The Best One Yet - “A student debt bailout” — Netflix’s profit pawn. Birkenstock’s $5B comfort. 44M Americans.

Episode Date: January 21, 2021

Netflix stock just enjoyed its biggest jump in 5 years because content is king and profit is a pawn. Birkenstock may get acquired for $5B because comfort striking while the shoe iron is hot. And Student Loan Forgiveness could be the new bailout.$NFLXGot a SnackFact? Tweet it @RobinhoodSnacks @JackKramer @NickOfNewYorkWant a shoutout on the pod? Fill out this form:https://forms.gle/KhUAo31xmkSdeynD9Learn more about your ad choices. Visit podcastchoices.com/adchoices Hosted on Acast. See acast.com/privacy for more information.

This is Nick. This is Jack. And this is Snacks Daily. It is Thursday the new Friday, January 21st. Highlight of yesterday's inauguration in D.C. I know what you're thinking. Lady Gaga's golden microphones and golden AirPods, real thing. Golden everything.

But can Nick and I please order two of those Midas Touch microphones, please? Not a big deal. Just, we're asking for a friend on this one. Yeah, our friend just happens to host a Daily podcast. Congratulations, Joe and Kamala. But seriously, someone, golden microphones. Before we get ahead of ourselves, Nick, remember, it is one year ago today that the first COVID-19 case was confirmed in the United States. Snackers, that stat, a key reminder that it has been a hard road over the last year, and we've still got a whole lot more to go.

That's why we're bringing you the best one yet today. TBOY, Jack, what's our first story today? Netflix stock just had its biggest jump in five years, so we're thinking one thing. Jack, we've been dying to say this. Content is king. Profits, though, are pawns. Queen's Gambit, Season 1, Netflix. Second Story, Jack, what do we got?

Birkenstock shoes are so old. How old are that? That Birkenstock measures itself in centuries. Turns out Birkenstocks may sell itself for $5 billion because Comfey is crushing it. For our third and final story, 44 million Americans have a combined $1.5 trillion of student debt. Student loan forgiveness, that could become the most strategic of bailouts. We're jumping in. But before we hit that three wonderful men,

mix of stories. Jack, is the answer A, is it B, is it C, or is it D, all of the above? Or is it E, none of the above? That's when they really master the arm. Actually, it's C, because technically C is correct two-thirds of the time. Is that right, Nick? No, it's not right. Someone just told me that once. The SAT, Snackers, an abbreviation, none of us really knows what it means. True question. Is eliminating its essay and eliminating those random subject tests they sometimes make you take? Snackers, if you're under the age of 18 and listening right now, congratulations, take a victory, app must be nice. The SAT is now easier, and the SAT is technically owned by a company called the College Board. Yeah, if you got to know the College Board a little bit more, it's actually

not public. It's not a private company. It's a nonprofit company. It's the third place, the nonprofit. Yeah, it's the third place. It also hasn't stopped them from becoming a $1 billion a year business with a monopoly on you getting into college. Correction, your random buddy who went to college in Ohio took the ACT exam, Nick. And they love telling you about that. But Snackers, Jack and I jumped in Snacks style, and it turns out in 2020, there were two million students who registered to actually take SAT tests. But we had a pandemic, so only half of those tests were actually taken. We hope people got some refunds. Not good for the college board revenues. Oh, and by the way, a whole bunch of admissions departments just started dropping the SAT

requirement. The University of California system is one of them, and it's partially because of the pandemic. It's also partially because of the cost of the test. It's also partially because of inequality in access to SAT prep classes, which a lot of people use for SAT prep. What does aptitude even mean anyway? Silver lining of the pandemic snackers, fewer standardized tests to get into college. And fewer paying the college board a non-profit, $50 to take a brutal test you don't want to take anyone. And then fewer dropping $11.25 for a carrier pigeon to drop your scores off with some random admissions office. Let's hit our three stories. You're tuned in this next daily. We spoke to the lawyers and we got to get something legal out the way.

It snacks about the hair ain't food, it's air candy. They don't reflect the views of the Robberhood family. It's all informational just so, you know. We're not recommending any securities. It's not a research report or investment advice. Not an offer or sale of a security. Right. Snacks is digestible.

Business news for you. Robberhood Financial, LLC, member Fenra slash SIPC. For our first story, Netflix just left the house. Graduated college, Jack. It just said goodbye to its parents. Netflix stock surge because it finally has achieved financial independence. All right, Jack, we got to do this. Let's just get the numbers out of the way.

Our favorite numbers right out of the way. Let's just do it. A hundred million. 100 million. A hundred million is how many households have now watched the crown on Netflix. Which is shocking because that's almost twice the size of the UK and about the same size as the Commonwealth, we think. The common one.

Is Margaret ever going to find love? I don't know. Season five. I hope so. Second number, Jack, $200 million. What is the $200 million? That is the number of paying subscribers dropping $14 a month for Netflix. All right, this is the wild thing.

Reed Hastings, CEO of Netflix, celebrated the number 200 million subscribers by going to Denny's ordering a $19 steak. He's celebrating $200 million the same way he celebrated $1 million. Oh, this guy, love what he's doing. With two eggs over easy, hash browns and sausage for $5.99. The only way Denny's does stakes. Jack, third number here, 50%. What is 50%.

That's how much Netflix stock had risen going into yesterday. yesterday over the past year. Like, not super impressive for like a tech company in the last year. No, it's the pandemic. You thought Netflix were to won by more than that. But Jack, if that was 50%, what is 17%? That's Netflix's stock jump just yesterday. Boom. The biggest single day climb in five years. Those are the numbers, but there was one line that stood out to Jack and me above all. We no longer have a need to raise external financing for our day-to-day operations. Netflix doesn't need allowance. By the way, that line, they bolded in. and italicized. We're surprised that it didn't underline. Very curious what went into that decision.

The reason it's such a big deal is since 2011, Netflix's had to borrow $16 billion to pay for all those actors, all those directors, all those sets, all those second grips. I love the second grips. Snaggers, you're 14 bucks a month. That's not enough to pay for Daphne's dresses on Bridgeton. True story. Stranger Things was $12 million per episode the last season. Oh, and get this, Snackers. Next month, Netflix has a $500 million bond. They owe $500 million, and it's supposed to mature. They've got to repay it. Yeah, all that $16 billion they've racked up in debt over the years, eventually you have to repay. Well, for the first time ever, Netflix is going to repay it and with cash, their own cash,

instead of refinancing that loan with even more borrowing. Until now, they've basically been repaying their credit card bill every month with another new credit card. Perfectly put check. But now, Netflix doesn't need a loan, doesn't need allowance to make ground season five. That milestone is way more important than reaching 200 million subscribers. So, Jack, what's the takeaway for our buddies over at Netflix? This is why profit isn't always king. Okay, so Netflix founded 1997, IPO 2002, it only just hit 200 million subscribers.

Netflix waited 23 years until it decided, yeah, now let's be cash flow positive. Tesla kind of went through the same thing, founded 2003. It only just hit that milestone too. This is why investors are often okay with young growing companies being unprofitable for a bunch of years. Yeah, because the first priority is growth. Get as many people as possible to absolutely love your product. That's what Netflix did when it was spending ridiculous money for the Crown seasons one through four. And then your name becomes a verb. You build up this loyalty from fans. And then you can let the cash come in, potentially turn some profits. For Netflix, content has always been king. But profits were always just pawns.

For our second story, Birkenstocks, the legendary clogs sandal, is reportedly trying to sell itself. $5 billion for this 250-year-old German shoe engineering company. Nick, can we call these Jesus shoes? They're kind of like the Volkswagen of Lofer's shoes. They got a couple of straps on their leather straps. It's actually a family business, Snackers. This goes all the way back to 1774. Johann Adam Birkenstock was a cobbler in the Dauph of Langenbos. We're not to add subtitles to this podcast. Fast forward, though, after he founded the company, 1896, what do you happen then, Jack? That's a hundred years later when his great, great grandson Konrad Birkenstock decided the company should specialize in a very particular footsbet.

Now, that was the key part, Snackers, because that is the differentiator. The footbed cradles your soul like a baby. Why put all your weight on just a couple contact points of your foot when you can distribute the weight across your entire foot. soul. Yeah, so instead of metal or instead of foam, Birkenstock started using cork early on, which is squishy and vaguely romantic. It really is. And in 1966, an American tourist was traveling Germany, noticed everyone was wearing Birkenstocks. So she bought a bunch of them, brought them back to the U.S., and then started selling them to Americans. Well, then Bergenstocks followed her there. And by 2019, Berkenstocks has been doing nearly a billion dollars in annual sales,

which, Jack, we sprinkle some context on here. That's about 10 times the sales. that Albirds does, which is ironic because one of Birkenstock's biggest sales, like, areas, is California. Okay, family-owned company, so it's sumo, we're straight up missing out, not publicly traded. However, Jack and I noticed that a new industry is emerging right now. The comfort economy. And shoes happen to be the, like, revealing trend of this comfort economy. Shoes is a single product that encapsulates the comfort economy.

All right, Jack, let's go to the whiteboard here. First thing we noticed, Dr. Martin's boots. It's basically a boot that is function over fashion. They are preparing for a $5 billion IPO on high demand for their shoes. All right. Then you got all birds. All birds, each pair is literally made out of a New Zealand sheep. That's what you're getting.

They've busted out of the incubator and now just raised $100 million to continue growing. And then you got Crocs, a shoe that is literally full of holes. The stock has doubled in the past year because comfort is what people care about. It's not what they look like. It's all about the comfort. And now, a private equity company in Europe called CVS wants to acquire Birkenstock for $5 billion and scale it globally even more. Later, Rosen, are the only German product not thriving in the comfort economy.

Leather pants is fashion. It is not functioned. So, Jack, what's the takeaway for our buddies over at Birkenstocks? We know exactly what these new owners would do with Birkenstock. Yeah, we do. They would go down market. Jack, I feel like this is a moment you should share with everyone. You bought a bunch of Birkenstocks recently, didn't you? Nick, I bought like 11 pairs over Christmas for my family members and their wives, girlfriends,

husbands, and boyfriends. So I got a $15 t-shirt. Everyone else is getting $100 shoes. Good to know. Well, Nick, these things are like $100 each for two. I know. I know, I know. Basically two reasons here, Stackas.

First, they're expensive because they're made in Germany. They're like the BMW for your foot. In my defense, Nick, I didn't think a New Yorker would ever put those Birkenstocks on their feet. I think we can move on now, Jack. Second reason here, the cork footbag. That is the key and that is expensive. That's because the Birkenstock family, in their 250 years, they've always been concerned about heritage, legacy, and reputation of the Birkenstock brand.

Jack, so funny you should say that because private equity, they've been around for a long time too, and they're concerned with maximizing profits. Exactly. Under new management, Birkenstock could offer a lower-priced version of their shoe by switching from cork, which is expensive, to a synthetic cheaper material. They could also open another factory outside of Germany in a lower-priced country. risk damaging the brand, but private equity could handle that because it would definitely boost sales. That's what we think private equity would do first. Go down market.

For our third and final story, Biden was just sworn in his president yesterday, but there's one item that Jack and I are thinking is top of mind for 44 million Americans. Student debt could become the number one debate among Democrats who are now in control of Washington. All right, first thing in our minds, the first image that comes to mind. Schoolhouse Rock, famous song, It's About a Bill. It's three minutes long with a bunch of lyrics because it's hard for a bill

to become law in the United States. Yeah, I mean, it just sits there on capital. Exactly. It's a lot easier for an executive order to become law. Yeah, if you don't have to compromise with Congress, then executive orders become pretty popular, which they have over the last couple decades.

So Joe Biden already announced the day before his inauguration. His top 10 executive orders, he wants to do right away. Yeah, there are a bunch of econ and businessy ones. for example, like stopping the Keystone XL pipeline, that was an early one. And rejoining the Paris Climate Accord, which happened yesterday. And there's also the 100-day mask challenge and national vaccine strategy.

All of these, businessy executive orders that happen. But 44 million Americans are much more focused on an executive order related to student debt. All right, Snackers, wild stat here. Six out of ten jobs right now require a post-high school education, and that is why 44 million Americans have gotten into a trillion and a half. of student debt pursuing that. And this mostly affects one generation, Gen E. Gen E, as in generation every generation. Yes. Monthly repayments on student debt can be a ball in chain that prevents you from moving on in your life, like getting married, buying a home or having kids. All right,

so Jack and I jump in snack style. Here's how student debt really breaks down. You got 85% of those loans to students came from the federal government. That means ipso facto, the president can cancel up to $50,000 per student borrower, according to experts, with just the stroke of Joe Biden's pen. Yeah, last March, Biden tweeted he actually supported canceling like $10,000 of student debt per student. Since last March, he's been a little more quiet. It seems he would prefer if Congress passed this instead of through executive order. Okay, so in the first 24 hours of the Biden administration, Jack and I were looking to see what the business implications would be. And we got like a whole flurry of executive orders, canceling student debt was not one of them. No, it was not one of them.

No, it was not one of them. Instead, he ordered his Department of Education to basically suspend repayments of student debt through September because, Nick, they've already been suspended since April. So not having to make payments for like another nine months is nice, but is that it? If you're in debt, you're pumped that's being paused, but you'd rather the debt just be canceled. So, Jack, what's the takeaway for our buddies over in the entire economy? We've had bailouts before. A student debt bailout would be the wildest one yet. Okay, so if we're giving $50,000 per student, basically would come out to a trillion-dollar cost, basically a bailout for indebted students across the country.

That's a big bailout, but there is precedent. The targeted asset relief program basically bailed out Wall Street in 2008 for $700 billion. Yeah, and since then, we've had bailouts for car companies, bailouts for airlines, industry-focused bailouts. This student debt bailout could have broad support, though, because both Republican and Democratic voters, they suffer from student debt. But like any bailout, this bailout would result in cries of unfairness from a lot of people. Some people are going to complain, why should we bailout students when I had to eat ramen for three years to pay mine back? Well, guess what? The same arguments would be made about banks that needed a bailout back in 2008. If America's 44 million students got some debt forgiveness,

that could be good for the whole economy because it'd feel like an economic stimulus. So on the one hand, it adds to America's debt, but on the other hand, it would unleash spending on homes, on vacations, on pent-up, delayed family building, that was delayed because of debt. A bailout of student debt. This could be the huge issue that Democrats debate in the next two years they're in power. Jack, can you whip up the takeaways for us over there? Netflix just reached 200 million subscribers, but they also reached financial independence. Content's always been king. Now profits finally get to share the throne, too. Burk and stock hasn't changed much in the last 250 years. Under private equity, we think they're going to change really fast, really quickly, really big.

probably go down market. Replace that cork with plastic. Anything, just anything. Third and final story, student debt cancellation. That could liberate 44 million Americans. And we're expecting that could be the big debate among Democrats for the next couple of years. Now, time for our snack fact of the day.

Also a fantastic trivia question tweeted in by Perry Holmes in lovely Bloomfield Hills, Michigan. With the inauguration of Joe Biden as president, there are now five universities that have graduated, both a president of the United States and a Super Bowl winning quarterback. First one here, let's go with one of the smallest of states. This is the spoiler because we mentioned Joe Biden, the University of Delaware. Yeah, Joe Biden and Joe Flacco, Joe combination there.

Second one is Stanford. Herbert Hoover and John Elway and Jim Plunkett. Third one is Michigan. Gerald Ford. Tom Brady. Fourth is Navy. Jimmy Carter and Roger Staubach. Fifth, didn't see this one coming, kind of near the logistics. Hub, Miami of Ohio. Benjamin Harrison went to Miami of Ohio, as did Ben Rothesburger. Snackers, before we go, remember, we all want to grow snacks. Ask your friends, H-Y-H-Y-S-D.

Have you had your snacks daily? We'll see you tomorrow, and Jack, I'm size 11. You can send me the broken stocks like, no, no, anytime. Just whenever you want to send. A hundred bucks, Nick. Jack, if you know, you know. And before we go, Snackers, big happy birthday to Cecilia Shinsun in Beijing, China. And congratulations to Sam Yum for getting into medical school in Kathmandu, Nepal. And congrats to Alicia Del Forno promoted over in Marblehead, Massachusetts. Happy birthday to Lizzie Kuyger in Austin, Texas. And Noah Crowdale in Porterville, California. And Nikki Boyd in Houston, Texas.

And Rosanna and Bredor in West Covina, California. And Critty, just Critty, in Pleasanton, California. This is Jack, I own stock of Netflix. The Robin Hood Snacks podcast you just heard reflects the opinions of only the hosts who are associated persons of Robin Hood Financial LLC and does not reflect the views of Robinhood Markets, Inc. or any of its subsidiaries or affiliates. The podcast is for informational purposes only and is not intended to serve as a recommendation to buy or sell any security and is not an offer or sale of a security. The podcast is also not a research report and is not

intended to serve as the basis of any investment decision. Robin Hood Financial LLC, member FINRA, SIPC.