that they're actually selling their US treasuries to buy these longer dated corporate bonds that offer higher yields.