The Best One Yet - Dick’s Sporting Goods’ big gun test, Wheels Up is a country club for private jets, and Germany’s negative interest rate opposite day

Episode Date: August 23, 2019

Dick’s pulled a classic tool out of its belt: A/B Testing. Our “Unicorn of the Day” is Wheels Up, which claims it’ll be the Airbnb of private jets (and Tom Brady and Serena Williams are members). And Germany’s 30-year bonds hit negative interest rates — so we break down what they are and why they’re so rare.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. It is Friday, August 23rd. It's the weekend. Feels kind of good over here. First weekend, not planning my wedding. Jack doesn't even have sleeves on his shirt right now.

Actually, he does. He's got two of them. Snackers, this is the best one yet. This is really the best one. Markets barely budged. Incredibly diverse set of topics we got there. The first one is about Germany. You know I love German stories.

Talk to us. Stalk to us. German bonds. Snackers asked for it. We're going to deliver. What is a negative interest rate? It's like an all. alternative universe. It's kind of freaky. Opposite-day situation. Germany's got them.

Dick's sporting goods is our second story. They just announced earnings. We're going to focus on a business tool as essential as a scooper to a Ben and Jerry's scoop man. Jack, I'd like to buy a vowel because we're talking about AB testing. A-B testing. Dix is doing it right now. Third and final story. Unicorn of the day is wheels up. The private jet startup that wants to be the Airbnb of G4s. We jumped into the snack style. It's really more like a traditional Ritz Carlton that happens to have an app. It's not the Airbnb of G4s, but they really want us to keep saying that. Snackers, there's a reason why this one happens to be the best one yet today.

This is the 100th episode of Snacks Daily. The 100th. We've been through a lot together. We've been through the Apple card. That just happened this week. The Uber IPO? That was a big deal. We were in New York.

Retail's not dead. Bad retail's dead. And Seltzer is replacing beer. Zima is back. It's been nice. Now, we've also gotten to know some great snackers along the way. Yeah, we get snack facts every day on Twitter, which is on believable.

Brittany sent us an actual pillow that says tariffs, nobody wins. Brittany from Tampa. Incredible. And we got conversations on Twitter like hashtag share your share where you told us what was the next sharing economy thing. That was big. Now, Snackers, as we go into our 101st episode, we know you want to know how to support Snacks Daily, and we love you for that.

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Robberhood Financial, LLC, member FINRA slash SIPC. For our first story, Germany has negative, let me say negative interest rates right now. And this illustrates the alternative universe slash opposite day we have in global finance right now. You got to picture that episode of Seinfeld. We're at like the alternative coffee shop and they don't have like a bizarro Jerry, Bizarro Kramer, Bizarro George. Right now you've got a bizarre finance situation and it's happening in Germany. Let's talk about Germany. The government of Germany is one of the safest investments you can make in this world. And they want a loan right now. They want to borrow some money so they're issuing bonds. In for secretest bond in all of the world.

This is a 30 year bond. So they're going to pay you back in 30 years except one catch. The interest rate is negative. The interest rate is negative. We are going to give an example of what a negative interest rate looks like. Okay. So investors gave the Chancellor of Germany, Angela Merkel, let's say $1,150. $1,150. And Angola Merkel promises that her country, Germany, she swear she's going to do this. We'll pay you back in 30 years, but you're only going to get $1,000 back. You're going to get less money back. Now, keep that in mind, because if you typically lend someone money, like your buddy Tim is going to buy a jacket, you expect good interest money in return. What are you going to do for me?

That's what an interest rate is. Angola Merkel is giving you less money in 30 years than you're giving today. Investors are losing money by letting Germany borrow money because these are negative interest rates. Negative interest rates are crazy rare. You don't see these things. This happens like once in a millennium. Like picture Lord of the Rings. You know that ring that all the hobbits were schlepping around trying to find?

Sneagle found it in the river. Boom, it pops up out of nowhere. Everyone's staring at it. They're like, what is this thing? This hasn't happened since like before Mordor. It's a little freaky. It's a negative interest rate. Now, the reason for the upside down situation, aka negative interest rates, is the European

Central Bank. The European Central Bank is Europe's version of the Fed. It's a central bank. And it's set a interest rate at negative 0.4%. So in the U.S. last month, the Fed lowered interest rates to like 2.25%. In Europe, they are negative 0.4%. So you're probably wondering, what does this actually look like for me, my savings account, my life? Let's say you lived in Europe.

If you've got that checking account, your money isn't earning interest just by sitting there. You pay money to your bank for the privilege of keeping money in that account. It's almost like Europe saying, hey, don't keep your money in this checking account. Do something else with it. Take it elsewhere. Guess what, Nick? It is. Exactly that.

Let's make this example even more concrete. Let's say you have $1,000 in your local checking account down the corner in Deutschland. They are going to charge you $4,000, which is negative.4% interest over the year. and send that to the European Central Bank. It's not even like a bank fee. It's the European Central Bank interest rate. In the United States, worst case scenario is there's an 0% interest rate, which just means your money is sitting in a checking account, not earning any interest.

It was 1,000 today. It's worth 1,000 in a year. But in Europe, the worst case scenario is a negative 0.4% interest rate, which means you are paying money for keeping that money in there. Your money will shrink if you keep it in a checking account in Europe right now. So investors are willing to invest in German bonds. at an interest rate of negative point one-one, because the alternative is it shrinks even faster at negative point four zero.

So, Jack, what is the takeaway for our buddies over in Germany who are looking at these, like, negative interest rates in the eye? Europe is desperate for some investment, and that's why rates are negative. It doesn't want you keeping your money in a savings account. It wants you to do anything but keep your money in a savings account. And that's because Europe still hasn't fully recovered from the financial crisis while the United States has. The USA took quick, swift action to recover from Lehman Brothers.

But in Europe, there was just like arguments between Germany and Greece. Debt crises. Will the euro continue to exist? More debt crises. So rates are low in most of the countries in Europe, even negative, because they don't want you keeping in a savings account. They want you to invest in the stock market or take out a loan at a low interest rate and put that money to work to grow the economy. Don't leave your money in a checking account. It will shrink.

Do anything else with your money because the economy needs it. Negative interest rates. Punish you for keeping money in a savings. account and they reward you for just doing something else with it. And it's happening in Germany and lots of Europe right now. For our second story, Dick's sporting goods stock jumped three percent, not because of gun sales. The sales also jumped by three percent at each store, which isn't great. That's like barely better than the economy is growing up. I think we have to rethink this verb here. It's less of a jump more of a hop. You can barely squeeze a piece of paper onto those. It's like a light

skip. But that is the best growth for Dick's sporting goods since 2016 because it's been suffering from Amazon. Now, the C.E. had a few words. Yes, he said the major headwinds of Dick's sporting goods are behind us, and we are bending the curve on sales. I don't know what that means. It sounds exotic. It's like a mediocre halftime speech. I think it means sales have been flat, and they're finally bending upward. Now, we're paying attention to this story because of the issue with guns in it. The CEO of Dick's sporting goods, Ed Stack, had a huge decision to make after the Parkland, Florida school shooting that happened in February of 2018. Basically he had a decision here.

He could decide which was going to be worse for the company. One, the negative PR that a mass murderer could potentially buy a gun from Dix. That would be a very, very bad. It would be awful in general. Or two, the negative hate from gun lovers if Dick's sporting goods takes action to limit gun sales. So Dick started making some moves here with its moral compass to immediately raise the gun buying age to 21.

Yes. It also immediately banned assault rifles from all Dick's stores as well as high-capacity magazine. And then they took the bold move of actually destroying assault rifles that were just stuck in its inventory. Toss these things into the lava of Mordor. Very symbolic. So Dix decided to also test banning guns altogether, not just assault rifles, at some stores. So this is where it gets interesting. Jack, what is the takeaway for our buddies over at Dix? Dix is doing a classic A-B test. Old school. And the results aren't fully in, but we can start to talk about it. An A-B test. This is when you

set up one difference, and that's it between two things. An A test and a B test, and then you look at how it performs. So you can actually do this yourself. Yes. Wear the same thing to work every day for a few months? We're talking the same dress, the same suit, the same outfit. But have one variable footwear. All right. So one day you're going with sandals.

And the other day you're going with Birkenstocks. One's Group A, one's Group B. And then keep track of Birkenstock days compared to Sandals days and see which one you have more confidence and which one you get better looks from. Boom. Suddenly B performs better. You are a Birkenstock person. Thanks to your own personal A.B.

Now, Dix is doing the exact same type of A.B test here when it comes to guns. Yes. Last fall, it ended the sales of guns altogether at just 10 test stores. And it turns out those 10 test stores, and they're now outplaying the rest of the stores. Okay. It wants to take that A-B test a little bit further. Last spring, it removed guns altogether from 125 more stores. So now it's got 600 stores with guns. Group A. And it's got 135 DIC stores without guns. Group B. Now, in 2018, sales at Dix shrank, and the company said it was partly because of these actions,

they've taken on guns. So the CEO is still analyzing what final decision they're going to make. Yeah, they haven't decided if they're going to keep guns in the stores altogether or not, but executives are closely looking for any differences between Group A's performance and Group B's performance. Classic A-B test. Nick, we did the German international finance negative interest rates. I remember it well. We did exporting goods in the guns. It was great. Let's hit the unicorn of the day. Jack, I got my rainbow feed out for you. We're talking about Wheels Up, which recently hit a $1.1 billion This is the company that wants to be the hotel tonight or like the Airbnb for private jets. Now, that's how the company describes itself. However, we dove in and recognized that this is just a country club, but instead of golf, you get access to jets.

It's a lot less techie than you probably thought it would. So you pay to be a member, but instead of tea times, you sign up for a seat or an entire plane to go from like Chicago to Coachella. And in case you're wondering, these membership sound lovely. What's the price tag? You're looking at a cool 2995 initiative. That's the upfront initiation fee. We're talking two comma 99-5. And then every year you have to re-up with 2445 renewal, 2 comma 445. Those are some hefty dues. And then by the way, if we actually want to book the flight, you actually have to also pay for the seat or the flight.

So you pay up front and you pay for every flight. It's a lot of paying situation. It's a lot of money, but it is a private jet. It is a private jet and it's technically like a membership club. They've got 6,000 members and they've got like an obsession with celebrity athletes like an 8-year-old. Especially celebrity football athletes, Tom Brady, JJ Watt, and then he got Serena Williams. Right. They are traveling in style in a wheels-up jet. Now, they're trying to make a name for themselves in the tailgate scene.

They got same-day game day, which is flights to and from college football games. Yeah, you get a bunch of buddies together. You pay a lot of money as being part of the member. I know there's a lot of University of Michigan fans in New York City. So you can go from like Teterboro to Ann Arbor Regional Municipal Airport. Probably not as big with the Neskack Ivy League games. but you can book out the entire plane or you can just get a seat or you can go with some random strangers and they also offer shuttle service like they've got a Friday night flight from Westchester

to Fort Lauder. Now we mentioned they're not quite like the Airbnb of seats on a private jet. No, we jumped into the snacks down and we thought it was fascinating. It's much more like a country club because those other things we just mentioned, those are tech platforms. Airbnb is just a platform. It doesn't own properties and it just connects people with space with people who want space. Now, Hotel Tonight, they're just connecting you. with other hotels or open table.

They're connecting you with restaurants, but they don't own any. Wheels up, on the other hand, has an entire roster of jets that it either owns or has leased, and it is hooking you up a seat on its own jets. So it's not purely tech. It's actually got a lot of hardware in there in the form of big, small planes. Now, you might be asking yourself, how's this different than Net Jets? Right. Net Jets offers fractional ownership of private jets, much like a timeshare.

So, like, you get one share of a plane, you get 20 hours of the plane for that year. Either way, it must be nice. So Wheels Up is like a subscription slash golf club membership. NetJets is like timeshare ownership. But neither one of them is really like Airbnb. So Jack, what is the takeaway for our buddies who just got a lot of money over at Wheels Up? Wheels Up is demonstrating skim pricing at its finest. This is a perfect example.

A lot of vitamin D in the skim pricing. You start super high end, that's skim pricing. And then you start to slowly decrease prices over time as you prove the concept and get people hooked on your brand. It's called skim because you start with the. cream that has rose to the top. It's a beautiful thing, and now you're going to start noticing skin pricing like a little bit of everywhere. Uber is Exhibit A. It is perfect Jack laid on us. It used to be super high-end black vehicles with really nice leather interior. Now you're getting the back of like a Toyota Tercell with like a burrito stain on the right corner and some

weird thing that's covering the seats. Don't ask about that thing. We don't even get into. Tesla is the second example, started with the very high-end Model S and even the roadster before that for like 100K. Now you got $35,000 versions. And then you can also see this in fashion too, with like Anteller Loft or Michael Corr's outlet lines. Discount versions of formerly exclusive brands. Exactly. So wheels up, focused on exclusivity first for its brand, then it's likely to cheapify itself. But right now, it's a $3,000 membership plus a lot more money for each flight. Jack, can you whip up the takeaways for us over there? Investors are paying Germany to borrow money from them because of negative interest rates. Gullum's precious just appeared for the first time

negative interest rates. Dick's sporting goods is mid-A-B test on whether to have guns in stores or not have guns in stores. The jury still out, but it's collecting the A data and the B data. It's a classic A-B testing. Wheels Up is offering country club-like memberships to a fleet of beautiful private jets. You got to do skim pricing. Start at the top and you

work your way down. Now, time for our snack fact of the day. This one tweeted in by Tulin Handa in lovely Melbourne, Florida. Which is apparently central Florida. He's reacting to our news this week. The three of the never-ending pasta pass winners,

were from Central Florida. Talon, put another shrimp on the bobby because this snack fact was wild. Talon points out that Olive Garden's parent company is Darden Restaurants, which I know well because I used to collect minuscule paychecks from them because I got all my money in tips. Can we mention you were the wine salesman of the month? Let's do that again. Again with the can't do. The parent company is headquartered in Orlando, Florida.

So Central Florida headquarters, Central Florida winners of the Neverending Pasta Pass. Interesting. Maybe a little bit of favoritism there. Very curious what's going on there. Also good to know Olive Garden pumps. about 700 million breadsticks a year. Also good to know, I had a secret order when I got my company meal. Secret menu?

No. Combination of two items. Capolini Pomodoro, lots of tomato, plus meatballs, everybody wins. So they just mix them together? They do. A classic. The waiter should let you do that. Now, Snackers, remember, you can get your free stock from Robin Hood at Snackspodcast.robinhood.com.

Snackspodcast.com. In the meantime, you guys look wonderful today. Great weekend. Have a good weekend. Talk to Monday. We'll do it. This is Jack, and I own shares. of Amazon. 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, or any of its subsidiaries or affiliates. The podcast is for informational purposes only, 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.