The Best One Yet - “More change in 1 year than 50” — r/wallstreetbets’ day 3. GM’s Netflixification. Facebook’s awkward Apple.

Episode Date: January 29, 2021

We don’t usually cover a story 3 days in a row, but this is different: We’re looking at how r/wallstreetbets made the industry uncomfortable. General Motors is going 100% electric by pulling a move straight outta Netflix. And the wildest part of Facebook’s earnings report… was Zuck’s focus on Apple.$GME $NFLX $GM $FB $AAPLStatement from Robinhood on yesterday’s events: https://blog.robinhood.com/news/2021/1/28/an-update-on-market-volatility 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 your Snacks Daily. It is Friday, January 29th. We're making this the best one yet. TbOI, Jack, what's our first story today? After days and weeks of wild surges on the stock market from stocks like GameStop, the brokerage industry halted it yesterday.

Snackers, we're going to break down what we know, what we don't know. Second story, Jack. For our second story, General Motors is trying to pull off the biggest pivot in car history. Jack, I got one word for you. net flixification. That's what they're going for. Third and final story, Facebook had its best quarter ever last holiday season, but now it's afraid of iPhones. Fair question here. Do you want to hate ads or do you want to hate ads a lot less? Snackers, before we hit those three stories, Nick and I want to tell you our thoughts on what is happening on the stock market this week.

So Snackers, I woke up yesterday and one of the first things I see is that GameStop stock had halted trading on our Robin Hood app. We later learned the reason that Robin Hood restricted the buying of some of these heavily traded stocks we've been talking about was to comply with financial regulations. Since Robin Hood acquired Jackson My Podcast just about two years ago, we've had a general practice that we've adhered to to never cover our parent company, whether that was good news or whether that was bad news. We published these as our editorial principles online,

and we did this to earn your trust and let other news organizations report on Robin Hood News, whether that news was good or bad. Jack and I go back to freshman year roommates, trust is why we always mention that a takeaway is our opinion. And why we always tell you we still own stock of Beyond Me, but we don't own stock of Carnival Cruises anymore. So here's what we're doing on today's pod. We're going to cover what happened on stock markets yesterday as our first story after this intro. But we wanted to let you know that Robin Hood's specific role in that story won't be the entire focus of the story. Because of our editorial principles. And Nick and I, we weren't personally involved in the decisions around that, so we simply don't have any information to share on it. Now, we know that this isn't going

to satisfy some of you who are listening and want answers that we just don't have. So we've linked to this statement from Robin Hood in the notes of this pod episode that you can check out for more information. But this story is so big. It transcends just the Robin Hood angle, and we're ready to cover it today. Snackers, you, us, Jack, we have been through a lot together in just the last couple of years. We owe it to you to be fully honest and transparent with you, Because trust is core to this podcast. And we love this podcast. And we sincerely feel for anyone who went through pain yesterday because of this story.

Snackers, 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 ear 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, after three days of unprecedented retail-fueled stock surges, the brokerage industry just halted it.

You can read this story just by looking at the numbers. Yeah, you can. All right, first up, GameStop stock was up 1,700% in the last month. and then it fell 44% yesterday. AMC stock was up 800% in just the last month. And then it fell 57% yesterday. You got Blackberry, Bed Bath and Beyond, Express, all these nostalgia mall brand stocks, they did a 180 from all their jumping they did in the last month.

We'll start with what we know about the story and then what we still don't know. All right, so here's what we know. We know that because of brokerage firms, Thursday was the opposite of the GameStop stock pop. Instead of mostly buyers of GameStop, like the last few weeks, there were mostly sellers yesterday of GameStop. So for various financial and regulatory reasons, many of these brokerage firms halted the buying of certain stocks, only allowing the sale of those certain stocks. And with buying forbidden and only selling allowed at some brokerages of these viral

stocks we've been talking about, their stock prices fell. Yeah, and here's how it went down. Over the course of the last two days, Robin Hood, TD Ameritrade, Schwab, and a few others took actions to handle all the stock volatility, including in some cases restricting the trading of these viral stocks. Not all the brokerages that do stock trading restricted buying of these stocks, but many had to yesterday. So Snackers, that's what we know right now. And by the way, we're recording this podcast on Thursday evening. Here, though, is what we don't know right now. We don't know when things will return to normal on the stock market and whether future spikes in

trading will cause this whole thing to happen again. Yeah, Jack, also, what we don't know, we don't know how bad the losses are to the retail investors or how many of these retail investors were affected by these stock. But we think, based on the stock prices falling yesterday, that a lot of people owning these restricted stocks had a bad day yesterday. So Jack, what's the takeaway for our buddies over in the stock market? Markets have changed more in the past year than they have in the past 50 years. Snackers, the rules that govern stock markets, they never imagined a whole social media coordinated mass buying campaign like the kind of thing we've been seeing over the last few weeks. And those rules also don't offer fair and equal access to

investors from the big fish to the little guy. All right, great example. Jack and I always like to mention this one, hedge funds. They get huge, vast access to shorting stocks, a sophisticated investing strategy. And that is something that is often not available to small retail investors. Wall Street pets found a cathartic way for the little guy to beat the hedge fund at their very own game. And they made the industry uncomfortable. There is still so much. We don't know about this entire developing story. We still don't know whether the structures, rules, and regulations of the stock market will be changed to deal with this new reality. Just like the rules of the roads, never imagine self-driving cars. The rules of stock markets

seem unprepared for social media meets finance. For our second story, General Motors is get this, it is getting rid of gas powered cars by 2035. They'll be gone. That's why we think the largest car maker in the U.S. is trying to pull a Netflix. That's right. Cars Netflix. General Motors kind of, Jack, it has like an uncomfortably high dependence on gas, like more than you'd expect. 98% of jam sales

are from gas powered cars, Nick. Snackers, maybe you think that's a high number. Get this. A hundred percent of their profits coming from gas powered vehicles. Correction, more than 100% of their profits come from gas cars because their electric business loses money. You see the math I did there? It feels like an aggressive roundup.

Now, General Motors, most profitable of profit puppies, which cars it, Jack? The Chevy Silverado. Classic. Everyone had a friend with one. It's actually like the worst car for the environment they've got. It gets about 34 feet per gallon with the wind behind, give or take, less rounding. Which is why yesterday's news was so shocking. General Motors is going in complete reverse. They just pledged to become carbon neutral within the next 20 years. And obviously, it's a car company. To get there, it needs to produce electric cars.

Yeah, it does, which is why Jack and I thought this part was fascinating. You got to sprinkle a little context on the electric car situation right now. EVs are the fastest growing type of car being sold in the world, but it still represents just 3% of global car sales. So if your General Motors, Jack, you're looking at this, you're kind of worried because you've got to make a whole bunch of money to replace that Chevy Silverado, and that's not easy. They must figure they're going to sell half as many, so they doubled the price. The electric Hummer is their first ESUV coming in at $113,000. We repeat, their first electric. electric SUV will cost you over $100,000, aka twice the price of the average General Motors car.

It's going to be tough to sell that. So electric vehicle sales are small today. They don't make profits today. So why are GM's stock up 3% yesterday? Jack, what's the takeaway for our buddies over at General Motors? They're going to pull a Netflix. They're going to burn all the boats. Snackers, in order to disrupt itself before Tesla does, you can't just sprinkle a little bit of change into a corporate action plan. GM can't just write a memo. They can't just circulate a PowerPoint turnaround deck. Uh-uh.

Here's what you got to do. You got to burn the boats behind you so that you are 100% committed to this new plan. Once you get there, there's no boats to go back on. So if your General Motors, 100% of your sales are from gas-powered cars, well, guess what? 100% of Netflix's sales were DVDs before 2007. And before 2007, that's when CEO of Netflix,

Reed Hastings, decided to burn all of the DVD boats behind him to head into streaming. Wild story, this is what Jack and I found fascinating. The DVD team over at Netflix was actually separated and sequestered in a separate part of the Netflix building because Reed Hastings wanted to move on out of DVDs. Every time there was a big meeting about the future of Netflix streaming, which was obviously the future of the company, they didn't even invite the DVD folks to come over and take part in this crucial meeting. And the DVD folks were responsible for 100% of Netflix's sales at the time. To disrupt itself, Netflix burned the boats.

GM's a car company, but it can look at a streaming company for the right lesson. For our third and final story, despite intense scrutiny, Facebook's business has never been better. Except Mark Zuckerberg is apparently afraid of iPhones now. Shocker that came out of the earnings yesterday. Now, when Jack and I jumped in Snacks down, We checked out this Facebook earnings. Things sounded like really good for Facebook's profits.

$11 billion in profits over the holiday quarter was up 53% from last year. Now, here is the key number that we focused on. In America and Canada, North America, Facebook brought in a whopping $51 per Facebook user last quarter, just in straight up ad revenues. That was it. This is called average revenue per user. It's basically how much were companies willing to pay to get a, ads into your Instagram feed. Yeah, it wasn't bad. Now, that was $51 per Facebook user in North

America. Globally, though, that average revenue per user, aka Arpoo, it was only $10 last quarter. Right, because when you're traveling to the Maldives, you're less likely to get expensive Instagram ads. Oh, by the way, politicians pay for ads too. Yes, they do, and they paid for a lot of them last quarter. But then, here was the shocking thing that no one expected out of Facebook's earnings. they started warning us, not about Twitter, not about like government regulation, Facebook warned us about Apple. According to Facebook, platform changes to iOS 14 could disrupt sales growth in 2021. Now, Facebook didn't mention privacy, but this is a privacy situation.

Yeah, it's not clear exactly when, but in the next couple months probably, iPhone owners are going to see a change every time they open up an app. Here's how it's going to go down. Basically, you're going to see a prompt that says, Allow Facebook to track your activity when you're on other apps and browsing the web? Question? Yeah, you'll have two choices. Yes, allow Facebook or no, don't allow Facebook.

Now, until now, until this point, the answer was always automatically yes. As in yes, let Zuck see all of the things you're tapping on your iPhone all of the time. If you wanted to shut Zuck out from your iPhone activity, you needed to actively go and find the settings section of your app and switch it to no. Instead of like the default yes to all of your data, let Facebook access it, Apple's now saying, hey, question here, do you want to let them do that? What do you think? It's consent. And Facebook believes iPhone owners will not consent. They will say no. Yeah. And Jack, what are we thinking on this? We totally agree. So Jack, what's the takeaway for our buddies over at Facebook? Do you want your ads to be targeted or not? That's actually a harder question than you think. Yeah, it is. And it is

because all that iPhone tapping that like Facebook watches you do, Facebook is using that data for one specific purpose to tailor ads to who you are. Jack Kramer, five, let's say six foot Vermont-basedborn. Say you searched hair loss into your safari app on your iPhone. Then you're going to see Rogan ads stocking you across all of your Facebook apps. It's a little creepy, but that's because Facebook was watching you even though you were outside of Facebook's app and maybe never even opened it up. And that Rogain ad is a targeted ad, which is more profitable for Facebook because Rogain is willing to pay more because it's more likely it will lead to a Rogain sale. Also, on the other hand, targeted ads are arguably more enjoyable to you because they're less awfully

irrelevant to you. If you're looking for Rogain and hair loss products, it would be annoying to get all these ads for irrelevant, like luscious hair products like herbal essences. Classic. Now, a potential downside of targeted ads gets you making online purchases that you didn't really. really plan on making it kind of fuels shopaholism for a lot of us so for the first time apple is about to let customers decide if they like targeted ads or if you don't like targeted ads if so facto apple is about to mess with facebook's record breaking profits jack can you whip up the takeaways for us before the weekend after three straight days of cyber bold stocks the brokerage industry halted it for a day social media plus finance it's a new animal for our second story GM is going to self-disrupt their

division that brings in 100% of profits. Good for them that they got Netflix as the playbook, and it worked pretty well for Netflix. Third and final story, Facebook's profits were better than ever last quarter. And if you're an iPhone user snackers, you actually get to decide how Facebook's profits will continue. Now, time for our snack fact of the day. This one sent in by a snacking legend, Scott Ferreira in lovely Scottsdale, Arizona. Scott has some simple advice for job seekers out there. Be flexible. Yeah, same as your mom told you. Now, it turns out the same man who, designed the Air Force One airplane, also designed the iconic glass Coca-Cola bottle. His name is Raymond Lowy, a French-American designer. Now, Raymond didn't stop there. He also decided to design a whole

bunch of trains and a whole bunch of cars 60 years ago. He also designed the logos of ExxonMobil, Shell, and BP. Guess he's got a thing for oil companies. One guy who did trains, cars, planes, logos, and soda. He was flexible as long it was within the design ecosystem. It was a Key caveat for him. Snackers, Jack and I love being with you for this entire week, and we cannot wait to see you on Monday. Get some rest. Have a great weekend. And before we go, Snackers, a big happy birthday to Los Angeles's Mike Mooney over at Spotify. You know, Spotify spent a lot of money on podcasts. Their best acquisition is a guy named Mike Mooney. Billion dollars. Also, happy birthday to Eric Durham, a snacker in Melbourne, Australia. And Manchette in Vancouver, Canada.

And Andrew Elkwin, congrats on becoming a U.S. citizen. in originally from the Philippines. Happy birthday, Ali Miller in San Francisco. Happy birthday Beck's Coleman in Philadelphia. And Joey Minerals also in Philadelphia. And Arjun Baylon, also in Philadelphia. Okay, happy birthday, Teresa in Chapel Hill, North Carolina. And Helena Kilbrun in New York City. And Delaney Lim in Oakland, California. And Ben Winner in Durham, North Carolina. And Cody Colzer in Campbell, California. And happy birthday Elliot Rosen in lovely Los Angeles. Andrew Wagonhalls, thanks for listening to your first Snacks Daily pod over in Rochester, New York. Although I guess technically

this is now your second. Also, Will Hoffman, congrats in getting into B-School over in Queens. And finally, happy birthday to Jack Gonzalez and Aramelli from Chicago, which does logistics. Does logistics. This is Jack. I own stock of Netflix, Nick own stock of Apple,

and we both own stock of Spotify and Beyond Meat. 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.