The Best One Yet - Big Trade War update, Apple’s bought 20+ companies in 6 months, and the largest VC investment in Latin America ever

Episode Date: May 7, 2019

The Trade War was supposed to end this week with a peace deal. That’s not looking likely, and we’ll tell you why. Apple’s CEO casually dropped that the company’s bought over 20 startups over the last six months. And super delivery app Rappi just raised $1B from Softbank, making it the biggest Latin American venture investment ever.Learn 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. This is snacks. Daily is Tuesday. May 7th, this is the best one yet. You take the woods right out of my mouth, man. Markets had a crazy day. It was kind of wild.

It started off a little awkward. Started very down because of new shots fired in the trade war. It doesn't get much down. But investors got over it, little by little, and it ended just down a bit. Kick themselves up a little, you know, prep top. Our first story, though, we're going to cover the trade war update. We got to talk about this. Sunday was nuts.

President Trump tweeted. Kick things up a notch. His right-hand man said more yesterday. Then you got China saying they're not going to. send the delegation here. Now they are. They are. It's a lot to talk about. We're going to break it down for you. Second, Apple, it just announced on Monday very casually that it makes 20 to 25 acquisitions just in the last six months. Just, you know, matter of fact. We're like, what acquisitions? When did this happen? So we break that down for you. We looked into each one. We got some cool stuff. Third and final story is

Roppi. I like your pronunciation. Rappi just raised one billion dollars in one round of private fundraising. That's just not typical. It's a Colombian delivery. company, and it's stretching the limits of what can be delivered via app. If there's something you want, Rappi will get it to you. They will. It's wild. But first, happy Ramadan, Tim. Yes, it started yesterday. Great way to kick it off with a little something else we want to talk about, though.

Game of Thrones. Where is my latte? I promise, this is not a spoiler. Not exactly. But season 8, episode 4, premiered Sunday night, about, what, 15-ish million of you watched it. And guess what? There was a casual scene where laying on one table just amongst the people drinking is what appears to be a Starbucks latte. Not exactly sure. It doesn't have the logo, but it's very

Starbucks-looking. This made it into the episode. We're talking about an episode where everyone's drinking out of ramhorns. They're drinking wine out of ramhorns. I only take my Merlot in an Elkhorn. And suddenly there's a Starbucks cup. That is nowhere. Precious marketing real estate. So basically, there was a mistake made error on the show accidental Starbucks cup in there. But of course, people got to crunch the numbers on this thing. So crunching the numbers, all of those eyeballs and all of this talking on snacks daily. Which you're doing right now. That has a mistake. That has a value to Starbucks, and they are estimating it's worth $250,000 to $1 million in product placement. It's worth just a million dollars in all the word of mouth stuff that's happening right now,

a aka us talking about it. Starbucks, you're welcome. If you want to send us a check, go ahead. Make it out to snacks daily. Now, before we get to those stories, listen to these important ones. You're tuned in to snacks daily. We spoke to the lawyers and we got to get something legal out the way. It's snacks about to hear rain 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. Nope. 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. Rob of her financial, LLC, member FINRA slash SIPC. For our first story, we've got a trade war update for you guys. It's not a fun one. No, it's not, but it's good to know. A trade war peace announcement would have been fun. That would have been great.

I've got like the napkins ready and like some stuff on the taste. Champagne? Got cheese. Champagne? I got cheese. Okay. So the trade war goes all the way back to January 2018. Oh my God.

That was a while ago. Jack was like this tall. Well, we hadn't even started a podcast. No. We were merely market snacks at the time. We hadn't evolved. No one knew. Now, in December, the trade talks, like, actually, they came to a truce.

So that's just a few months ago during this holiday season. They announced no more new tariffs. We're actually going to talk this out. And they've been negotiating for five months. Now, seriously. Like literally every other week, a trade team is going from Beijing to D.C. or D.C. to to Beijing. Right. And we all expected that maybe this week could be the week that a peace resolution happens. And it wasn't just all of us. It was markets in general. One of the key drivers for stocks being at record highs right now is the potential end to the trade war.

Everyone thought it was coming. Everyone wants these tariffs to end. Tariffs are, they're rising prices for the economy and they're hurting profits for pretty much everybody. Okay. So that's where we stood on Friday. Everyone's going home. The cheese is ready. And people we're ready to celebrate a trade deal. And then, nope, Sunday night happened. Twitter happened twice. So there were two tweets from President Trump on Sunday night. The first was an announcement that the current tariffs that exist on Chinese imports

is going to increase from 10% to 25% on Friday. Boom. So that means if you've got a made in China good, it's going to be more expensive in the U.S. From 10% more to 25% more. So then second, we only currently tariff half the stuff that we import from China currently. all of that is going to be tariffed soon. Everything with the gold made in China sticker. So that's threat number one and threat number two.

Now, this is a battle of huge egos between the China and the United States. Two biggest economies in the world. And the stakes are wicked high. You pulled that one out of the money. This is bad for the economy and it's bad for profits and bad for trade. So consumers, on average, according to studies, pay about $500 more a year based on the higher prices resulting from tariffs like this. Yeah, we like buying stuff from China. and it's all more expensive because of these tariffs.

Now, as a result, pretty much everyone wants a trade war situation to end. There are very few winners of the trade. That's an economic principle. Now, the latest is that the U.S. top trade representative said that China, last second, right before these final meetings, is reneging on like some of the agreements that they've already come to. And that's the justification for why things were kicked up a sweet notch on Sunday while we had the cheese rate. This was supposed to be just like a signing ceremony this week, but I guess there's more going back. and forth. So Jack, what's the takeaway for our buddies, aka everyone who's subject to this trade for?

The big, sticky, huge issue is corporate theft. Now, China has notoriously been a chronic rule breaker when it comes to world trade. Yes. We're not talking about their cheap labor, which has caused a lot of outsourcing from the U.S. to China. That's actually totally fair game in like a trade perspective. What we're talking about is corporate theft in that China stealing secrets from U.S. companies. Yeah. But also how China does business with U.S. companies trying to enter China. We covered this on our pod last summer. When an American company or a foreign company wants to go to China and start business, it has to disclose all of its secret sauce. Every special thing about the company that makes it profitable. It special. It has to tell the Chinese partners

over there because it has to do a joint venture with a Chinese company in order to enter China. And that is like totally unfair. No other country does it like that. That's one of the reasons that China has advanced so far economically is because they've been taking Western trade secrets. And that corporate theft issue has become the sticking point for what's now delaying a trade piece. For our second story, Apple just casually announced it, but, you know, about 25 companies recently. In the past six months. Yeah, no big deal. 25 companies. Basically, Tim Cook was sitting down with CNBC over at the Berkshire Hathaway conference. Because Berkshire is a big investor in Apple, like $40 billion worth. And he probably admires Warren. And then in this, you know,

Azure interview, he says, you know, we bought a company every two to three weeks over the last six months. 20 to 25, give or take. That's how many companies we've acquired in the last six months. You know, you just lose track after the first dozen. Nick and I read this and we're like, what? We've got to jump into this thing. I started counting companies I remember them acquiring. I got to want. We're like writing it down on our snacks whiteboard over here and we could not track them all. Now, Apple doesn't need to announce acquisitions to the public unless they are quote unquote material to the company. And it turns out a lot of these acquisitions were just not for big numbers. Well, they might have been big, but relative to Apple size.

They weren't like changing the game. In fact, only 14 of these companies have been accounted for in the press right now, which means there's a bunch of them out there, like half a dozen that just have been acquired and nobody knows. Actually, there's 14 unaccounted for us. So we're aware of 11 of these acquisitions, but 14, we're like, I don't know. If you're one of these unreachables companies, cry out for help, do a hashtag at Snacks Daily, and just let us know who you are.

Can I at least get a tweet? Apple want to know your own accounts. We actually, we care about you as people. So we noticed a trend among the recent acquisitions in the past six months. Now, Apple said it's made these minor acquisitions for talent and intellectual property. So to get good workers who are smart and to get IP. When we at Snacks Daily looked a little bit more into who's been acquired, we noticed a couple other trends. Well, we noticed that they are all artificial intelligence and they tend to be media focused.

Now, laser-like. That's one acquisition that there's a press release. somewhere out there. So it actually existed. And they specialize in machine learning. Right. So basically when an algorithm looks into patterns and is able to make decisions without you telling it a second time. It's like you program a robot to respond to commands. Or like when you tell Alexa, no, I don't like that particular jazz playlist, she picks up on it and does the other jazz playlist. That's machine learning. Now, a second acquisition we noticed is a company called pull string, which specializes in voice apps. Right. So we're talking about the kind of thing where if you're interacting with a virtual assistant,

voice would be pretty critical. So that's just two examples, but the trend among those two and several others is that they all seem to be trying to beef up Siri. So that's the bold claim we're going to make here. It's that smart home devices have continued to get really, really big, and Apple's been a little, little bit behind. And Siri needs like an online degree or two. Siri needs an online degree and a little bit of steroids and a couple protein shakes. She needs to beef up her resume. These acquisitions are key for that. So why is Apple doing this, Jack? Because Apple has bananas amounts of cash. We're talking $225.4 billion in cash.

That's how much cash it had at the end of the last quarter. Now, it's pledged to spend $350 billion in the United States over the next five years. And it's going to fuel that with the money it already has. Right. Profits it's going to continue to make. Like, for example, it recently said it's going to throw $1 billion down for a campus in Austin, Texas. Now, $1 billion is barely anything. Not much out of the...

Contared to what Apple has. And it's not planning any HQ2 for like $100 billion right now. So keeping your lawyers busy by buying companies every couple weeks is a great way. to spend cash. That's one way to get rid of your cash. So Jack, what's the takeaway for our buddies over at Apple? Apple uses acquisitions to catch up when it's fallen behind. Great example here. Apple had fallen behind in music. Yes. It invented the iPod in like 2004, which was amazing. It invented iTunes, which changed how we buy music. And then nothing happened for like a decade. Yeah. It totally fell behind to Spotify, even to Pandora. So it spent like $3 billion to buy beats headphones in 2014 to get into more hardware. And it actually turned

beats, which also add a software component, into the Apple music we know and love today. Then it spent $400 million to buy Shazam in 2017 to get to figure out your music taste. And now Apple Music is a crucial part of Apple's strategy. But it's using these acquisitions to catch up in areas where it's fallen behind. It did it with Apple Music, and our bold claim, it's doing it now with Siri. For our third and final story, Rappi just raised $1 billion. This is the largest venture capital investment ever. Latin America. And that's huge, and so are their ambitions. To be honest, though, this is like the largest Latin American business story we've encountered yet. In a few months. If you think about it,

there aren't that many Latin American brands that have, like, made it globally. On the global stage. Ropi, though, is doing so in record time on this stuff. And full disclosure, I worked with them in a prior job when I was at Endeavor. Great founding team there. I understand that they kind of ripped off Lyfts branding. With the pink mustache. So if you've been to Latin America, you've probably seen people scooting around with like a pink-ish orange-yued stash. That's their brand. Now, it's a little different than the lift mustache. It's a little shorter. And I would argue like almost, I would say, a little bit younger. Okay. Slightly less hipster. So this is a Colombian delivery startup. And it has a billion dollars of fresh cash now to grow. Now, it got that money from SoftBank, the big Japanese

venture capital firm. SoftBank is a big deal. If they invest in you, if they invest in you, you have like a golden ticket. Tell mom. Put it up on. the fridge. It's like getting drafted by the Yankees. Now, your chances of success are big. So, Rappi was founded in 2015. It's now in Brazil, Mexico, Argentina, Peru. It's pretty much everywhere. And it's in this, you know, delivery food industry.

Right. We know it well in the U.S. In the U.S., it's growing very fast. You got Postmates, DoorDash, Uber Eats, Grubhub, Caviar. Those five, I think those five companies. Yeah, let's count it. Those companies combined, their sales grew by 55% in the United States last year. And Ropi is pursuing the same trend.

And SoftBank, which is a savvy investor, sees it working in the U.S., he says, let's make this happen in Latin America. So, Rappi's focus is on becoming not just a delivery app, though. And this is the difference between it and those U.S. firms. It wants to become a super app. It wants to be the app for everything. Like, if you're at home and you need anything and you're like thinking of something. It wants you to go to Rappi. Think of a thing right now. And someone will deliver that thing for you. Just think of a thing. I need a two-by-four to build a bench in my back. Boom. If you can type that into a little thing on Rappi, you can probably get that to happen.

I need to pay my taxes to like the government authorities downtown. Guess what? It's happening. So Rappi began with like food delivery, dog walking. You're kind of typical stuff. Conventional gig economy stuff. Then it said, you know, we're going to kick things up a notch. And it introduced something called its blank box.

Yes. And this allows you to basically request anything. You just write it in in the box. And Rappi will look in to see if they can actually get this delivered for you. And when they introduce this, they learn some fascinating things. Well, first of all, cash security is. not that strong in Latin America in many places. So if you're like going to an ATM, it can be a dangerous situation. And so you can actually request like $100 of the local currency to be delivered

to your home because you're afraid to carry cash on the streets. Because you're letting someone go and pull it out of an ATM for you. And Ropi will let you do that. Now, in 2016, 5% of Ropi's business was that. Which is shocking. I don't know how the delivery people don't just run off with the cash, but somehow they hold them accountable. Well, also around tax season, people are paying their income taxes by having cash payments delivered with RAPI deliverers. And then the last one we found fascinating Mexico gas issue this past January. Gasoline was being delivered with RAPE. So RAPE heard that this was happening and shut the request down because that's federally illegal.

It's probably pretty dangerous. But it revealed that people were willing to ask for anything and expected to be delivered by Rappi. So the gig economy just has wider boundaries in Latin America. So, Jack, what's the takeaway for our buddies who just got a billion dollars in fresh cash over Rappi? Business models can adapt to their environment. Now, Latin America, according to the founders of Ropi, is a market that is, quote, unquote, better suited for on-demand delivery than the U.S. is. Now, is that a quote you read or is that a one-on-one conversation? It was one I read.

So look at the Latin American market. Many of the countries have less reliable shipping and postal service and logistics companies, so you can't just order Amazon Prime. And then on the demand side, you've got a growing middle class that wants to save time and not do things themselves. And then in the gig worker supply side, there's a lot of unemployment in many places in Latin America. So people would love to deliver stuff to make a living. So when you hear a story about, you know, Ropi, a company in Latin America that's raised so much money, you got to start thinking, what business models have you seen abroad that you could bring back to the U.S.? How about soccer?

Jack, can you whip up the takeaways for us? Sure, but first, Ropi, that orange pink you were talking about. It's actually slamming salmon. I love that. It's between pink and orange. It's the kind of thing you don't want on a tie. You want it on a tech. All right.

So this is a big week for the trade war, and markets are hoping for peace. Keep the Prosecco in the fridge, jack. Second story, Apple has been on an acquisition spending spree quite under the radar, and we think it's trying to fix Siri. It is not giving up on Siri yet. Series is getting a little spoiled. Maybe something new will be rolled out soon. Third and final story was Rappie.

It's adapting the U.S. gig delivery business model to Latin America. One word I love from that, super app. I wish that was more of a thing. Now, fact of the day, this one sent in by Justin Cram. Cram with a K. Cram with a K. We were trying to figure that one out. From Fort Lauderdale, Florida.

So he gave us a little walk-down memory monopoly lane. Jack, I love this. History Major. The game Monopoly was inspired by another game called the Landlords game. Which was created by a woman named Elizabeth Maggi in 19. No, 3. And interestingly, monopoly is all about acquiring land and bankrupting your competitors. Yeah, you can pull some kind of sketchy moves in that.

It's pretty ruthless capitalism. But this landlord's game was actually designed to show the unfairness of accumulating land and land ground. The power of branding jack. A little total 180 there. Now, a couple big stories that we're going to be covering is it's basically apparently tech developers season. Yeah, baby. Microsoft had its big developer conference yesterday, and we break that down. Now, Google has got its big conference today.

exciting stuff. We love to have you guys on the pod with us. Can't wait for tomorrow. We'll talk to you tomorrow. It's going to be a T-Boy. 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 Robin Hood 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.