US Economy Powers Through Rate Hikes & Did Man City Cheat?

Good morning, Brew Daily Show. I'm Neil Freiman. And I'm Toby Howell. Today, AI is misbehaving far more than we knew. Then Manchester City kicked out of the Premier League. It could happen thanks to financial breaches. It's Monday, September 28th. Let's ride. Good Monday morning, at least here in the stormy Northeast. It was a rough weekend for doing anything outside. So instead, everyone was debating a list of the top 100 TV shows of the 21st century the New York Times just released. Going from 5 to 1 is Fleabag, Succession, Mad Men, The Wire, and in the top spot, Breaking Bad. I don't think that'd exactly be my top 5. Personally think Better Call Saul was better. Fleabag had all of 12 episodes, and Succession may be a case of recency bias. But Toby, as someone who doesn't watch a lot of TV, what's your take? I felt really lucky. I'm not going to lie. The take I most aligned with was, where is The Sopranos? Like, how could you leave out The Sopranos? Well, it was made in 1999, so it wasn't part of the 21st century. Here is the list that I have the most respect for, though. An ex-user, Robbie Pierce, ranked the best 100 shows of the century by how many times they've appeared as an answer in the New York Times crossword. Neil, can you tell me what the number one most mentioned crossword answer show is? Like a show? It's a show on the list. I'm blind. I'm blanking. Amongst the list. Give me a hint. It's four letters, and it starts with L. I was going to say silo, because that seems like it's pretty, I mean, that doesn't start with L, but it has very generic crossword letters. What is the show? Oh, Lost. Lost. There it is. I just needed to talk it out. You needed to talk it out. It goes Lost with 231 mentions, then House with 106. So Lost is by far the most. Then Atlanta, actually, Beef and Andor. You need those A's. You need those vowels. So that was the list that I most. You know, could relate to. And now a word from our sponsor, Roku Ads Manager. All right, Neil, pop quiz. Where do people spend the majority of their screen time? I'd probably say social media. Streaming TV is actually number one ahead of social media, with an average of three and a half daily hours spent watching. No wonder 70% of advertisers are increasing their streaming budgets in 2026. And a lot of that is being pulled straight from social. Yeah, and many of those advertisers are bringing those budgets. To Roku. At the top smart TV operating system in the U.S., the scale alone speaks for itself. Roku is offering a $5,000 match to first-time spenders on Roku Ads Manager. Just head to advertising.roku.com slash MBD and use code brew5k. Despite inflation, tariffs, high interest rates, and ever-rising treasury yields, the U.S. economy's role simply cannot be slowed, like the American team in singles at the President's Cup. But while a hot economy. A hot economy sounds great on the surface. A hot economy next to two-decade-high treasury yields has economists nervous because it raises the possibility that the Fed will have to go full Boulder, Colorado and hike, hike, hike. The Fed's biggest tool for controlling inflation is raising interest rates. Higher rates are supposed to cool economic activity by making borrowing more expensive, discouraging business investment and big-ticket consumer spending. But companies are so gung-ho about AI and its eventual returns that they are continuing to build. Despite higher borrowing costs. Meanwhile, a string of economic reports show that instead of slowing down the economy, it appears to be accelerating. The jobs report showed hiring picked back up in August, while layoffs have remained low. Manufacturers also had a very strong quarter. Those signs of strength mean interest rates are likely to stay higher for longer. So if you're asking investors to lock up their money in a treasury for 10 years, they demand a higher return to do it. Still, danger looms with that 10-year yield hovering. Over 5%, it means everything from mortgages to car loans are more expensive, putting consumers metal to the test. You know, we've got ourselves a robust economy, but right now, the stronger it gets, the harder it may be for interest rates to come down. Let's look under the economic hood to understand why rising bond yields or bond yields of over 5%, which is that symbolic threshold, are supposed to slow down the economy. One reason is that they raise borrowing costs that is supposed to slow growth. The other reason is that they raise borrowing costs that is supposed to slow economic growth. But then I have to finance it, and I look at these rates, and I'm saying, okay, no, it's actually not, it's going to be expensive for me to pay back all that interest. And the other way that higher bond yields are supposed to slow economic growth is that perhaps you are an investor and looking to say whether I'm going to invest in stocks or bonds. And you see bonds, wow, 5%, 6%, that's pretty good. That makes this stock look less attractive, so I'm going to put my money in. And bonds and stock prices do fall as a result, but yeah, we're just ripping apart the playbook here because those two breaks on the economy just aren't doing anything to slow it down. The issue, too, is that when you have borrowing costs that are elevated for an extended period of time, it just increases the chances that something breaks. Because right now, you can support the weight of higher borrowing costs because the AI boom is being, it's booming. You know, companies are still investing. They're doing business investment, even though technically they should be pulling back. Consumers, too, just are kind of powering through because the job market is propping them up. But that's a house of cards. It's a very fine line once you stay in a place where rates are elevated for longer. And so you can just go back through history and see how the economy. The economy reacted in similar times to this. John Roque of 22V Research identified 16 similar rapid increases in the 10-year treasury yield over the past 50 years. And every single one was associated with some form of financial disruption. That can range all the way from a massive market crash, if you go back to 1987, if you go back to the dot-com bust, to the housing crisis. Or it can be something like a string of bank failures like we saw in 2023 with the Silicon. Valley Bank imploding. His warning was something always breaks. So, again, right now we are telling this story as the economy is hot and it can support these higher borrowing costs. But it just decreases the margin of error. Yeah, but we may have never seen anything like the AI build-out. In fact, we haven't. People say it's the biggest infrastructure build-out that America has ever seen. And these companies like Meta, Amazon, Anthropic, and OpenAI are not as sensitive to interest rates. And they're not as sensitive to interest rates as they were when they first started out. So, again, we have to keep an eye out for these companies. And we have to keep an eye out for these companies. It's basically these companies, if there is a 50 basis point increase like we are seeing in the 10-year treasury yield or other borrowing costs, the returns on AI investment are so great that they'll literally just shrug it off. What he said is the result is that the most capital-intensive construction cycle in the United States is being driven by entities for whom the cost of capital is at a first approximation. It's one of the most important reasons why the economy has absorbed a substantial rate hike cycle without cracking. So, it looks like these guys are just going to continue to build data centers. That powers construction jobs. That powers consumer spending. And it looks like that may not be breaking. The problem is Kevin Warsh at the Fed, it wants to slow down the economy because a hotter economy means higher inflation. He needs to get that back to 2%. So, what he might do is pull the emergency brake and crush literally everything that's not AI data centers because, as we've talked about, we still build on. And that's bad news for the rest of us who aren't building data centers. Yeah, just final note here. For more than a decade, the assumption was that capital was cheap. It was plentiful. Now, it is becoming more scarce and more expensive. What does that mean? It's definitely a new reality that everyone is going to have to adjust to. You know when your car is making a weird noise, you bring it into the shop. They look into it and go, oh boy, you got some major issues here. That's what's happening in AI right now. Turns out the OpenAI agency. Agent Swarm Hacking Hugging Face was just the tip of the iceberg. OpenAI, Anthropic, and outside security researchers are now investigating tens of thousands of incidents where AI agents went rogue and weren't on their best behavior, Axios reported. Those incidents include things like hijacking websites, creating message boards, and escaping sandboxes researchers built to keep them from getting out. A number of those episodes have come to light over the past week. There apparently was an attack on an Australian government website back in June. We learned that. OpenAI agents interacted with U.S. government websites in unexpected ways and leaked 53 images from chat GPT users online. The revelation that there are literally tens of thousands of these mishaps, likely more, comes amid a furious debate over what to do about AI safety. Leaders of the top two labs, OpenAI's Sam Altman and Anthropic's Dario Amadei, have urged for a slowdown in development on cutting-edge models until they can build sufficient guardrails. On the other side, NVIDIA's Jensen Huang and President Trump say, The battle lines could be redrawn as more of these concerning cybersecurity breaches come to light, because it seems the more you look, the more you'll find. So some context is needed when you talk about tens of thousands of incidences, because Anthropic, OpenAI, all these AI companies, they're conducting hundreds of thousands of these tests, and they are deliberately trying to put them in adversarial experiments. It's not like these agents are, you're asking them, to, you know, book them, book a restaurant reservation, and suddenly they're attacking government websites. A lot of them are deliberate sandbox environments where they are stress-testing them to see how do they behave, do they want to to escape etc also anthropic uh said that their new opus 5.5 system attempted to escape a sandbox and 1.5 percent of test runs which actually on the surface you're like oh pretty low but then that that number needs context too because if you if you extrapolate that to the millions and maybe even billions of agents that will eventually come online as this technology becomes more widely adopted that gets a little more scary actually because one and a half percent that can easily turn into thousands or even tens of thousands of real world incidences so both numbers need a slight bit of context maybe the 10 000 seems worse than it actually is but then also 1.5 percent error rate if you will is probably worse than it sounds too yeah let's just look at one example of what happened here so in the australia incident which broke last week we learned about it actually happened earlier in the summer but basically an open ai agent gained unauthorized access to australia's medicare statistics database which it pulled public and non-public files from then maybe the more concerning part was how open ai addressed this australia's government said they just sent a letter to or an email to a generic government address they australia's called that unacceptable and they want to haul amadei and sam altman to their senate to answer questions about this hack and then they've also looked into or open ai agents have also interacted with u.s government websites in ways that these these companies find unacceptable and they're not going to be able to answer questions about this hack the reason we're seeing a lot of this government website stuff is that when you give these agents a task they need to find information often government websites are the place that has the best information but the problem is they are so persistent they are relentless they work harder than uri has ever ever worked and they won't stop at anything to find out the answers so whether they want to get whether there's a block you know if there's a blocker to a website there's a filter or something and we need a login credential we'll just say never mind like i just won't do this particular task but these agents will find out the answer and they're going to find out the answer we'll find every single way around that and that's what's concerning to these companies just this morning though we saw nvidia sort of put its foot down and say how do we address this ai security problem and they came out with a better cage essentially instead of trying to stop ai progress like some in the industry are calling for nvidia's like wait a second why don't we just have better safety systems and so they introduced the open agent safety platform which they say is a two-layer security system that's going to be able to do a lot of things and they're going to be able to do a lot of things that's meant to control autonomous agents the first line of defense is you basically let developers establish rules governing what an ai agent is or isn't allowed to access that's kind of table stakes for this but then they have a second layer that it's calling sentry which is essentially you watch the watcher and if sentry finds an agent that is doing suspicious things it can kind of ixnay it in milliseconds so they are open sourcing all of this they are putting their foot down and saying look better security is how do we address this ai security problem and how we solve this issue not uh stopping frontier ai development like a lot of the abs have kind of said they're going to do now the kicker is that these systems are built on ai uh hardware that is from nvidia itself so there's certainly some self-interest involved here but it is kind of showing what the ai debate is is coming to either you slow things down or you build better safety systems nvidia is in favor of open sourcing and building better safety systems so that's kind of speaking of breaking containment did you see snl so this this ai safety story is completely broken out of its sandbox from it used to be an academic conversation about you know the the death of humanity a few years ago but now after dario amadei wrote that blog post and jacob cox and the researchers said i'm quitting because there's a 10 chance of humanity it's in the public consciousness and we saw that on snl the big guest quote-unquote guest on weekend update was somebody portraying dario amadei as this more person who's going to be in the public consciousness and we saw that on snl the big guest quote-unquote figure who's basically asking people to regulate us because we can't stop building tools that may destroy humanity one quote from the snl was ai is not a weapon it's a tool a tool for building weapons and i urge you to urge me to stop let's move on it's winner of the weekend time the segment where neil and i picked two stories that had a better weekend than the shellacked gourds who made it out of storage for the first time this year i'm switching things up though and picking a loser of the weekend that loser is the english premier league side manchester city who have been found guilty on 114 of 115 charges related to breaches of financial regulations manchester city has been one of the most successful football clubs of the past 20 years winning eight league titles seven league cups four fa cups and one champions league city's rise to footballing royalty came after sheik mansour a royal from abu dhabi took over the club in 2008 the injection of cash from the uae meant city was suddenly challenging for titles and the city's rise to footballing royalty came after sheik mansour a royal from abu dhabi took over the club in 2008 the injection of cash from the uae meant city was suddenly challenging decades of wallowing in mediocrity but the same transformation that turned them into a dominant force might have come with a side of manipulating the books financial regulations in football limit how much a club can spend tying it to the amount of revenue a club brings in to ensure things don't spiral into seeing which billionaire owner or oil-backed sovereign wealth fund can withstand the most losses the premier league is accusing city of inflating sponsorship income hiding payments to players and coaches and breaching the premier league's profitability and sustainability rules in the process the punishment has not been decided yet but lots of options are on the table from fines to points deductions to full-on expulsion from the premier league city have maintained their innocence and are expected to appeal meaning this case still has a long way to go neil but it's got the league in a very difficult position either you enforce the findings of the investigation and punish one of your marquee teams or you don't and risk showing your regulations don't have any bite to them i don't think i'm not the only one who's getting shades of blue i'm not the only one who's getting shades of blue i'm not the only one who's getting shades of like lance armstrong doping or the steroid era of baseball where you have this entire period of time where there's been this one successful team and they're so successful i mean i think they won six out of seven premier league titles during a particular stretch where you just have to maybe slap a big fat asterisk on it and i think the backdrop is really important because premier league wasn't always this global league with global capital it's only happened over the course of a decade and it's only happened over the course of a decade and it's only happened over the but what you're having is premier league and all these other leagues having to respond to that where you have literal billionaires buying these teams you have to put these spending caps and create more financial regulations because you're trying to create you're trying to maintain the integrity of the sport and now we find that man city i mean their record is almost as on this particular issue almost as good as their actual soccer record a hundred and out of four 114 out of 115 counts of financial malfeasance and it's become such a big issue that literal diplomatic ties are being called into question right now because the uk and the uae have actually been cozying up of late they have roughly 25 billion pounds in bilateral trade last year so these are two economies that are pretty intertwined and the fact that the iranian war has broken out uae has basically been seeing who our friends in the region are in the uk has come to their aid the fact that this might fracture an important geopolitical relationship just shows how big one of a deal football is in both parts of the the world but two that maybe nothing will happen because they don't want to fracture this relationship with the uk and uae the other aspect to this too is other clubs within the league because a lot of players were joking like oh does this mean i actually won three a couple more premier league titles manchester united players especially because they finished runner-up to city a couple of times that probably won't happen where they'll actually rewrite the record book and get stripped of their titles and get strips of yeah if city gets stripped of their titles then the next man up would would win but other clubs could absolutely sue manchester city then it becomes a much bigger deal than just points deductions because you're talking about lost prize money you lost broadcast revenue it becomes a whole thing even if the league doesn't find them guilty or hands down a pretty mild punishment other clubs can say uh-uh we're not dropping this all right we're going to take a quick break and come back with neil's one of the weekend right after this you may have heard about built as the loyalty program that lets you earn points on rent wherever you live well they just leveled up even more as of 2026 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meet to discuss important matters about the companies you invest in now you can easily make your voice heard too. 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Just tap once and it acts as a second brain, for anything spoken. Go to Plot.ai slash Brew and use code Brew for 20% off all Plot devices. My winner is Chinese Electric Vehicles, which you can now charge up during an NFL commercial and barely miss any of the game. Last week, the auto giant Geely, which owns Volvo and other brands, unveiled new technology that charges a battery from 10% to 70% in four minutes and 30 seconds. With a sub five minute time, Geely joins other Chinese giants, BYD and CATL, which have rolled out similar ultra fast charging capabilities to hook consumers in the world's largest EV market. Compare that to American charging speeds and it resembles a race between Usain Bolt and me. The fastest EV charging available in the U.S. takes roughly 20 minutes and only under optimal conditions, which is why with over 100 domestic car brands, China is ground zero for the EV wars as companies engage in cutthroat technological one-upsmanship to gain ground on rivals. In the same time it takes to fill up a traditional car with gas is one compelling selling point. Toby, 10 to 70% is the new zero to 60. My big question, though, is can you do it sustainably over the life of the battery? Do you zap it? Like I charge my phone with my computer. Exactly. That was exactly what I'm thinking of is that, yeah, you can juice this thing quickly, but does it cause overheating? Does it cause degradation? Does it cause just things to explode inside the battery? And. It really says that it has thought about this, obviously, and they have an AI powered predictive thermal management system that keeps the pack at the correct temperature over time. They also use AI controlled micro pulses of current designed to reactivate certain lithium. Basically, they've we don't need to get into the weeds of it, but they've thought about this and they do think that they can extend the battery life even beyond what their previous batteries were while giving you this amazing charging. Speed. So we'll see over time, does it play out that these batteries do degrade more quickly or if they actually are just having your cake and eating it, too? But just imagine if you're an American, you're looking far away at China and saying, oh, my God, you know, when I have to charge my EV, I have to go to a mall or some restaurant or some place where I can just, you know, go do something else because it takes 20 to 30 to 40 minutes or bring a book and really disrupts your flow. That's one huge barrier to the EV market. In the United States. And the question is, will we ever see any Chinese cars in the U.S.? Right now, there's essentially a blanket ban. Geely, in fact, is the only Chinese auto company that can legally sell cars in the United States. Right now, there's bipartisan legislation that would permanently ban Chinese cars from being sold in the United States. You're seeing some pushback to that. I read this op ed in The Washington Post saying we're basically doing American consumers a disservice here by barring American Chinese cars from the auto market. Yes, it may protect U.S. auto brands. But the fact is, for consumers, getting cheaper, faster charging vehicles may be something that they want. I mean, we did this with Japanese cars. We did this with South Korean cars. And now on Car and Drivers 2026 list of the most affordable cars, the top 12 are all from foreign brands. So there's a little bit of pushback to the ban, potential ban of Chinese vehicles. But for now, it's Monday. So here's what you need to know to stay ahead in the week ahead. We'll see you next time on The Washington Post. The calendar changes from September to October, bringing a key jobs report on Friday. Expectations are for a solid month of hiring. The economy is projected to have added 100,000 jobs in September with an unemployment rate of just 4.2 percent, combined with a fresh inflation read on Wednesday. These two data points could solidify another Fed rate hike before the midterms. We're in that weird dynamic again where you don't necessarily want a monster jobs report. We want a good jobs report. We don't want a great one because a great one probably means that the economy is still running too hot. It goes back to our first story of the day, and it strengthens the case for another Fed rate hike. So we're looking for good. We're looking for Goldilocks. We're not looking for great. Next, keep your eyes peeled on the skies because two high-stakes space launches are scheduled. As soon as this morning, SpaceX will attempt to send its massive Starship, the biggest and most powerful rocket in the world, into orbit for the first time ever. In its previous 13 test flight, Starship has only gone suborbital. And on Thursday, Google will try to be the first big tech company to give space data centers a try, sending up an MVP, or minimum viable product, of four computer chips equivalent to the power of one server in a terrestrial data center. Remember how far-fetched space data centers felt even six months to a year ago? But now Elon Musk, Jeff Bezos, Sam Altman, they've all thrown their money behind this idea because I think that happens when everyone on Earth, everyone hates terrestrial data centers. So they're saying, oh, maybe space does seem like a good and attractive option right now. Obviously, a ton of challenges lay ahead. This is just the first step. But space data centers, they're becoming more real than probably I expected, more quickly than many did as well. In terms of upcoming movies, I'm not sure there's been as bizarre a lead-up to a release as Digger, which comes out on Friday. Tom Cruise stars, and many consider this role his best shot at winning an Oscar, which he's never done before. But then Cruise went on to say that he's an extremely rare press tour to promote the movie, and it flopped hard. He just came off as super weird in pretty much every interview, and his chances at a trophy have cratered as a result. In the summer, Kalshi had his odds of getting nominated for Best Actor at 76%. Now it's 38%. It is crazy. He's only been nominated three times over the course of his career for acting, and that was all, mostly all, before I was born. The first one he was nominated for was Born on the Fourth of July in 1990. Then there was Jerry Maguire in 1997, and then he got nominated for Best Supporting Actor for Magnolia in 2000. After that, crickets. I mean, he's gone on to become the biggest action star in the world with his mission Impossible. But the fact that his last nomination came back in 2000 is shocking to people. I kind of hope we see it. This was supposed to be his last best hope, and then he just started opening his mouth, and you see the literal line go down, and people are like, I don't know. I don't know about this movie anymore. In sports, the best stretch of the year is upon us. MLB playoffs. The field is set, and the best of three wildcard round begins on Tuesday. If you need me on Wednesday evening, I'll be in the Bronx to see the Sox take on the Yankees. But the city that's buzzing the most, Chicago, where the Cubs and the White Sox are both in the playoffs for only the fourth time in history. Also in postseason news, the WNBA playoffs are now underway with eight teams vying for the championship. The Las Vegas Aces began their title defense against Caitlin Clark and the Indiana Fever. Sorry, now you got to peel back the curtain for people here. You flip flop between being a Boston and a Philly sports fans, and you're sort of confusing everyone. Just break it down for us real quick. Okay, so my whole family is from Philadelphia area, and I grew up in Massachusetts in Western Massachusetts. So it's a little confusing. My whole extended family is huge Philly sports fans, and obviously that gets passed down through generations. But where I grew up, everyone was a Boston sports fan. So I've been picking and choosing a little bit saying, okay, I'm going to pick the Philadelphia team in this particular sport, the Boston team in this particular sport, or sometimes both, because at least in the case of baseball, the Red Sox and the Phillies aren't in the same league. So they don't play each other. They don't really compete unless they go into the World Series. So I'm allowed to like both in other sports like basketball, the Celtics and the Sixers are heated rivals. So I have taken the Sixers. I am a big Sixers fan. I'm not a big Celtics fan. Baseball, I am a Red Sox. I don't know about the whole of the line, but you get the idea that despite them being close, Boston and Philly don't often play each other in certain sports like football. I mean, once every four years, the Eagles play the Patriots. When the Eagles did play the Patriots in the Super Bowl, I do root for the Eagles. I'm a much bigger Eagles than Patriots fan. That was probably way too much information. But it's actually good because a lot of people in the comments going, wait a second, what's going on with Neil here? So thank you for breaking that down. I'm sure we'll get a new basketball and hockey season. Yeah. All right. That is all the time we have. Thanks for starting your morning with us and have a wonderful start. to the week. To share your thoughts on the episode or anything else, send an email to morningbrewdaily at morningbrew.com or DM us on Instagram at mbdailyshow. Let's roll the credits. Emily Milliron is our supervising producer. Raymond Liu is our senior producer. Our producer is Olivia Graham and our associate producer is Olivia Lake. Technical direction by Nina Miller. Hair and makeup needs a recharge. Devin Emery is our president and our show is a production of Morning Brew. Great show today, Neil. Let's run it back tomorrow. Neil, what's your plan for managing your money? Good one, Toby. Tell me another. Listeners, please don't take after my co-host. Northwestern Mutual's comprehensive planning approach can give you peace of mind in an uncertain world. Whether you're just getting started or wondering if you're on the right track, they'll match you with a financial professional who will meet you where you are and ask better questions to uncover blind spots and find new opportunities. Get started at nn.com. nn.com. Plus, to better understand your finances, tune in to the award-winning podcast, A Better Way to Money. That's nn.com. The Northwestern Mutual Life Insurance Company, Milwaukee, Wisconsin.