The Best One Yet - “J. Crew returns itself” — Quibi’s real life drama. Berkshire Hathaway’s 1st public mistake. J. Crew’s bankruptcy style.

Episode Date: May 5, 2020

Berkshire Hathaway’s annual shareholder day featured Warren Buffett pounding a 6-pack of coca-cola, and then admitting 1 huge stock mistake. J. Crew became the 1st big national retail brand to file for bankruptcy, but we’re not blaming the corona-conomy. And Quibi’s facing a legal drama that they could probably turn into a Quibi show.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. And this is snacks. Daily, it is Tuesday, May 5th. Cinco de Maile. Happy Cinco de Maile. Hope everybody's shaking up with Margarita today. Enjoy celebrating with nobody.

Taco Tuesday, by the way. Exactly. Perfect for Cinco de Maia. Never happens. Can't believe it's happening today. How do we feel about this pod? This is the best one yet. Our first story, Berkshire Hathaway's annual meeting happened over the weekend.

Spoiler, Warren drank two of Litos a cola. Also, spoiler, we boil down the entire Buffet Palooza into one takeaway. a buffet, Warren to airline CEOs, by the way. It's not you. It's me. For our second story, Jay Crewee traded in its cashmere sweater set for a Ludlow ultra-slim-fit pinstripe suit. Jack, when you're meeting with bankruptcy lawyers, you've got to dress up, you've got to look the part, you've got to look focused. That's right. Jay-Crew is bankrupt. We are breaking down the first big retail bankruptcy of the Corona Economy. Corona Economy hoarding item for week number eight. Chino Slim-fit, let's go with Slammon Salmon Salmon. For our third and final story,

It's the legal drama of the day. We're going to tell a quibby tale of backstabbing, disgruntled employees, heartbreak, and a highly monetizable video technology that's getting stolen. Get these guys an agent, sounds like it should be a quibby show. Quibi is getting sued. And a hedge fund is paying for the lawsuit? And Chrissy Teigen is not the judge. And I'm Ron Burgundy.

But at first, happy T-Boy Tuesday. Jack and I woke up. We're both wearing white t-shirts right now. It just felt like a T-D-Gy. Boy Tuesday kind of day. For this T-Boy Tuesday, we're talking the streaming wars, which are getting aggressive. Let's face it, it's pretty much the only thing you're doing after 7 p.m. Walmart, who knew Walmart had a streaming service? They sold theirs. It was called voodoo last month. Great name, kind of a terrible name. And this month, we got HBO Max, HBO streaming service coming out on

May 27. Joey Triviani and all his friends are back in our living room starting May 27. And it's not just April. It's not just May. Even today, we're talking about Quibi, a mobile streaming service. The latest new video streamer, though, is a complete and utter shocker. Enter the United States Supreme Court. That's right. The nine justices of the U.S. Supreme Court couldn't physically spread out enough on the bench, so they are live. First of all, they're doing it remotely, and all of us can watch through video streaming. Ironically, probably illegal for them to be together right now. We got two name ideas so Clarence Thomas and his buddies can save their creative juices for something else. Right. It feels like they're going to do a Brady brunch kind of thing. In the meantime, just

don't follow in the likes of Hulu and Roku and Voodoo. Go with the name, Suko. Or to sound fancy, you could call it Supreme Now Plus. Now what we think is an incredibly bold move here, the business model. No ads, no subscription, free for everybody. Oh, wait, by the way, we're taxing you. The government's taxing you. That's how they're doing. They're also providing original content behind the robes. Yes, this is the new series they should be coming out with next. Meet the Taylor stitching those Supreme Court Justice Rhodes. We'd also pay $9.99. a month for Ruth Bader Ginsburg's live streaming fitness classes. It's called the glass ceiling-shattering bicep workout.

Little to left and little to the right and you curl to the left and you curl to the right. Let's get through our story. Please. You're tuned in the snacks 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. We're not recommending any securities. It's not a research report or investment advice. or sale of a security. Right. Snacks is digestible. Business news for you. Robberhood Financial, LLC, member Fenra slash SIPC.

For our first story, Warren Buffett spoke at Berkshire Hathaway's Big Weekend Shareholder Meeting. And we got you covered on the one takeaway you need to know. Before we hit that, Nick, yes. Is Warren Buffett 89 or 98? Or does it matter, whatever he's having, I'll have two scoops more. If it, please. He's actually having Coca-Cola.

I saw one video on Twitter of this event. He was sipping Coke from a wine glass. Yeah, and the reason why that not-so-solo move doesn't surprise us, this guy drinks five cans of the stuff a day, Snackers. He reportedly eats seize candy every day, which is that fluorescent colored like sugar powder. And he's starting things off with the breakfast of champions, an egg McMuffin with two sides of preservatives.

His diet requires the resolve and dedication of Tom Brady's, but with a lot more grossness. Now, Snackers, just to give you a little context here, Jack and I came of age graduating from college right after the 08 financial crisis. And one Warren Buffett quote has burned in our memory. Be greedy while others are fearful. Translation, he invested in stocks during the financial crisis of 2008. And here's why Jack and I were so fascinated about what happened this weekend. He's not investing during this financial crisis. His reason for not buying any stocks right now,

he said, we don't see anything that's that attractive. means he thinks stocks are not as good a deal right now as you may think. The he that we keep on mentioning is Warren Buffett, the leader of Berkshire Hathaway. We're going to have to start capitalizing this pronoun. Berkshire is the Nebraska-based legendary investing company that you or I could buy stock in. They've got an A version that's like $300,000 or a B version that's like not ridiculous. It's kind of like a Tesla situation. Unaffordable and remotely slightly less unaffordable. So Berkshire announced a record $50 billion loss for just the the first three months of 2020 as the stock market tanked. And that's because Berkshire owns a lot of

stocks and a lot of entire companies. But everyone is interested in the Oracle of Omaha and the quotes that he makes every year. Seriously, you look at the shareholder meeting. It's like a 1930s image of reporters. Everyone's got a little no-pad out. Like, what's you say? What'd you say, Warren? What's you saying? First, he talked about life. He said it's been seven weeks since I've had a haircut or put on a tie. And then there was this awkward moment where he said, I got a box here of our peanut brittle, and I will not share it with Greg. That's the folksiness you only get with Warren Buffett. It's so classic. But then we noticed some just like straight up powerful patriotic statements. American magic has always prevailed, and it will do so again. Boom, throw it on a Harley, make it a tattoo.

He also talked about the importance of cash. He said, we never want to be dependent. Jack, can you translate that for us? He's basically saying, make sure you always have cash on hand just in case. Honestly, your mom would say the same thing. But there was one specific quote that got Jack and I particularly focused on what was going on. Our airline investment was a mistake. And then he went on to say, Berkshire is worth less today because I took that position than if I hadn't. No excuses, Warren. No excuses. So Jack, what's the takeaway for our buddies over at Berkshire Hathaway and our friend, Warren? We know you're listening. Thanks for listening, Warren. Warren Buffett is cutting his losses on airlines and moving on. Snackers, another final quote from Warren Buffett. The world changed

for airlines. That means Warren thinks long term. There's some concerns about airlines. Back in early April, we reported on Snacks Daily that Berkshire Hathaway had sold 18% of its stock in Delta and 14% of its stock in Southwest Airlines. Now we know Warren's confirmed that he sold everything for about a 50% loss since investing back in 2016. Berkshire just a few months ago owned 11% of Delta Airlines, 10% of American Airlines, 9% of Southwest, and 9% of United. Now he owns 0% of each of those. And the word that that's down to 0% that dropped airline stocks to their lowest level in seven years. It's understandable why Berkshire is afraid of airlines. We see short-term problems. You got money-draining precautions like cutting out the middle seats and

flying airplanes half full. Yeah, we've also got an economic recession, high unemployment, and everybody's afraid of viruses. That does not mean you're taking your family to vacation in Disney or Paris. And if the short-term concerns didn't scary off, maybe the longer-term ones will. This extended work-from-home experiment, it could reduce the amount of business travel necessary forever. And once we even have a vaccine for the coronavirus, after all that, airlines will still be stuck with a whole bunch of debt. Warren, Warren, Warren, Warren. You always finish with some good, clean, family fund Midwestern values. When he was talking about the airline breakup, he took full responsibility, no blaming. These losses was not in any way the fault of those four excellent airline CEOs.

For our second story, Jack, can you please step away from the mannequin over there? Jay Crewe just became the first major retailer. to file for bankruptcy. True story. When I was a kid, I was at an L. Bean store in Fremont, Maine. I touched the mannequin thinking it was real and asked it a weird question. Let's not get into it. They do that to trick into buying things. It's a classic retail practice. Snackers, the new hoarding item in the Corona Economy, 484 khakis in Mediterranean Blue. No joke. When we heard this news happening, I loaded up on the charcoal version and the shopping cart. Now, we are actually fearmongering right now because J. Crew will continue selling online and will eventually reopen their

physical stores. That caramel, cable-knit, cashmere sweater is going to survive this whole thing. Now that we're talking about Jay Cruz quasi-ending with this bankruptcy, let's talk about where it started back in 1947 as the Popular Plan Club. If that launch today, it would be like a generic subscription to Chino's once a month, you pay, and then they constantly bill you and send you a box. Nick and I were arguing in this before the show. The zenith of Jay Cruz's existence was when Michelle Obama showed off these little green gloves during the first inaugural parade. of President Barack Obama.

Also happens to be the same year they came out with their first $2,000 sweater. That was a shocking moment. Now, the lows for J.Crew is probably the past five years when your inbox has been hit by 50 emails a week about shocker, another sale on another sale. Oh, wait, here's another email.

It's hot my inbox. Did you see our previous email about the J. Crew sale? Look at the website right now for J.Crew. They're talking about 40% off summer ready styles. This isn't the time to discount summer sales. Snackers, Jack and I jumped in snacks down this one. No joke. Top of the homepage right below that one. They're promoting a sale for 60% off swimwear. I wish there would be a nonprofit to protect people from

getting duped by the J. Crew Factory website because the flannel at J. Crew Factory is as good as Kinlan. Honestly, it's like if you're going on a date with J. Crew, they're like, please, I'll marry you. What do you want? I'll give you all the money. Now, two big events in history. Help us understand how J. Crew got to bankruptcy. Now, here's the funny thing. J. Crew actually used to be a publicly traded company back until 2011. That's when two private equity firms tag team to buy 100% of all the stock available, taking the company private. And in order to take over the company, they needed cash. So to do that, they borrowed about $3 billion. Kind of like buying a house with only 5% down and 95% through a mortgage, right? And now J.Crew is still buckling beneath all that heavy debt. As of right now, J.Crew has $1.7 billion of debt and only $1.65 billion of everything else.

It stores, it's clothing in the back. You know, do you have this in size medium in the back? All of that stuff is not as big as it's debt. They're basically trying to squeeze into an ultra, ultra, ultra slim fit crew neck and it's not working. It's a recipe for insolvency. But, Nick, Madewell is cool, and J.Crew owns Madewell, right? The thing about made well is it was acquired by J. Crew back in 2006, and it quickly

became Mickey Drexor's favorite child. Yes, mom jeans are way cooler than Jay Cruz's 71 different variety of Marino wool sweater. Do you want thick or do you want really thick or really, really thick? So Jaycru planned to sell Madewell actually this year by spinning it off into its own company with its own publicly traded stock. And if they had successfully sold off Madewell, they would have gotten a lot of fresh cash, which would have helped them survive. But Jack, one ended up happening. It got canceled because of the COVID-19 crisis, like everything else. So, Jack, what's the takeaway for our buddies over at Jay Crew? The Corona economy didn't cause the Jay Crew bankruptcy.

It just fast-forwarded it. Snackers, for half a decade, J-Crew lost its fashion and its financial identity. Take me two year later. It had four leaders in the past two years now. Four different CEOs. Plus, they had a few months where they actually had four executives serving as a single CEO. That's like eight CEOs in two years. Quad-packs are good as Hetty craft beers, not as CEOs.

Then let's talk about the pricing. They've got about 350 locations. half are discount Jay Cruz and the other half are actually full-priced Jay Cruz. That's right. Half are factory stores that are selling you Kinling that they market as flannels. They basically trained you just to wait for the sales emails. Finally, the competition's been tough. On the fast fashion cheaper side, you got Zara eating them from below and it got a whole bunch

of luxury brands eating them from above. Jay Crew is probably heading for bankruptcy. Now it's just happening sooner. All you snacks challengers out there. If you're doing an out and in, I hope you had a good out because time to come in. Definitely sounds inappropriate. For a third and final story, this one is wild. We got to point out.

Quibi is getting sued by a tiny Israeli tech company. Which is getting bankrolled by a cutthroat Wall Street giant. Now, Snackers, we got to ask you because we've jumped in snacks style. We use the service. It's fantastic. Have you tried Quibi? They do like a 90-day free trial right now. That 90-day free trial is the best in the biz outside of Casper mattresses.

Yes. Internship hack, get a Casper mattress, return it at the end of the summer. Casper is like literally get married, use our mattress. mattress and call us eventually if you want to give it back. Back to Quibi. They launched on April 6th, and it's a premium streaming for your phone only. It's like HBO and Snapchat had a little too much a drink. They ended up with Quibi. Now, one key feature of Quibi is this thing called Turntable, which is the subject now of a heated lawsuit. So Snackers, here's the alleged story. Jack and I thought it was wild. And it's according to the company that's

actually doing the suing. So keep that in mind. We're starting the story with Echo, E.K.O. It's an Israeli-based tech company whose tagline is, Entert You control. Which sounds more like a vague threat. Echo's key feature is this interactive video thing that makes horizontal and vertical viewing totally seamless. Boom, you use this on a phone, you're watching on a roller coaster, and you have no issues on the loop-to-loop.

It's constantly going back and forth horizontal vertical. It's beautiful. You keep watching your show despite the loop-a-loop, and there's no black bars of death on either side, like when you're watching YouTube on your phone. So Echo's looking at this product, this technology they've created, and here's the business model. sell a license to that software to video streaming companies so they can use it for all their shows.

All right, boom, we got the game plan. So a few years ago, Echo puts on their best t-shirt to go into Snapchat for a sales pitch. L-A-B. Snapchat looks at the thing and says, you know what, we're going to pass on this deal. But some SNAP employees must have thought it was a good idea. They went over to Quibi, this well-financed startup that was planning on launching something similar to Snapchat, but premium. True. And they introduced this idea that sounded very similar to the idea that Echo had just pitched to them. Interestingly, now that concept is one of Quibi's main features. So Echo's like, yo, that's our feature. We're going to sue you, Quibi, for stealing our tech. And their focus is on the former Snapchat employees who stole the idea allegedly and then brought the stolen goods back to Quibi. So facto, Quibi is an alleged technology thief in the eyes of Echo. Which brings us to our key news that we

noticed this week. Elliot management, which is the meanest hedge fund on Wall Street, is behind this Echo lawsuit against Quibby. Snackers, you may have heard us mention Elliott Management before because they recently forced AT&T CEO to quit and they're trying to do the same thing over a Twitter. They're basically just like really mean. They're really, really, really mean. And they're really rich. And now they're getting into quote unquote litigation financing. So here's how this goes down. To beat Quibi in a lawsuit, the startup Echo needs like a lot of money. And Elliot's giving Echo that money to pay the lawyers. In return, Elliot's like, I'm going to own a big percentage of Echo when this is over, according to people familiar with the matter. P-F-W-T-M. This all sounds like the key

plot of billions season 26. So, Jack, what's the takeaway for our buddies over at Quibi and Echo? Turntable could become the next like Dolby surround sound. Snackers' patents are perfect if you're lazy, but want to become rich. Gortex is a powerful. That's used in lots of jackets, even though Gortex doesn't actually make any jackets. You've got the same thing going on with Dolby Surround Sound when it comes to movies. Since 1979, when Dolby Surround Sound 5.1 debuted with the movie Apocalypse Now, every movie wants to set themselves up for that 5.1 Dolby Surround Sound layout. Now Dolby Digital is rich by selling its audio compression technology to like the movie

studios, the theaters, and the speaker companies. And Echo's thinking they can get rich similarly by selling turntable to all of the modern video platforms. But first, it has to win a lawsuit. Jack, and you'll whip up the takeaways for us over there. Berkshire Hathaway has sold all its stock in the four big U.S. airlines. And airlines may never be the same after COVID-19. For a second story, J-Crew has declared bankruptcy. And it won't be the first big retail bankruptcy that the coronavirus accelerates.

For our third and final story, Quibi has this awesome feature. feature called Turntable, which it allegedly took from Echo, according to lawyers who were getting paid really big by a really mean hedge fund called Elliott Management. It's really mean. They like show up at your office. They're doing a terrible job. You're doing a terrible job. It's awful. So mean. It's very personal. Now, time for our snack fact of the day. This one tweeted in from Chris Stockton in lovely Duncan, Oklahoma. Duncan, Oklahoma is the home of Halliburton, the big oil services his company. But Chris is a social media justice warrior. He has to give credit to Peter Malook, who he retweeted and is the original author of this snack fact. Twenty-five years ago,

nearly 7,500 companies were publicly traded. Today, the number is less than half of that because America is going private. America's going private. Private equity firms are like buying up a lot of companies. A lot of startups are waiting until a lot longer to IPO. That's also true. But I feel like what was missing here is consolidation. There's been so many mergers and acquisitions. What used to be like 20 companies is now Amazon. Oh, I'm a merging a little bit of acquiring. Oh, by the way, remember that fantastic snacker family that we gave a shout out to a little

while ago who was obsessed with the letter M? How can I forget them? We got Marianne. Let's see. We got Molly, Morgan, Maria Jr., and they were all living in Miami. Well, happy birthday to Chessie and Isabella daughters of that wonderful M of the family. Or is they like to go by Chessie and Mizze? the belt.

Snackers, you looked fantastic this week. If there was part of this snacks that you loved, tweet it out, get it out there, HY, HYS Day. Have you had your snacks daily? We'll see it tomorrow. If you know, you know. This is Jack. I own half a stock of Berkshire Hathaway,

the cheap one, not the really expensive one. 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 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.