The Best One Yet - Spotify’s new app, Mirror is our “Pre-Unicorn of the Day,” and why markets jumped so much Tuesday

Episode Date: June 5, 2019

Wall Street just had its best day since January, so we explain why (it’s all about The Fed’s focus on something sexy). Spotify whipped up a new app to fix a problem and also take down radio. And fitness-tech mirror Mirror is about to hit a $300M valuation.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 5th. And Jack, what do we think about this? We got the best one yet, ready for the Snackers today. Markets add like the best one in a long time, too. The best one says January, and that's one of our three stories.

But first, what else we got? We're kicking it off with Spotify, which just introduced a second app. Second totally different app called Stations. Very nice. It's a small tweak on its original product with huge implications. We're looking at you, radio. Dial in. We are looking at you.

Second story is the pre-unicorn of the day. Are we going with baby corn on this? We'll start with that. I got a better idea for later in the pod. But we're talking about mirror. It's the fitness startup that's literally a mirror, very apt name, but it hit a $300 million valuation. It's a $1,600 mirror that you are going to continually pay for it to stare at. Third and final story.

The big question of the day for markets, why did markets jump so much yesterday? And the answer was the Fed. We're going to explain exactly what it's up to. Before we get to anything, Jack, this show is having its best ratings in 14 years. Ding, ding, ding. What is Jack? Jeopardy. You win, my friend, because the Jeopardy guy, James Holshower, his 32-game win streak that everyone's been talking about, even though not everyone knows about it, but everyone's talking about it, just ended.

Nick, you know who's celebrating this really hard. Our buddy Kenny? Our buddy Ken Jennings, who from the mid-2000s came super famous by winning 74 straight games on Jeopardy. But what he didn't have is the pro move that was Jeopardy Legend James Holshower's strategic winning strategy. My brother was telling me about this Jeopardy disruption all weekend. I guess Ken Holzhauer, who was a professional gambler before coming on Jeopardy, tried to disrupt the Jeopardy status quo by asking all the big $1,000 questions first. instead of last. Who cares about $200 questions,

but he can discover the $1,000. This guy bets the house on every question. So, Jack, who was the big competition and who took him down? The professional sports gambler lost on Monday night to a professional 27-year-old librarian. We're talking about someone who wrote her master's about trivia.

I can't think of better training for this. You can't make this up. And the best part of the whole story, footage of the loss leaked, like before it actually came out at like 7 o'clock Eastern time. It's like a game of throw. So James didn't even get to tell his mom about it in person.

Right. Let that sink in. Listen to these keywords and then we'll hit our stories. You're tuned in the snacks daily. We spoke to the lawyers and we got to get something legal out the way. The snacks are 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, Spotify just unveiled a simpler version of Spotify.

And it's basically just radio, but in smartphone app form. And classic snack style, we decided to jump into this one. Jack, take us on your journey with this new Spotify app. We were going to cover the story today, so I downloaded the app, and it's not Spotify. Spotify. It's Spotify stations. It's a different app, but you got the same Spotify login credentials. So you got the same login. This is a different app, though. Jack, first experience. It's like you're at a concert almost. What happens with the opening act when you open this app? All right. My phone is connected to my Bluetooth headphones and boom, I get prints. Raspberry Bray playing in my headphones the moment I opened this

thing. Almost like it was personally set up for you. Jack, I'm just curious, were there any other artists involved or were you just having like a personal kind of existential experience with Prince? I'm sitting there being serenated by Prince and I see I got a couple other options on my screen. There's a Beyonce station, a Prince station, and a fish station, fish with a pH. And those were definitely customized for me because I've been listening to them recently. Not totally shocked because Beyonce is a huge listener snacks. But Jack, tell me a little bit more about what's going on with the stations when you went a little deeper into this new app. Nick, you're really curious here. You might just want to download it yourself, but I'll keep giving it to. So,

the app is super duper simple. It's just like those four or five stations, I can scroll up and down, and that's it. And then I can push plus and, like, create new stations. Feels like a radio because of the stations. I almost feel like I was there with you. Great job on that explanation, Jack. Now, I got to tell you, after listening to this, the first thought is this. This new app is an attack on radio and serious XM. Can't get it out of my head. The first thing I thought was, this app is perfect for commuting because it's super simple. And you know, Nick, finding the right Spotify station while you're driving is... Is that even possible? Wildly dangerous and should be illegal. Yeah, that's not a good thing for human beings to be doing.

Now, since our company Market Snacks was acquired by Robin Hood and became Robin Hood Snacks, Jack and I are now part of a tech company. So we have a good sense, like an insider look about how products like this come to life at a tech company. All right. Five step process. Step number one, what is the goal? They always ask, what is the goal? And the goal for this is probably growth. They want more people using Spotify. The company's doing really great, but they want 20% more. Okay, so the people say we need growth. Then they bring in the customer research team, and that's step number two. What is customer research doing? Yeah, and they probably ask some existing or like former Spotify users, why don't you listen to Spotify? Why don't you listen to Spotify more? And Jack, as a Spotify user,

I can tell you what the answer is. We've all had this dilemma. Yeah. I don't know what to play. I open the app. It's dinner time. I don't want to play the coffee table jazz playlist because I'm sick of it. I don't want to play Soak Up the Sun playlist channel because it's not sunny out.

And I'm kind of sick of chill beats because I feel like it's judging me. Yeah. It's like, dear in the headlights, you want music. You don't know what to do. It's not simple enough. So the third step is the product people. They create a product and they call it stations. And that's when the fourth step comes in, which is the marketing people,

who determine what the value proposition is, the purpose and the value of this particular new product. And they come up within five words or less. And maybe they say, I don't know, what kind of thing you think the marketing people would come up with? They actually said, this is what it says in the app store. It's like radio, but better. Now you're 99% there.

People know the product. It's time for the call to action. You need to summarize it in three words. So Spotify goes with instantly play Spotify. Emphasis like instantly. It's to the point. So Jack, what's the takeaway for our buddies over at Spotify? A tiny little tweak can change everything.

Now, this is why radio and series XM may feel a little threatened by this and should feel really threatened. Because their one benefit has been convenience. Yeah, you turn on a radio and it's immediately playing. The customer doesn't have to decide what's going to play. But Spotify could come in and kill that advantage with this single product. And this single product is basically a dumbed-down version of Spotify that makes it easier to use and it could kill radio. Dumbed down, but dressed up Spotify style. Jack, for our second story, count your ab.

Mirror the fitness tracking thing is our new pre-unicorn of the day. Okay, my two pack abs are ready for this story right now. By the way, pre-unicorn, can we give mules a little credit? Let's call it a mule. A pre-unicorn. Are we thinking? Are we... What about like a unicorn with just like a small horn?

Yeah, I'm going to go with mule because Colby College doesn't give enough love. We'll open this up to snacks listeners. Let us know what you think we should call it. This company just raised, it was about to raise $36 million, which would give it about a $300 million value. All right. So definitely pre-unicorn status. But Nick, what is the sales pitch for mirror?

We're talking the future of fitness at home. We're talking a near invisible at-home gym experience. We're talking a fitness product that is a mirror. Wow. So it's a mirror. Is it a video screen? It's kind of like video screeny. Basically, this is an actual mirror you would put in your home.

home. And when you turn it on with your phone, it actually turns into an interactive live workout just like a TV screen, except it's a mirror. Beautiful. So this thing's like eight feet tall. It talks to you, like mirror, mirror on the wall. And it tells you to do fitness. What kind of classes can you do? All right. So we're talking, you know, like it's going to interact with you, show you videos of like abs classes, high intensity interval training, a bunch of plank stuff. Like the kind of stuff that you don't actually want to do, and you usually only do when an instructor yells at you. Exactly. So this thing is expensive. It's a big piece of hardware with a lot of tech packed in. So it costs about $1,500 up front, and then you're paying for a subscription, $39 a month.

Now, those $39 bucks a month are going to get you access to, like, a wide array of classes. They're adding like $50 a day or a week or something. And basically, this is like online direct personal training through a mirror. Yeah. Sounds kind of like Peloton, except without the bike. And this thing is perfect for Instagram because you want to do a workout selfie. You have the mirror built into the equipment. When do you get that kind of an opportunity? Now, Jack and I jumped in snacks style of the business model a little bit further, and we think there's a key distinction to make here.

Mirror is not about home convenience and just being able to work out at home. It's about the experience, and there's two huge advantages it offers customers. Okay, so the first one is hardware. This is not some, like, bulky piece of equipment. It is a fancy piece of furniture to show off. It is a nice mirror. Look, technically this falls into the category of home workout equipment, but this thing is beautiful. It's gorgeous.

We're talking like everyone's had those like rusty dumbbells back in their homes. Yeah. Like everyone's parent worked out on a Nordic track in the 90s at some point pretty much. This is not one of those things you're ashamed of and thrown the corn. Yeah, the Nordic track occupied like 50 square feet of our guest room in the house I grew up in. The hardware is advanced. Second is the software. This gets you as close to an engine.

experience with a personal trainer barking at you as possible. Love a good digital barking. Now, those are a couple nice advantages on the hardware and the software, but the reality is there's also one big disadvantage mirror has. Yeah. If you look at these celebrities that are endorsing this product, you understand the disadvantage. You got Gwyneth Paltrow, Reese Witherspoon, very nice.

Alicia Keys. They all love mirror. But it also highlights a big problem, which is that it's pretty much just celebrities who can afford to be using Mirror. This thing is really expensive, and the company thinks that enough people want an equinox like, you know, $200 a month experience, but at home. So, Jack, what's the takeaway for our buddies staring at themselves over at Mirror? Does this valuation deserve it, or is it driven by FOMO? Exactly. Fear of missing out FOMO, Patrick McGinnis's term, that is key here because fitness tech has shown itself to be like the thing venture capital is really into right now.

Everybody's doing it. $500 million have been invested. in fitness tech so far in 2019. And the star of fitness tech is Peloton, a company whose concept, it's basically Mirror on a bike, and it just hit a $4 billion valuation and it wants to IPO this year. We expect that company to IPO this year, and that's going to get a lot of Peloton investors rich, but a lot of investors passed on Peloton. So the question here for Mirror is, how much of this investment in the company is just investors who thought they missed out on Peloton? FOMO. For our third, Third and final story, we're going to answer the question that everyone's been asking, which is the question, why did markets like surge yesterday?

The answer is the Fed. Sorry, what is the Fed? And it's basically saying to investors yesterday, don't worry, I got your back. Don't worry. I got it. No big deal. Everything's going to be fine. We're talking about America's Central Bank, the Federal Reserve, which manages interest rates in order to affect the economy and kind of give a nice little level of control. Right. And no mouth. markets like Jerry Powell can move markets. Jerry, he is the Fed chairman, and he had some very specific words that he uttered yesterday. Yes, he said the Fed will act as appropriate to sustain the economic expansion. Translation of Jerry, if markets fall, the Federal Reserve will cut interest rates to stimulate more economic growth.

Jerry basically said, don't worry about the trade war. Don't worry about the speech you have to make it your wedding this summer. Don't worry. Also, don't worry about the other trade war with Mexico that just started. We got your back. Line at the ice cream store, don't even worry about it. That's how investors interpreted Jerry's words. Now, we have some key context to provide about the Federal Reserve Bank of the United States. I'm hitting up my constitutional law professor, Nick Martel. Jack, you know, I love a good serving of context. We're talking about the Federal Reserve two constitutional mandates. Left bicep and right bicep, maximize employment and keep inflation down. All right. So the first left bicep there is mandate number one, maximize employment. For that, it lowers

interest rates. It grows the economy. And that's pretty much everything it did from 2008 to 2015 for like seven years after the financial crisis. Yeah, interest rates can sound kind of funky. Basically, by keeping interest rates low, it's encouraging borrowing, which means you're more likely to take out a loan, maybe buy that house, and do something that you may or not be able to afford otherwise. Right. So that was the nice stuff it did for the economy. But then to control inflation, sometimes it raises interest rates to make sure that things don't get too crazy. Yeah, because maybe it doesn't want everyone buying a house that they can't afford and creating a whole situation. Yeah, let's avoid that this time. So since 2015, the Fed has been gradually

raising interest rates. And it's been like kind of tough medicine. Like the economy, we don't want it, but it's good for us for the long term. We know mom would make you do it. So Jack, what's the takeaway for our buddies over at the Fed, aka Jerry? The Fed seems to be focusing on just the one mandate that's politically sexy, which is growing the economy and maximizing employment. Now, interestingly, this seems like it may be driven by pressure from President Trump. Right. Remember, since 2015, the Fed has been raising interest rates, and the plan was to continue doing that for like a few more years. And a little bit more context here, the Federal Reserve is supposed to be very independent from any other government body. But then in December, President Trump complained that the Fed should stop

raising interest rates. And guess what? That's when it changed its policy and hasn't been raising interest rates. So a lot of the stock market growth you've seen so far this year and the big stock market jump yesterday are pretty much thanks to Jerry and the Fed keeping interest rates kind of low. Jack, can you whip up the takeaways for us for Wednesday, please? Spotify just launched a product to make its music more instant. Going after AM FM in like a very aggressive way here. And that mirror has a couple big advantages over other ways to work out, but it is really expensive. By the way, Jack and I used to live together as roommates. We all know each other's mirror faces post-workout. Everyone knows that stare. How do I look? That's unforgettable. It's a memory burner. And the third and final

The Fed is focusing on just the sexy part of its two-part mandate. It's maximizing jobs by boosting the economy. Now, time for our snack fact of the day. Jack, we got to talk about a big, really expensive lunch. Yeah, $4.6 million is the price that a crypto entrepreneur is spending for the pleasure of having lunch with Warren Buffett. Now, a key asterisk here, Warren Buffett, aka the legendary investor, is really skeptical of cryptocurrencies and Bitcoin. Yeah, the Oracle of Omaha is really dreading this lunch where he's just going to be evangelized on crypto. Good thing that there's $4.6 million involved because he definitely doesn't want to do this thing. Now, Jack, a couple other awesome stories we're covering in our Robin Hood Snacks news on. All right, Tiffany's announced earnings yesterday, and it's blaming

lack of tourists in the United States for falling diamond sales. And then CVS is not just a boring pharmacy chain. It is now turning 1,500 pharmacies into like many hospitals with little wellness sections and a bunch of other funky health stuff because people want to live. Yeah, it's a crazy story. Now, Snackers, thank you for spending this pod with us today. Always enjoy it. Jack, what do you think? At same time tomorrow? Same t-shirt. I'll see you then. Look at your mirror faces, people. 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.