The Best One Yet - “The power is in the plumbing” — Visa cancels Plaid. GM Teslafies itself. KB Homes’ backlog secret.

Episode Date: January 14, 2021

General Motors just did its best impression of Tesla (and it was good enough to pop the stock to an all-time high). We noticed 3 lines in KB Homes’ earnings report that tell us everything about the real estate market in 2021. And Visa just canceled its $5B acquisition of Plaid, which will change the future of your credit card.$KBH $V $GMGot a SnackFact? Tweet it @RobinhoodSnacks @TBOYJack @NickOfNewYorkWant a shoutout on the pod? Fill out this form:https://forms.gle/KhUAo31xmkSdeynD9Learn 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 Thursday, the new Friday, January 14th. Breaking Thursday afternoon news, the president of the United States was impeached for a second time by the U.S. House of Representatives. We know you're thinking what did stocks do, not really a market story. Stocks didn't really, they didn't really do anything. The second impeachment of Donald Trump affects history, not as much to the future. Exactly. So Snackers, we're going to update you again if the Senate convicts and ends up barring Trump for being president again. in the future. Meantime, this is the best one yet. TBOY, Jack, first story, what do we got today?

KB Holmes does one thing and does one thing really, really well. They build homes. That's what they do. And Jack and I noticed three lines in their earnings report that tell us everything you got to know about real estate in 2021. Jack, what do I got to do to get you in this two-story tutor? For our second story, Visa, tried to acquire a plaid for $5 billion, but that credit card deal just got declined.

Yeah, funny thing, that might be the best thing that's ever happened. Happened to Plaid ever. Bad news is good news. For our third and final story, GM tossed off their tie. All right. They threw on some all-birds. Nice move. And did their very best impression of Tesla. And then GM stock jumped to an all-time high because it's actually a pretty good impression. It's really good. I was impressed. It was very good. But snackers, before we hit those three stories, the most stressful article we've ever read. Oh my God. Jack and I read this in the New York Times. Jack, I'm still sweating over here. A guy named Stefan Tomas, who's a German engineer, he is living in San Francisco right now. Side note, buddy and mine is named Tomas Stefan also from Germany.

Inverse of the reverse. Now, this guy, Stefan in San Francisco, he has a digital wallet that is filled with 7,0002 Bitcoins. That's what's in it. Based on Bitcoin, $36,000 price, that wallet is worth $200 million. Damn. Congratulations, Stefan. Gazuntite, Stefan. One big problem. Stefan lost the piece of paper that had his password written on it, which he needs to access that 200 mil. Yeah, a funny situation here because Bitcoin doesn't have a customer service line. Tomas, have you tried one, two, three password exclamation point? Give it a shot.

So that's the problem. But here's the bigger problem. The digital wallet holding his Bitcoin only lets you try 10 passwords. After that, you're out forever. It's done. You're locked out. You could never access that $200 million of Bitcoin again. Nick, the biggest biggest problem?

Please, Jack. Stefan has already tried. failed with eight password attempts. Stefan has two password guesses left or he loses $200 million. This sounds like the plot of a Dan Brown novel. Jack, if the ninth password attempt is wrong, the Sistine Chapel explodes. According to the times of all the 18.5 million Bitcoin that exist on earth in some server somewhere, 20% are lost or stranded in wallets like Stefan. Here's what Jack and I are wondering. Ben, Ben, the Bitcoin, he may be in there. Ben, if you're in there, wink twice.

And we'll hit our three 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 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. LLZ. member FINRA slash SIPC. For our first story, KB. Holmes is enjoying the old three-for-one tailwind in the home building business.

This year is going to be a McMansion worth of profits for home builders. All right, Snackers, this company, KB. Homes, founded in Detroit, they got a Piet of Tera in L.A., and that's where they're headquartered now. KB. Holmes has been hammered nails into two-by-fours since 1957. Yeah, now they're building these Energy Star Homes, and they're doing it in eight different states, not too shabby. modest single-family units, 2,000 square feet-ish with the backyard in a front porch. You're going to round up a little bit. This is perfect if you're like, you know, you're upgrading from the apartment to the first home. We're talking first lawn kind of a situation.

KB. Holmes' stock jumped 3% yesterday because new orders for homes jumped 42% last quarter. And that powered in a $106 million profit from October to December. But Jack, what's the real key here that we noticed in the numbers? Sixty-one percent of KB Holmes' new home customers. are buying their first homes ever. That's right. These are gateway homes. By the way, Jack, 61% that means 61% of their buyers have never changed a gasket. Sixty one percent of their buyers are about to buy their first six-pack of WD40. Sixty-one percent of their buyers are going to say, what the hell are we thinking? Now, in the first paragraph of KB Holmes' earnings report, the CEO very nicely summed up why 2021 could be House of Paloosa for the economy.

Snackers, here are the three keys about why 2021. could be the house. Suppose at first, you got the market forces. They said that the housing market conditions will continue to be robust. The CEO specifically said that during this pandemic, homes offer people financial, health, safety, and emotional benefits. Yes, they do. You're not getting that out of like a car or an upgraded microwave kind of a thing. You're not getting it from your tiny New York City apartment either. No, you're not. But cyclical forces is the second key here. And those cyclical forces are the fundamental shift that has been long anticipated. What the CEO is referring to there is the millennials, Nick and me, who didn't buy homes in our 20s like other previous American

generations have. I mean, basically, Jack and I had to listen to our parents talk about, you know, splurging on a duplex at the age of 24 after they got their first internship bonus. Our generation entered the job market during the financial crisis, and we basically had to follow jobs to cities where real estate was completely unaffordable. Well, fast forward a few years. Now, COVID-19 is unleashing pent-up demand because we've been saving, you know, those grandma, off $5 checks for a whole bunch of years now. The third reason the CEO is bullish about KB Holmes' future is their pricing power. Yeah, apparently KV Holmes said they widened their profit margin to 21% because they were

able to increase prices on the homes they were selling. There are millions of millennials wanting to build homes and there aren't enough builders to build those homes. KV Holmes knows you want to get settled in ASAP so they flexed that leverage by jacking up the prices on you when you were just trying to buy a home in the pandemic. You want a new home? That's going to be 20% more. So, Jack, what's the takeaway for our cozy buddies over at KB. Holmes? The backlog.

That is the only part of the earnings report that actually looks forward into the future. Snackers, the appeal of owning a stock is really the chance that a company could become more profitable. And here's the key in the future. And the only part of KB Holmes' business that talks about the future is the backlog. Which is wildly ironic, Jack and I noticed because the backlog is now the only part that doesn't look back, it actually looks forward. What is wrong with these accountants, like naming terms the wrong thing? It should be called the forward log. The backlog of KB. Homes. The backlog is basically

like if a customer signed a contract for a two-story modern farmhouse, but the construction on that modern farmhouse hasn't exactly started yet. Right. That's why the backlog represents future sales, future revenues, future profit. It's basically a waiting list for new homes to get built. Well, Jack, the backlog over at KB. Homes, what was it over the last year? Last year was 1.9. billion worth of homes on the backlog. This year, it's up 63% to $3 billion. They have $3 billion worth of homes in their backlog. The backlog tells investors that the boom times for home building, there's a lot to go still. 2021, House of Palluza. For our second story, Jack, call up Alicia Silverstone. General Motors

is totally pulling a clueless on us. Complete makeover. GM is not a truck and SUV company. It's an electric package delivery system as a service. Snaggers, last week, honestly, Jack and I had a blast getting to update you on GM's brand new logo. This thing was cool. The new logo looks vaguely more hip than its 65-year-old predecessor. We kind of got Tron vibes. Jack, it looked like the logo got lost in the Matrix. If you touch this thing, your hair is going to like straight.

So we said, hey, GM, we have a suggestion for you. Can you change your name instead? Just change from GM to MG. The motor general. General is better as a noun than as a verb. Well, GM didn't listen to us. Ignore us. But on Tuesday, they said, you know what, we're going to do something better. They announced a new slogan, electrifying an industry. Electrifying the car industry, right? Yeah, actually, no, not electrifying the car industry. True. GM just announced ambitions to electrify package delivery from factory to table. So CEO, Mary Barra took the virtual stage at the Consumer Electronics Show and announced new things.

Operation Bright Drop. Bright Drop. A whole new jam business. It's commercial deliveries and logistics. Yeah, basically, it's the entire chain of getting stuff to you. They want to make all of that 100% electric. They don't want any gasoline to be harmed in the making of this film. So the first thing they unveiled, pretty straightforward.

They call it the EV-600. It's an electric van. 250 miles per charge. It looks like a futuristic electric van. We were like, okay, interesting. But then we got really interested because they unveiled EP1, which is an electric pallet. Most pallets I've seen are wood, but this thing is a big chest on wheels that moves through an electric motor at three miles per hour. It's pretty wild. You kind of got to see it to believe it.

It moves basically any item from a warehouse to a van, and then it can move that item from a van into your house. So picture the van showing up at your house. Actually, that's the dance, which we're about to get to. It's the dance. They call it the dance. The dance is when the van pulls up in front of your house. The side of the van opens up like a treasure chest and reveals that there are four of these R2D2-like electric pallets inside. Then these things get to work very confidently.

They roll outside of the van and just go straight up to your door to drop off your stuff. The delivery guy is just walking along this electric pallet and eventually he finally takes your package and puts it on your front stoop. So, Jack, the secret sauce to this thing? Altium, that is GM's trademark. electric battery that runs the whole thing. And now they're going to have a whole fleet of electric vehicles that can be tracked and managed all through a smart app using their Ultium batteries. Oh, and one more thing? They had a Steve Jobs kicker at the end of this. No big deal. On the side hustle

GM's doing? Yeah, they're working on an electric flying car. Best regards GM, PS, we have a flying taxi we're working on. The customers, Jack, who we got buying this stuff? Any company that delivers, including FedEx, which is the first customer, they already ordered 500 vans and probably like a thousand electric pallets. So Jack, what's the takeaway for our buddies over at General Motors? Now GM has a story to tell investors. Snackers, Tesla has always had a story. It's always had actually a really great story. This is Tesla's slogan, and I've always admired it, accelerating the world's transition to sustainable energy. Yeah, Tesla doesn't do just cars. They also do Tesla solar panels, Tesla home battery storage. They should do Tesla theme parks. And that story gets the people going. That is the

fuel behind Tesla's insane stock rise. Well, General Motors doesn't really have much of a story. Like a rock. Bob Seeger, we all saw the commercials from like the suburban back in the 90s. Great songs, great guy. Huge SUVs and huge trucks. That's been GM's story that they've been telling. It's more bedtime story, less Al Pacino halftime speech, kind of a motivating story. But this new GM story is more compelling. They're going to make all the packages that we buy, like through Amazon and e-commerce, all of them, zero emissions by the time they get to our door. That's the kind of story that gets people going. Wall Street agrees GM stock just jumped to a record high yesterday because GMs finally got a story they can actually tell investors.

For our third and final story, Visa was going to have this epic $5 billion acquisition of Plaid and that deal just got canceled. And that could change the course of the future for the credit card industry. Now, Snackers, you know Visa and you've used Visa because it's everywhere you want to be. You've used Plaid. You don't know Plaid because you didn't realize you were using it. You didn't realize you were using Plaid. Plaid, it's basically going to connect your old school bank accounts to your new school bank accounts. Right. It'll connect your Wells Fargo account to your new school Venmo or Robin Hood or Coinbase account. Also, full disclosure, this podcast, Snacks Daily, is part of Robin Hood. Robin Hood Snacks is part of Robin Hood. So typically when you want to like connect

whatever app you're using for payments to your bank account, they're going to say, hey, go find your account number, find your routing number, input your full name. Or you could just click here and log in with Plaid. Please upload three PDFs of recent Wells Fargo statements. Please. Or just log in through Platt. Yeah, Plaid is basically like, it's like a financial bouncer who really enjoys networking. They connect 200 million financial accounts to 11,000 banks and 2.6,000 FinTech apps. Yeah, Snackers, like we said, 25% of Americans, or like, you know, probably three and quarters of snackers, use plaid. You just didn't know it. Well, Jack and I checked out the calendars, and literally, exactly, couldn't be more precise.

One year ago, Visa said, hey, we're going to acquire Plaid for $5 billion. Visa said, we're going to keep our friends close and we're going to keep our enemies acquired. And that's where this gets interesting. Because think of all the data that Plaid has got. It knows you Venmo Chiquet for that Cosmo twice yesterday. It knows you just got three bedrooms worth of side tables you slapped on your Chase Sapphire credit card. Yeah. It was the connection with all those transactions.

So Visa acquired Plaid to make sure that Visa can continue to dominate the credit card business. Because get this, this is a wild stat. 60% of the debit and credit card market, it's controlled by Visa. 60% of the cards that we swipe or stick the little chip into, they got a little Visa logo on the bottom right. Now, there is no technical, like, official number for what's a monopoly. Yeah, 60% of feels like it would kind of be that number, Jack. I would say that's a monopoly. And that's why a few months ago, the Trump Department of Justice sued to block Visa from acquiring Plaid. And Jack, can you share with this what they said? They said, if they got Plaid, Visa would be a monopoly on transactions.

So, Jack, what's the takeaway for our buddies over at Plaid? Plaid shows us that the real power is in the plumbing. Powers in the plumbing snackers because canceling this deal, it actually wasn't about Visa's monopoly. It's really all about Plaid's future monopoly. In fact, this deal getting canceled this week could be the best thing that ever happened to Plad. Plaid, you may actually want to pop some Tatangier because Plaid had been looking for an excuse to get out of this $5 billion deal because it's actually worth more. Again, exactly one year ago when this deal was announced, before the pandemic. That's the key. Plaid was slapped with a $5 billion valuation.

But here in the corona economy, digital payment apps have been soaring. And Plaid's not competing with those digital payment apps. It's powering almost all of them. That's because Plaid is the plumbing behind your phone payments. And the real power is in the pipes. Now that Plaid has gotten itself out of this visa deal, it could IPO or get acquired by another company likely for a lot more than $5 billion. Probably for a lot more.

Jack, can you whip up the takeaways for us before the weekend? Sorry, I'm getting ahead of myself. It's only Thursday. KB Holmes hooked up 2,876 families with new homes last quarter. Yeah, the backlog, the backlog. That shows you there's like a whole lot of two-by-fourths to nail in 2021. For our second story, General Motors is new slogan, electrifying an industry.

Zero emissions delivery. A whole lot more compelling than like a rock. I mean, seeker's great. I'm a big seeker fan. And the Silver Bullet Band, for that matter. Nate. For our third and foul story, because the government was trying to block it, Plaid and Visa canceled their deal. Kind of a blessing for Plaid, we're thinking, because the power of fintech, it's in the plumbing. Time for our snack fact of the day. This one, a second one,

this one coming in from Mr. Conklin's Carlisle High School class, Jack, the snack fact. I believe Coca-Cola is the most recognized brand in the world, with 94% of Earthlings recognizing the Coca-Cola logo. But funny story that Mr. Conklin's high school class noticed when the Coca-Cola brand launched in China, the Chinese characters for it made the name of the company sound a little different. In China, Coca-Cola was female horse covered in wax. Not exactly a thirst quencher. No, it wasn't. It wasn't what they were going for. So they came up with new characters for a slightly different name that sounded mostly similar, but not terrible female horse covered in wax. The result, Coca-Cola in China is known as Kiku Kili, which means delicious happiness, which sounds a little more right.

Does not sound like female horse covered in wax. And that's the takeaway. Snackers, you looked fantastic today. Have a fantastic one. We honestly can't wait to be with you tomorrow. As always, HY HYSD. Ask your buddies, have you had your snacks daily? If they say no, show them snacks daily.

Nick and I, I'll see you tomorrow. If you know, you know. And before we go, Snackers, big congrats to Ezekiel and Karina. who apparently had a fantastic first date down in Mexico City. Couples that snack together do stay together. It's a proven fact. No pressure, but. And happy first mom birthday to Rita saying,

this is her first birthday since becoming a mother. Congratulations in San Jose. And happy birthday to E.K. in Chantilly, Virginia. And Alina Liu in Boston, Mass. And Josh Chu in Los Angeles. And Devante Horn in Mountain View, California. And Ray Ramos over in Atlanta. And Phil Reamer over in Atlanta.

And Jose Strawberry. down in Rancho Cucamongo, California. And Cale Paul in Pollock, Louisiana. And happy birthday, Kenny Chung in Denver. And finally, happy birthday. Sarah Schmidt, Raleigh, North Carolina. Happy birthday. 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.