The Best One Yet - ☁️ “Midnight Blue Thursday (worst day since ‘87)” — The stimulus keg. LabCorp’s Baby Yoda moment. Direct-to-Consumer drama.

Episode Date: March 13, 2020

The worst day for markets since 1987’s Black Monday. We’re looking at why the stimulus keg from the government didn’t save stocks. Virus-testing company Lab Corp is now facing the moment it’s been waiting for (but it’s stock is still down). And Direct-to-Consumer startups and stocks have been having a different kind of moment, so we’re looking at Casper/Brandless/Harry’s/Outdoor Voice’s CAC problem (“customer acquisition cost”).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 Friday, March 13th. Snackers, it's the worst day since Nick and I were in heaven before we were born in 1987. Nick and I are 88 babies. It was a beautiful time. Year of the Dragon, it's a great thing.

Let's talk about 87. Well, in 87, they had a thing called Black Monday. It was on Monday. Yeah. It was black because the stocks fell 22% on average. What happened yesterday wasn't quite as dark. Jack and I were calling it midnight. Thursday. It was dark, but midnight blue, dark midnight blue, because the Dow Jones Industrial

average dropped by 10% yesterday. The worst day we've ever seen. In the morning, the stock market triggered its circuit breaker again and had to stop trading temporarily. Right. There was a 15-minute pause where everyone was supposed to calm down. Guess what? They didn't calm down. Stocks fell 3% further over the course of the day. By the end of the day, the Dow had lost 2,352 points, but Jack and I managed to whip up three wonderful stories for you. Snackers, I think you know that we're bringing you the best one yet no matter what. First story, Jack. Lab Corp and Quest Diagnostics are disease testing companies who are sitting on the bench, chewing on some sunflower seeds, just waiting to get in there. Now they're getting up in the coronavirus game. They just got called up. We're looking at the medical testing industry and their business model and how they can test for coronavirus. But do not call them a pharmaceutical company. They hate that. They're not able to that. This isn't a pharmacistory.

Our second story, direct to consumer startups, are having a moment right now. CEO has been fired, devaluations are happening, and the stocks are pumping. We didn't say it was a good moment. They're having a rough moment right now, and we're looking at their top problems. It's cack. Customer acquisition costs, great word to say. Our third and final story, the government just brought out an economic stimulus keg, and they're throwing a keger-rager party right now. Unfortunately, no one's shown up in the basement because investors and consumers aren't going to a coronavirus party. They're staying home right now.

We're breaking down what the government should be stimulating instead of financial markets. Now, Snackers, before we jump into that wonderful mix of stories, you may have noticed a lot of calendar invites getting declined on an epic basis. South by Southwest and Coachella, both not happening. Broadway and New York, no events with more than 500 people happening. I was supposed to see Hamilton this weekend finally not happening because I should not be surrounded by 500 people. I was hoping to get to a Rangers game, but NHL, NBA, MLB all have been suspicious.

March Madness is totally canceled, by the way. They're not going to play in empty arenas because Duke and University of Kansas were like, we're not putting our players in harm's way. But in the meantime, Jack and I noticed one particular event that kind of snuck in just in time because it started in February. They were the last one to do this before the music stopped. And it's the most surprising event I've never heard of. Of course, Jack and I are talking about Disney California Adventures Food and Wine Festival. Now, I thought Disney is supposed to be a good, clean fun for the whole family. A wine festival? Are you bringing babies to this thing? This is a beautiful thing. They're whipping up Mickey-shaped macaroons, Jack. This menu looks like a different language to me. What is compressed watermelon? Are we squeezing this thing?

If you have to ask, you can't afford it because it's coming with whipped ricotta and lemon olive oil. Artichoke Tappanade? They've got a workshop teaching you how to do caramel whiskey glazes. Now, Disney claims this is for all ages. I don't even think it's for my age. I don't know what half this stuff even is. The bottom line, it can't happen right now because people are social distancing even for Mickey. Snackers, remember social distancing. Finally, introverts can just be themselves. Let's hit our three stories. You're tuned in to snacks daily.

We spoke to the lawyers and we got to get something legal out the way. The snacks about to hear 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. Not an offer or sale of a security.

Right. Snacks is digestible. Business news for you. Robberhood Financial, LLC, member FINRA slash SIPC. For our first story, the federal government offers up a financial and economic medicine stimulus keg package. And markets kind of hated it. Markets hated it. Oh, the worst.

Wednesday night, the White House took their first decisive concrete response to COVID-19. It's called the 4M plan. No one called it the four MMs. Jack and I just noticed you could find the word M inserted four times in a bunch of these initiatives. The first M is movement. We're talking travel bans on flight from Europe to the United States, except for returning Americans, which wasn't clear on Wednesday night. And the second M is money. There was a pledge to help sick workers and Trump urged Congress to eliminate payroll taxes, basically potentially boosting your paycheck by around 6%. The third M is markets. Now, this one's not president, not from President Trump's Wednesday night speech. This is from the Fed. on Thursday, which offered up $1.5 trillion in loans for financial institutions that need it to weather this market turbulence. And the fourth is medium, as in like loans for small and medium-sized

businesses that happen to be struggling right now. We're talking like the yoga place down the street. Right. That last one was a pledge by President Trump to try to help like, you know, Main Street economy. So, Jack, what was the reaction, not the takeaway? Well, the worst day for stock since 1987, I think it's safe to call yesterday a crash. Snackers, Jack and I are looking at the situation. And basically, when you look back through the history books, the president and Congress are very helpful when it comes to the economy being sick. Right. We saw that in 2009 when the federal government bailed out the auto industry. And now look, we got Chrysler, we got Ford GM. They're all healthy and they all employ tons of people. Meanwhile, the central bank for the country, the Federal Reserve,

is helpful when the financial system is sick. We saw that a year. before in 2008 when all the financial institutions needed bailouts and they also needed emergency loans to stay allowed. Here's the wild thing about right now. Our country is literally sick. And handing out money and loans doesn't exactly solve this particular problem. No, we need public health efforts to limit the spread of the disease. That is the issue we need. Because the disease is what's stopping people from spending money on going to see hockey games, going out to see plays, going to dinner and going on Right. It's not money that's stopping people from spending money. It's the disease. We think that when you look at yesterday's crash, it's a sign that investors wanted big health measures to contain the coronavirus. Not big measures to give out money and loans. So Jack, what's the takeaway for our buddies who are the 4M stimulus package cake? South Korea should totally be our COVID-19 inspiration. Snacker, South Korea had a rapid increase in the number of infected people, just like we're going through right now in the U.S. And guess what? The South Koreans took decisive public. health action, not economic and financial stimulation. They boosted the number of tests available,

and now they're testing 20,000 people a day in the U.S. We're testing less than 10,000 of people in total. They also made tests and like healthcare in general pretty much free, and we know that the cost of health care is a big reason for under testing in the United States. And they encouraged working from home because no one gets tired of an almond butter, honey, and banana toast toast. Finally, South Korea mandatory canceled public events. We're finally doing that now. with Major League Baseball, the NBA, the NHL, and March Madness. Snackers, by containing the coronavirus, that's what can help markets and the economy. For our second story, direct-to-consumer startup drama can now be summed up in one beautifully sounding word. The word is cack. We're not talking

Neskak, the New England Small College Athletic Association. But it's basically the same thing. Can we say that? No, it's customer acquisition costs. It's totally different. Completely different thing. Now, Jack and I are researching this article from the help of Maya Kosoff, who wrote a great piece analyzing this on media. Yeah, but let's start by whipping out the Silicon Valley definition of direct-to-consumer startup. Or you can just say D to C if you want to sound like an Andresen-Horwitz business school summer intern. It's all about cutting out the middleman to sell directly online to customers because you can offer a cheaper and better experience. Snackers, you've noticed direct-to-consumer bands because they typically advertise to you in a podcast, and there are over 400 of them now. that are pretty well known. There are D to C strollers, candle companies, erectile dysfunction pills,

everything you can find D to C. Name it. You can cut out that middleman very quickly. Now, we've been getting smacked with D2C stories. We've been covering them on this pod sometimes, but we're trying to wrap them up in this story because they're everywhere. We're making them extra direct for you. So for example, how about Casper, Jack? You know what I just thought? We could call these the extra terrestrials. We're going to write this one down. This is good. Let's run with this. We'll talk about it. I'm right, Casper was worth $1.1 billion selling mattresses in a box delivered to your door. Beautiful. Now they're worth one fifth of that because the public markets have destroyed it post-IP.

They're worth $200 million. Another one we card recently? Let's talk about brandless, Jack. They raised $300 million to sell household goods direct to consumer. Now they shut down. I bet we whip things up to your face over there and hit Harry's Razors. Nick got me a Harry's Razor shave kit because I'm a groomsman in his wedding and I need to get groomed. It was a hint.

got acquired by Shicks Raiders, but guess what? That acquisition fell apart. It didn't even happen. And then finally, Jack, because we got to clothe our bodies when we're doing micro-sweeting. How about outdoor voices? Nick and I only wear outdoor voices on weekend. It's like our weekend suit. We're weekday. Started losing $2 million a month, though, recently, and the founder and CEO, Ty Haney, she just got pushed out and stepped down. Snackers, you don't even have to jump in Snackdown this one, but you may have noticed a few trends here. All of these companies are obsessively focused on one product. Yeah, how about away suitcases? They're like running out of colors to put on their single away suitcase. They're also all

obsessively focused on one brand. If you're going to focus on one product, then you can't just use the same millennial pink font as everyone else who's D2C. And they're all struggling really hard right now. It has a lot of investors wondering whether they're venture investors or public investors is direct to consumer broken stack can't direct to consumer work. Should snacks daily go direct to consumer, launching their own podcast app. Big questions. We should talk later. So, Jack, what is the takeaway for our buddies in the direct-to-consumer world?

The biggest challenge facing direct-to-consumer companies is CAQ. I love the way this sounds. Kack. Customer acquisition costs. It's how much a company is paying to get you as their customer. So, Nick, let's say Snacks Daily launched an epic Super Bowl ad and it costs like a million dollars. I like where we're going. If we got a million new subscribers, then the KAC for that Super Bowl ad is $1.

It was $1 per new listener. Am I right? I like where you went with that simple math. We threw it up on the whiteboard. If you're a traditional retail company, for example, you're going to get eyeballs the old-fashioned way. People see you on the street because people walk around the streets, and that's how you're going to be getting your customers in addition to ads.

Right. You have a physical store, and you put that store where people already are, like in a mall on Main Street or an airport terminal. But if you're a direct-to-consumer retail company, you're only online, probably, so you don't have a physical store for people to walk by. You've got to start from scratch. Caspers. brandless, Harry's Shave Club, Outdoor Voices, all of them depend on Google Search, Facebook, and

Instagram to show you ads so that you can discover who they are. That means that Google and Facebook are basically their new landlords because online ads, that's the new rent. And they're all targeting, which we imagine is called the active urban millennial by posting ads on Facebook. And guess what? The cost is up 50%. That's the cost per click on Facebook. It's an insanely high cack for D2C companies. For our third and final story, one potential hero of the COVID-19 situation. We're talking Quest Diagnostics and Lab Corporation.

The two leading diagnostic companies that can actually test you for coronavirus. We're talking to Coke and Pepsi of testing. Nick, you know, I'm a one medical guy, and I love that they're like dressing down their doctors there. It's like, oh, are those slim-fit chinos? Are they relaxed? Did I see you in GQ? But, Nick, I'll tell you, when there's a global pandemic, I want my doctors wearing

white lab coats, goggles. I don't even want to see their face. I want to touch their hand and there's so many layers of rubber glove, they can't even bend it. So we all know, the first rule for solving a problem, or the first thing when you solve a problem, recognize that it exists. We know there's an epidemic, a pandemic, but who's actually got it and who's spreading it? That's the key information. So, you know, the coronavirus cure is months away. Everyone knows some, like, they're talking about some random Canadian company. They got $15 million. They've got a cure, but it's going to take but everyone's talking about something random. That's why testing is the really crucial thing that we need to nail down right now to contain

coronavirus. If you don't know, then you know you have a problem. Here's the thing. Lab Corp and Quest Diagnostics operate labs that can test you for various diseases. Now, technically, there are state-owned labs that do too, but they're kind of like fractured nonprofit. It's not the best. Right.

But Nick, for Quest and Lab Corporation, this is their moment. Snackers, they've been doing push-ups, free throws, and testing. out every different game scenario possible on the bench. They're ready to get in the game. They're like Rudy. They've been on the roster for three years. It's the last game of the year. There's like one play left. Jack, get this is your moment. Take the practice uniform off and jump on in there already. So according to the former FDA commissioner Scott Gottlieb, a lot rides on Quest Diagnostics and Lab Corporation right now. But their stocks are still down, which is why Jack and I want to talk to for a second about blood urine and other bodily samples. Well, blood, urine, and bodily samples,

that is the data that Quest and Lab Corporation crunch to come up with a health diagnosis for you. Quest is based in lovely Sikakis, New Jersey, and has 2,000 locations across the United States. Lab Corporation is based in Burlington, North Carolina. I can't believe there are so many Burlington in this country. Note to self, trademark the word Burlington for our next company. That's insane. We've mentioned it 10 times this week. Nick and I checked out both these company's websites, and both of them are like right front and center saying like, we are the solution for COVID-19. We do testing. But then right afterwards, they say, but do not visit us if you have it. Don't even come close to our facilities. They really don't want, if you think you might potentially

have COVID-19, do not visit Lab Corp and Quest Diagnosers. Now, their stocks are down for an interesting reason. It's because they can't capitalize on the moment right now. So, like, they're pretty much just suffering down 25 percent,ish, like every other stock in the S&P 500. So Jack and I are looking at it. We think these two companies, LabCord and Quest, they're going through a Baby Yoda toy moment. Everybody wants a Baby Yoda toy, but Hasbro wasn't able to deliver

kind of like Quest and LabCorp right now with tests. So Jack, what's the takeaway for our buddies over at Quest and LabCorp? American Healthcare is part for-profit business, part public health. Snackers, Quest and LabCorp, they can test thousands more coronavirus samples, but they're not doing that quite yet. Reason number one, Quest and LabCorp, they only do the testing for coronavirus. They don't do sampling, which is the crucial first step. Right. Quest and Lab aren't doing the Q-tip thing in the nose. That's a very different thing.

Right. In fact, they don't even want to do that because they don't think they're like sophisticated enough. They want you to go to the doctor, get the sample done with the doctor, and then the doctor will ship the sample to them and they'll test it. Reason number two, you got a lot of red tape. The CDC is only letting certain people even take the test. For extensive testing of coronavirus to happen in this country, which we're really need, the health policies have to change. Jack, can you do us a favor and whip up those wonderful takeaways before the weekend? President Trump and the Fed just announced big financial and economic stimulus in the same day. But markets still have their worst day because we really need public health, not free money. Our second story, I can't believe, by the way, we're saying that and it's true.

We don't need free money right now. It's a wild thing, you know? Second story. The Facebook and Google rent is too damn high. Snackers D2C companies are getting priced out of profitability because the cack is too damn high. A third and final story. Quest Diagnostics and Lab Corp are having a baby Yoda moment, but they can't capitalize. They could test more people for coronavirus, but our health care system makes it hard to get tested. Now Snackers, time for our snack fact of the day. This one sent in from a San Francisco born and raised native Leo, just Leo. San Francisco born and raised is a rare breed. He was at the SFSU, San Francisco State Union. University. This guy's like Cher. He only goes by Leo.

Well, he's actually got a marketing professor who told him, and we couldn't fact-check this, but let's believe SFS. I always appreciate marketing. One of the oldest versions of branding was the marking on a barrel of beer back in Europe in the 1500s. Barrels were made out of like a really expensive wood parts, so manufacturers really wanted them back when you were done drinking the beer. Right. So basically, they would get a really hot like iron thing and they would physically burn the brand into the barrel. And it's like, okay, once you're done drinking this ale or or logger, send it back to Kramer's brewing company. People started recognizing what was sitting on taps,

then they'd asked for specific barrels, hence the name, the branding based on the brand. I honestly am really glad I just learned that. It was actually a great fact. This is a good one to share this weekend. By the way, speaking of this weekend, happy birthday to Marcello, we know you had to cancel your spring break trip.

It's a bummer, we feel you. Oh, we're all canceling things right now. But nonetheless, seems like you have an incredible girlfriend named Isabella. we want to wish you happy 22nd birthday, which is this Sunday. And if you haven't talked about the whole boyfriend-girlfriend thing, and we just called her your girlfriend, we've just defined the relationship. We're really happy we did that for you. All right, Snackers, this was an insane week.

We hope you have a great weekend. But also, if one of your buddies is asking about how crazy markets were, you know what to do. H-Y-H-Y-S-S-D. Let them know to become Snacker. Have them join Snacks daily. We'll talk to you Monday. 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, 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.

Thank you.