The Best One Yet - “Rent-a-Zombie” — Hertz back from the dead. Apple’s App Store bias. BP’s oil DCF.

Episode Date: June 17, 2020

You thought Hertz was dead when it went bankrupt last month, but now it’s issuing $500M in new stock — we’re looking at how that’s possible. Apple wants to be both the referee and a player in its App Store, and the implications are huge for the great platforms of tech. And BP thinks its oil is worth $17.5B less than it last told us, so being honest about COVID’s impact on its biz.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 Wednesday, June 17. Markets rebounded nicely because of an easily misinterpreted headlines. Snackers, best time ever to drop the term, Best time ever in everything you do. Our intro will actually explain that misinterpreted headline.

We will. In the meantime, Jack and I whipped up the best one yet when it comes to Snacks Daily. Nick, remember the classic player coach position from the 70s? I'm talking Bill Russell, Pete Rose, and Wayne Gretzky's cousin from Manitoba. Great guy over there. Apple Snackers wants its app store to be a player referee. And the EU is calling a penalty. By the way, I think Mario Lemieux was a player coach. I'm impressed that you just whipped out, Mario. Everyone was Canadian before the 90s. Second story, we thought Hertz was dead, but we just poked it with a stick and we're pretty sure it moved.

It declared bankruptcy last month. And now it's asking investors to buy half a billion dollars worth of worthless stock. They admit it's worthless stock. Third and final story, Jack. 10 years after adding a few million barrels of oil to the Gulf of Mexico. The worst. BP is recognizing that oil's future isn't looking so good. We're talking DCF discounted cash flows, your finance buddies revere them, and BP uses them to predict an oilless future. Before we get to those three T-boy stories,

beware of all these headlines that are saying, best ever this, best ever that. We jumped in snack style because the main driver of the U.S. economy, everyone knows, is retail therapy. Retail therapy is an actual thing. feel better after buying things. Jack just splurged on his fifth pair of outdoor voices, hiking boots over there, and he's smiling so big,

he's going to need a bigger size of boot. You need a pair for every day of the week. So yesterday, Jack and I noticed that the big retail sales report for May came out, and this thing was large. The Census Bureau told us that retail spending by American surged by 18% May compared to April. AKA the biggest gain for retail sales ever. But we got a spring. some context on that misleading headline. Yeah, that stat actually compares month over month, so

May to April, not year over year, like May 2020 to May 2019. And if you compare May of 2020 to the year to the year before May of 2019, sales were actually down by 6%. Because we're in the coronavirus. Celebrating the best ever growth doesn't really work when you're starting from, you know, zero. Nick, in 2011, I earned a bajillion times more bachelor degrees than the year before, a.k.a. I got one bachelor's degree. He's right because of, you know, math. Snackers, beware of best ever headlines as we crawl ourselves slowly out of the Corona Economy Hall. May's retail sales were the best ever in one thing, but definitely not the best ever. Not everything is really a T-boy. Let's hit our three stories.

You're tuned in the snacks daily. We spoke to the lawyers and we got to get something illegal out the way. The snacks are about the hair ain't food. It's air candy. They don't reflect the views of the robberhood. It's all informational just so you know. We're not recommending any securities. It's not a research report or investment advice. Not an offer or sale of a security. Snacks is digestible. Business news for you.

Robberhood Financial, LLC, member Fenra slash SIPC. For our first story, Apple is in trouble for playing favorites in its own app store. Scout us ask, should a referee oversee a game if his kid is playing in that game? Which means we got to go all the way over to Europe, home to a lot of popes, a lot of World Cup victories, and a lot of resentment for American tech. That's because Silicon Valley dominates Europe's scrolling and Europe's tapping of all its smartphones out there. Snackers, remember when Jack and I whipped up that freaky fact that, like, 96 minutes of a teenager's day in the United States are spent on YouTube? Well, it was even higher in European countries, actually. That's right. And Europe's governments, they hate Amazon and Facebook and Apple's huge profits that are being made off of all those Euro-eastern.

users. Because they're paying like basically no taxes to European governments through some Irish Bahamas like triple Dutch legal loophole. This is what the lawyers get paid for. It's good entertaining stuff. So that's why Europe has taken a lot more action to regulate American tech companies than American government has. Which brings us to our latest news, the European Union is investigating Apple for its app store and Apple pay. But we're going to focus on just the app store part of this story because the App Store is a gigantic digital farmers market, but for apps. That's right. In like the 80s, you wandered your way through like the Abercrombie and Fitch at the Mall.

Today, you're making your way through the App Store. Get this. In 2019, there was $519 billion worth of revenue that went to app developers thanks to the App Store. Right. You downloaded the Uber app. You're using Uber rides. Boom, Uber's making money off of that app store download you did. Or one of those premium weather apps that's like $5 a month to download,

and they will guarantee with their lives that it's raining or not. We swear on our firstborn, it is 1,000% raining outside right now. So Apple's generated a whole bunch of commerce with the App Store, but the issue here is accusations that Apple has been playing favorites. That's right. It's given some special treatment out. It's putting its kid in as the starter when we all know little Junior can't even kick with his left foot. Everyone's like, are you kidding me? Junior is a starter for this game?

Now, Jack and I, when we were done ripping on Junior, we jumped in snack style. found a few really interesting examples that you can search for yourself right now in the app store. If you have an iPhone, go to the app store and type in Maps. The first thing that comes up is Apple Maps, even though we all know Google Maps is better. Yeah, Apple Maps doesn't even cover four states in the United States. It's absurd. If you search for podcast, after you see the Amazon ad for podcasts, then Apple Podcasts comes up next. So, Jack, you're saying Spotify didn't even come up first. Spotify was like number six, even though they're number two in the podcasting market. Okay, so then how about if you search for music in the app store? What about Spotify then?

Naturally, Apple came up number one, and Spotify was number five, even though I'm pretty sure Spotify is a bigger player in music than Apple. It's like they're given Junior the MVP trophy, and we all know Junior should be riding the bench. It's an obvious conflict of interest when the referee of a platform also has its own services competing on that platform. Oh, and by the way, Snackers, it's not just Apple. Amazon, Spotify, Google, all the platforms out there, They have the same conflict of interest. Spotify could give preferential treatment itself to its own podcast like Joe Rogan's podcast. Amazon could give preferential treatment to its own products like Amazon Basics. Google Search could show up number one in a Google search its own services like Gmail or YouTube.

So, Jack, what's the takeaway for our buddies who are referees over at all these platforms? There's a mild, medium, and hot way that regulators could regulate all this. We took this straight out of the salsa playbook. Paul Newman's taken a commission for this takeaway. And of course, donating 100% of proceeds to charity. Classic move. Hear that, by the way, Snackers? That's the chatter of regulation for big tech getting louder.

And the tech platforms we're talking about in this story could be the first ones to get regulated. So here's what Jack and I think could be like the mild, medium, or hot regulation that ends up hitting big tech, specifically platforms. All right, the mild flavor. Make Apple have to publicly show its criteria for how it ranks results in the app store. Boom. Accountability and transparency. All right, medium regulation.

Force Apple to label its own apps with a very big badge that everybody knows. Yeah, like a casual, you know, we're biased for this one. It's our kid. Look at the name tag. He's not a great kicker, but it's okay. We love this guy. Finally, hot regulation. Make tech decide.

Are you a platform or are you a player? Don't even let Apple apps show up in the App Store searches because there's an literal conflict of interest. In that case, you'd make Apple spin off the app store as a separate company so that you no longer have one player who's also the referee. For our second story, Hertz has become a zombie stock. No beating heart, but it's still walking. Probably going to become a Jerry Bruckheimer film, too.

I think we should call it a ghost rider, actually. It's driving, but there's no behind the wheel. May 24th, Hertz files for bankruptcy. June 12th, Hertz plans to sell 500 million in new shares? Did they just Benjamin Button this thing? Is time reversing backwards? Where's the continuum transfunctioner when you need it? Now, Snackers, Hertz has been running out cars since 1918 when their first option, no joke, was a Ford Model T. Does it come in the SUV version?

That's right. A 22-year-old kid named Hertz bought 12 Model T's and started renting a map. Did this guy have a first name, by the way, or was it like Cher? Was it just Hurts? I don't know. It doesn't matter. Doesn't even matter. Now, last year, Snackers, this company was enjoying a record $10 billion in revenue and a record $20 billion in debt. Well, here's why. It has 12,000 rental locations with $500,000. thousand cars spread out among them. Yeah, and it's recently done like a hundred percent financing of all those cars, so it owed a lot of money for it. So when travel stopped with COVID-19, it had no revenue coming in to pay those gigantic car loans that it's accumulated. Hertz. Survive the Great Depression? Not COVID. The stock has fallen 80% recently, and it filed for bankruptcy just the last month.

And then the shocker hit just a few days ago. Mid-bankruptcy, Hertz, is issuing $500 million of brand-new Hertz Now, public stock markets, as we've said before, are a bastion of truth. Love that B word. So Nick and I jumped into the SEC issuing document that Hertz had to issue, and it was shocking the blunt honesty we saw in there. Early takeaway here is Hertz was very self-reflective and very open. Hertz mentioned the word worthless seven times. They mentioned the word loss nine times, and then get this one, get this, get this.

Our compliance department is going to love this one. They mentioned the word risk 52 times. There's nothing we love doing for you more Snackers than Jack and I spending an hour doing Apple F when we're reading through an entire SEC doc. Nick, get this. They mentioned their stock, quote unquote, could be worthless and go to zero dollars. Our translation, we hope you buy these brand new shares for like $3 each, but they're most likely going to $0 each.

The salesperson is literally like grinning ear to ear at the same time he's shaking his head and like texting his wife. Oh my God. Oh my God. They might buy it. Oh my God, baby, I can't believe it. Book Cabo, we're going. So why did shares plummet 80% as it approached bankruptcy and then jump 600% mid-bankruptcy? Jack, there's nothing better than when you set up a nice takeaway.

So what's the takeaway for our buddies over at Hertz? This is speculation, not investing. Our buddies over at Forbes have a very straightforward definition of speculation. A financial transaction that has substantial risk of losing all value, but with the expectation of a significant gain. Speculation sounds kind of like irrational expectations investing. That's right, it does. And while there's risk with any type of investment, there's a whole lot more risk when it comes to speculation. If you own stock of a company, you actually own part of that company. It is a beautiful thing about finance. It's like the circle of life. But for Hertz, there is no company left to own. It owes more money to

its lenders than itself is worth. Recent investors of Hertz don't seem to care about that lack of intrinsic value in the stock, Nick just referred to. Yeah, the Hertz investors right now, they're focused on the height for a volatile bankrupt company stock. The excitement for bankrupt stock is a case study in speculation. For our third and final story, BP's oil fields just lost, get this, $17.5 billion with a B, not pounds, in value. And the news signals the acceleration of the post-oil economy. Snackers, if you want to know if youth lacrosse is growing, you'll look at stick sales. You want to know if carbs are back? Look at yeast sales.

And if you want to know where investors think the world economy is heading, you look at oil's futures prices. Those jeans you just bought actually required ships to get cotton to the factory, trucks to get the jeans to the Levi's store, and your car to get the jeans to your dresser. First, you shimmy and shake to get into those things. Then you realize that demand for oil is a crude but accurate way to measure economic activity. And in the short term during COVID-19, economic activity got pretty, pretty, pretty, Pretty, pretty, pretty dark.

The global economy slowed down so much, we had a freakishly large oversupply of oil. Oil rigs in Texas were paying people to bring a tanker over and take their oil away. They were paying them. They were borderline going on Craigslist like, hey, this fridge is free if you'll come remove it from my basement. It's not free, Nick. They're like, this fridge is free and I will give you a foot massage. I'll throw in a Pamplemuse-Lacroy if you do this within the next 24 hours. So that's how bad the oil market got.

in March, but BP just signaled what it thinks long-term about oil. Snackers, the team at BP devalued what it thinks its own oil assets are worth by $17.5 billion. That means two lifts worth of assets just vanished from the balance sheets of BP. Disappeared, the genes are gone. Then BP went a step further and cut its long-term outlook for oil and gas prices and said it's going to cut down some of its oil fields. Now, normally, you'd think all this news was kind of depressing. Yeah, you hear this. It kind of implies to like, you know, demand for oil will stay low because economies won't bounce back after COVID. It's a Debbie downer headline about the future of our economy, right? Actually, Jack and I are looking at this announcement, and it's kind of optimistic for society.

Let's grab a quote from BP's press release. The pandemic will accelerate the pace of transition to a lower carbon economy. It's not that economies won't rebound, they will. It's that countries will build back their economies better with energy that's less carbony, and more renewable. More renewably. So, Jack, what's the takeaway for our buddies over at BP? This is discounted cash flow in action. Snackers, that's a valuation concept

that goes all the way back to the 1700s, typically just seen when like your one roommate in investment banking like whips out a spreadsheet in three in the morning. You've probably got a buddy with a DCF tattoo somewhere. They're using DCF as a verb. DCF figures out the value of something today based on estimates of the cash it will generate in the future for you.

And that could be like a company, a stock, a product, it could even be like an entire apartment building. You could do a DCF on that. How much is this apartment building worth? Well, it's got 12 apartments that are generating $3,000 of cash every month. For BP, it's how much are its oil rigs worth based off the billions of oil revenue that they make long term. BP thinks its oil rigs are worth a lot less because the price of oil has fallen and in the future, there's going to be alternatives to oil. Typically, you're not seeing DCF unless you're like in an MBA class or like stuck in an analyst training program. But BP just announced a DCF.

in real life. Jack, can you whip up the takeaways for us over there? Apple is being scrutinized by Europe for refereeing the app store, but also competing in the app store. We cut up some tomatoes and whipped up a wild, medium, and hot version of platform regulation. Second story, Hertz has declared bankruptcy. But there's still an inexplicable interest in buying new Hertz shares. We think it's not really investing, it's speculation. Third and final story, BP's executives think the world will wean itself from oil post-corone economy. Every company announcement is new info we can use to steer our investments. BP thinks the world is ditching oil. What companies would benefit if the world ditches oil? What companies would benefit? So time for our snack fact of the day. This one's ended by a trio.

You got Ahmad Raza, Zunera, and Zahab from lovely Jersey City, New Jersey, which kind of stole a theme from New York City. This snack fact is about Sears, which used to sell entire houses in a kit. back in the early to mid-1900s. You're like, I'm going to need a sales rep to help me get to the car, please. It's a true story. The department store began offering mortgages to facilitate sales of those home kids. That made Sears a pioneer giving minorities access to homes at a time when traditional lenders, we're not doing that.

That was the time when banks were redlining, refusing to give mortgages for homes based on the applicants' race and the neighborhood they lived in. Early 1900s, you got a department store making homeownership achievable when bank. wouldn't. That was a fantastic one. I had no idea about that story. Kind of makes me sad, Sears has gone bankrupt. True. But we gotta wish a happy birthday still to Emily Wormsor, a snacker down on the Lower East Side. She's been listening to snacks every day since a road trip to Spain last year. Which means we got to highlight Amit from New York City also happy birthday. No word on the neighborhood in New York City, but the best part about quarantining for Amit is that the Knicks aren't

losing games. So true. Snackers, if you've got a buddy who lives in New York City, why don't you ask them HY HY HYSD. They're going to be like, what are you talking about? What does that even mean? That doesn't even speak about. You're wasting my time. Nick, I don't know what you just said. But HY HYSD, have you had your snacks deal?

If you know, you know. We'll see you tomorrow. This is Jack. I own stock of Amazon and Spotify. 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.