Tech Brew Ride Home - Thu. 01/28 – Robinhood Freezes Stonks!

Starting point is 00:00:00 On April 4th, 2023, around 2 in the morning, a man was found stabbed multiple times on a sidewalk in downtown San Francisco. Hey, who did this to you? What happened next turned the story into a political firestorm. Reports have identified the victim as Bob Lee, the founder of Cash App. From Bloomberg Podcasts, this is Foundering, the Killing of Bob Lee, beginning April 16. Welcome to the tech meme right home for Thursday, January 28th, 2021. I'm Brian McCullough. Today, we finally get to the whole GameStop story because Robin Hood has frozen trading for some folks looking for fresh tending. Apple and Facebook release absolutely killer earnings as expected, but are they about to go to war in court? Tesla's earnings disappoint and Facebook's oversight board issues its first rulings. Here's what you missed in a wild day of tech. All right. This whole Wall Street Betts game stop stock story is the very definition of a story that got away from me. I think I told you before that I day traded for about a year in the late 90s. It's how I earned enough money to launch my first company.

Starting point is 00:01:24 Also, I cut my teeth on Raging Bull and Yahoo Finance message boards during those years. So I'm used to this sort of shenanigans. I cut my teeth on it, plus I know folks who work on Wall Street. So I think that's why we might even have mentioned Wall Street bets in the past. I know we've discussed the whole kids trading options on Robin Hood thing in the past. Anyway, this is all to say, this whole thing was very much a story that I was aware of, at least as soon as a week ago today. But even by Monday when this story and the GameStop stock actually was beginning to blow up, I still kind of felt like this was too esoteric a story.

Starting point is 00:02:02 even though it had the whole Reddit angle, so there was a tech angle there. I just was afraid that it was a story that I cared overly about and maybe no one else would. Well, now, of course, it's the biggest story in the land, and it's been fascinating to me how absolutely passionately interested people are in this story, like two separate people in my life. Neither of them in tech, neither of them in finance reached out to me separately out of the blue yesterday to talk about this story because they knew I'd be following it. So to catch you up and give you the latest, Robin Hood, the commission-free trading app that maybe laid the whole groundwork for this, I guess Robin Hood combined with Reddit, Robin Hood says that due to, quote, recent volatility, it is restricting trading in some stocks, including GameStop,

Starting point is 00:02:53 AMC, Blackberry, and Nokia to position closing only. That means, if I can translate, you can only sell, not buy those stocks for the time being. Those last three stocks, by the way, stonks, I guess, are stunks that people think the Wall Street Betts folks will be targeting next. Quote, Free stock trading pioneer Robin Hood and interactive brokers both made efforts to curb the wild trading activity in heavily shorted names like GameStop, AMC, Blackberry, and costs on Thursday. Initially, shares of GameStop reversed course and slid quickly in a negative territory as the word of the trading restrictions spread. The stock, which traded above $500 at one point in pre-market trading, was below $290 per share shortly after the opening bell. The steps by

Starting point is 00:03:41 Robin Hood and interactive brokers taken Thursday were even more drastic than what brokers did earlier in the week. T.D. Ameritrade and Charles Schwab raised margin requirements on Wednesday. Robin Hood customers took to Twitter to express their outrage surrounding the decision. Robin Hood has made a name for itself through its mission to democratize investing for everyone. The Silicon Valley startup with more than 13 million users pioneered free trading, forcing the entire brokerage industry to drop commissions in late 2019, end quote. Yes, let's talk about that whole idea of democratizing trading, right? Is this even legal?

Starting point is 00:04:18 I mean, I'm sure it is. I think it is. Banks, financial institutions can do whatever they want to manage their own risk, right? But, I mean, isn't this a huge risk for Robin Hood especially? I mean to their brand, to their whole standing with their customer base, quoting Alex Willam on Twitter, trading apps. Here, have zero-cost trading and options access and go wild. Also trading apps, whoa, whoa, whoa, whoa, whoa. Not like that, end quote. Apparently, already this morning, Robin Hood has gotten over 100,000 one-star reviews in the app store. So yeah, when you sell your

Starting point is 00:04:55 whole deal as we're changing the world by disrupting Wall Street, and democratizing savings and investment, this is not a good look for you. And they know that, I would have to imagine. So I wonder what kind of pressure is being applied to Robin Hood behind the scenes right now to get them to make this sort of decision. Also, timely reminder, you're not really Robin Hood's customer. Robin Hood makes most of its money selling your trading data to high-speed traders so that they can jump ahead of your trades, right? Remember with any free product, you're not the customer, you're the product. But see, I'm really wondering if people know the tiger they're trying to grab by the tail right now.

Starting point is 00:05:33 Why are my total normie friends so into this story? It's almost instinctual everyone's reaction to this. Everyone feels like this is the little guy sticking it to the man because the game is rigged, man. And so people have been saying that inevitably some powers that be will step in and crack down on all of this. And when they do that, they're just going to prove that the game is rigged. And so we've got this sort of what's the opposite of a virtuous... cycle going. We just figured that the people stepping in would be the SEC or something. But here's one more crazy detail. According to a pop-up on Robin Hood's app homepage, 56% of its users own at

Starting point is 00:06:12 least some GameStop stock. So they're right now potentially pissing off half of their users. And believe me, folks are pissed. Social media is basically on fire right now with people absolutely apoplectic about how this is Robin Hood and other firms manipulating the stock, manipulating the market, picking winners and losers because the wrong people are winning and the wrong people are losing on these trades. Again, is this legal? This action is basically costing people money since a large percentage of people can only sell and not buy right now.

Starting point is 00:06:48 Thus, the price of these stocks is cratering. If I got into one of these stocks last night and all I could do is sell. sell now at a loss, I wouldn't be very happy. You gotta believe lawsuits are coming. You really gotta wonder if Robin Hood has in one fell swoop killed not only their brand, but maybe their entire business. Here's how crazy it is. AOC, Ted Cruz, and Donald Trump Jr. are all tweeting saying what Robin Hood has done is unacceptable. When was the last time those three people agreed on anything? I would not want to be a Robin Hood Combs or PR person this week. Anyway, if you need a catch-up on this whole story, I've got a bunch of links in the show notes to catch you up.

Starting point is 00:07:32 Bloomberg has a piece that outlines how this whole Wall Street Betts targeting GameStop started, going back over a year. It's the best summation I've seen of the whole thing. Also, the Wall Street Journal has a profile of the guy who founded Wall Street Betts, the whole subreddit that this all came from. And just yesterday afternoon, I tweeted at the Coin Talk podcast guys, demanding that they do an emergency podcast about all this. And they tweeted right back that they had just finished recording. So yeah, check out their most recent episode to talk about this and also other crazy degenerate gambling slash investing like investments in crypto art and non-fungible tokens. The rest of today, or at least the majority of it, is going to largely be devoted to that whole

Starting point is 00:08:22 idea that was raised recently that maybe tech is now in an era where it's a zero-sum game. And so we're just going to see everyone in tech in a multi-front war against everyone else in tech, sort of like the ending of the movie Reservoir Dogs where everyone's pointing guns at everyone else. First up, though, Apple reported Q1 revenue of $11 billion up 21% year over year. This is notable because this is the first time ever Apple has done over $100 billion in revenue in a quarter. So again, $11 billion in Q1 for commencement. In comparison, 10 years ago, Q1 of 2011, Apple reported 26.7 billion in Q1 revenue. Apple is only the third American company after Walmart and ExxonMobil to do more than $100 billion in a quarter.

Starting point is 00:09:14 How did they get there? By breaking records for iPhone sales, wearable sales, services sales. And by the way, International represents fully 64% of Apple's sales in total now. Anyway, this is, as I was saying yesterday, kind of a story of, yeah, big tech, big killing it. 90.1 million iPhones shipped in the quarter. Tim Cook said on the earnings call that Apple now has an installed base of over one billion iPhones and 1.65 billion Apple devices in total. Net income was $28.8 billion. Services revenue was $15.8 billion, which leads us to Facebook, which ditto for them. Killing it. Facebook reported revenue up 33% year over year. And for both of these

Starting point is 00:10:07 companies, for both Facebook and Apple, remember, this is all coming in a pandemic year. Facebook also reported 2.6 billion people use a Facebook service daily. That's up 15% year over year. Facebook's annual revenue per user is now $10.14. Again, free service, who's the product? It's you. But anyway, on to that idea of tech devolving into a circular firing squad. On the Facebook earnings call last night, Mark Zuckerberg took pains to specifically call out Apple as one of Facebook's, quote, biggest competitors, end quote, quoting CNBC. Zuckerberg in his comments suggested Apple uses its position to help its own services, particularly its iMessage service, which competes with Facebook's messenger and WhatsApp services.

Starting point is 00:10:52 Quote, iMessage is a key linchpin in their ecosystem, he said. It comes pre-installed on every iPhone, and they preference it with private APIs and permissions, which is why iMessage is the most used messaging service in the U.S., end quote. He said Apple's business is now depending more and more on gaining share in apps and services. Apple has every incentive to use their dominant platform position to interfere with how our apps and other apps work, which they regularly do to preference their own, he said. This impacts the growth of millions of businesses around the world, including with the upcoming iOS 14 changes, end quote.

Starting point is 00:11:28 Yes, those app tracking changes that Facebook is so concerned will hurt smaller businesses because they won't be able to target ads. More on that in a second. Because this morning, the information is reporting the earth-shattering news that Facebook might be preparing an antitrust lawsuit against Apple, claiming Apple is forcing developers to abide by App Store rules that Apple's own apps don't have to follow. Hmm. Isn't that what we just saw Zuckerberg saying? Quote, Facebook CEO Mark Zuckerberg, is attempting to build a broad legal case arguing that Apple's rules

Starting point is 00:12:03 for app developers, which forced them to use Apple's in-app payment service, for instance, make it harder to compete against Apple in areas such as gaming, messaging, and shopping. While Facebook could seek monetary damages in a lawsuit, the more meaningful outcome for the company and every other app developer would be material changes to Apple's iPhone restrictions. A similar antitrust case against Apple filed last fall by GameMaker Epic also seeks changes to Apple's business model rather than monetary damages. Facebook has considered inviting other companies to participate in its prospective lawsuit against Apple said three people with knowledge of the talks. Plaintiffs in such cases face an uphill battle and seldom succeed in getting the case to trial. Most end in a settlement out of court.

Starting point is 00:12:44 In response to antitrust allegations against its App Store rules, Apple has argued that it doesn't have a majority share. of the smartphone market and that its rules make devices better for consumers by limiting the spread of scams and malware, end quote. And so about those ad tracking privacy changes that Google and Facebook are so worried about. Well, if we finally have a timeline for when that's rolling out, Apple says its app tracking transparency feature is coming in the next beta release of iOS 14 and that the full feature will roll out sometime in the spring with updates to iOS 14, iPadOS 14, and TVOS 14, when all those are updated shortly. Remember, this feature will be on by default and quoting TechCrunch.

Starting point is 00:13:37 While iOS 14 launched in the fall, Apple delayed the tracking restrictions until 2021, saying it wanted to give developers more time to make the necessary changes. This is how Apple describes the new system. Quote, under settings, users will be able to see which apps have requested permission to track and make changes as they see fit. This requirement will roll out broadly in early spring with an upcoming release of iOS 14, iPadOS 14, and TVOS 14, and has already garnered support from privacy advocates around the world, end quote. Apple is also increasing the capabilities of its ad attribution API, allowing for better click measurement, measurement of video conversions, and also, and this is a big one for some cases, app to web conversions. This news comes on Data Privacy Day,

Starting point is 00:14:19 with CEO Tim Cook speaking on the issue this morning at the Computers Privacy and Data Protection Conference in Brussels. The company is also sharing a new report showing that the average app has six third-party trackers, end quote. Not technically part of the whole tech world war that's coming, but real quick, Tesla had earnings last night as well, and they seem to have disappointed Wall Street despite the fact that Tesla was able to claim its first full year of profitability. Quoting CNN business. The electric carmaker reported fourth quarter adjusted income of $903 million, excluding special items, more than double its earnings a year ago, but short of the $1.1 billion forecast by analysts. Net income was $270 million, well short of the $780 million estimated by Wall Street.

Starting point is 00:15:10 The company posted quarterly revenue of $10.7 billion, which was up 46% from a year earlier, and which, unlike the profit numbers, topped Wall Street forecasts. revenue was up 31% for the year, and adjusted income was up more than 6,700% from the modest profit. Tesla posted on that basis in 2019 the automaker's first profitable year. Net income for 2020 was $721 million compared with a net loss of $862 million a year earlier, end quote. Tesla's stock is down, at least this morning, apparently because of operating margins, which shrank to 5.4% in the fourth quarter down. from 9.2% in the July to September period. And this just hit while I was finishing up the script. GM has officially set a date of 2035 for phasing out all gas and diesel-powered vehicles from its lineup among the first major carmakers to set a date to transition to only making electric vehicles exclusively. Now, this is sort of a seeing the writing on the wall sort of thing, since many governments ranging from California to Japan to the UK have pledged to ban fossil fuel powered cars by then,

Starting point is 00:16:25 but I still think this is a noteworthy milestone nonetheless. Finally today, this is also not circular firing squad related, but Facebook's oversight board has finally issued its first ever rulings, which Facebook says it will abide by, and it's notable that the board overturned four out of the five cases it reviewed, quoting NBC News. The board's first rulings concerned five cases in which Facebook had removed posts for violating its policies. And in four out of the five cases reviewed, the board voted to overturn Facebook's original decisions.

Starting point is 00:17:03 The board also called on Facebook to give users greater clarity over its policies and how it intends to enforce them. Two of those rulings pertained to Facebook's policy on hate speech, one of which was overturned and the other upheld. In the first case, Facebook had removed a post from a user in Myanmar who appeared to disparage Muslims as psychologically inferior. While the company decided that the post violated its policy, the board ruled that the terms used were, quote, not derogatory or violent, end quote. While the post might be considered pejorative or offensive towards Muslims, it did not advocate hatred or intentionally incite any form of imminent harm, the board wrote. In the second case, a user posted a term to describe Azerbaijanis that Facebook interpreted as a slur. The board similarly ruled that, quote, the context in which the term was used

Starting point is 00:17:49 makes it clear it was meant to dehumanize its target and upheld Facebook's decision. The third case pertained to nudity. The board overturned Facebook's decision to remove an Instagram post from a user in Brazil intended to raise awareness about breast cancer. The post included five photographs that showed women's nipples, which the board declared permissible in light of Facebook's own policy exception for breast cancer awareness. The fourth case pertained to violence. One user quoted Joseph Gerbils, the Nazi propagandist, who is on Facebook's list of dangerous individuals. Facebook policy states that quotes attributed to such individuals are an expression of support for that individual unless otherwise stated.

Starting point is 00:18:25 But the board said the quote, quote, did not support the Nazi party's ideology or the regime's acts of hate and violence, end quote. The fifth and final case pertained to misinformation. Facebook had removed a post from a user in France that falsely claimed a cure for COVID-19 existed and criticized the French government for failing to make it available. Facebook said the posts could lead people to ignore health guidance or attempt. to self-medicate. But the board, considering the context of the user's post, argued that the user was, quote, opposing a government policy and aimed to change that policy and that his post would not lead people to self-medicate since the combination of those medicines was not available

Starting point is 00:19:07 without a prescription, end quote. So are you happy now, everybody? Facebook does have this moderation board, and it seems that they're making decisions that people are probably not going to be very happy with. Thank you to all of you who have been signing up for the Ride Home Plus feed. If you haven't done so, you can do so by going to tech. comcast.com. If you check the show notes, there's a link at the very bottom. You can do it all right inside your podcast app, the very app you're listening to me on now, unless you're listening on a smart speaker or something,

Starting point is 00:19:50 or unless you're driving, in which case, you know, wait until you get home or something. Your generous support. is, of course, much appreciated. As I say, you'll see the first fruits of this, this weekend with the first gadgets episode. I forgot to mention yesterday that you can't do the Ride Home Plus feed if you listen on Spotify, though. Don't blame me, blame Spotify. They also just don't play well with RSS feeds.

Starting point is 00:20:13 And also, if you have an issue with your specific feed, get in touch with me on Twitter at Brian MCC. If ever you're not seeing the show, no matter what feed you're on, check Twitter first. because if there is an issue, I've probably posted there. I thought there might be an issue today because my internet has been in and out intermittently. But if you're hearing this right now, that all went well eventually. Talk to you tomorrow.

Tech Brew Ride Home - Thu. 01/28 – Robinhood Freezes Stonks!

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