The Best One Yet - 😬 “The Snaggletooth Stock” — SmileDirectClub’s matrix. Spotify’s spiderweb book. The Fed’s game of chicken.

Episode Date: September 22, 2022

Millions of Americans’ pandemic secret was those invisible adult retainers — but SmileDirectClub stock has now fallen 95%. Spotify finally launched audiobooks because nothing feels sticker than Charlotte’s Web. And the Fed just raised interest rates by a record amount for a 3rd time in a row, because someone’s gotta blink first.$SDC $SPOT $SPYFollow The Best One Yet on Instagram, Twitter, and Tiktok: @tboypodAnd now watch us on YoutubeWant a Shoutout on the pod? Fill out this formGot the Best Fact Yet? We got a form for that tooLearn 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. It's Thursday, the new Friday, September 22nd, and today's pod is the best one yet, baby. It's the best one yet. I'll accept the Dow Jones Industrial Average did drop 500 points yesterday. And the S&P 500 index fell by nearly 2%. Yeah, more on that in our second story. In the meantime, Jack, what's the first story for our T-Boy?

Smile Direct Club just fell another 10% as people stopped buying those invisible braces. Because Smile Direct Club is living in the wrong matrix. Leo Morpheus. For our second story, the Federal Reserve just raised interest rates by a record amount again. And it all comes down to a game of chicken. Our third and final story. First, Spotify did music. Then Spotify did podcasts.

Now, Spotify's doing audiobooks. Because Spiderwebs feel good. Was that uncomfortable the way I said good? It was just a good. uncomfortable enough. Yeties, before we hit that wonderful mix, Jack, I love this mix. Hold on to your horoscopes. Yeties, we're transitioning moons to the sign of Libra. The sun and Mars just aligned with Jupiter. Directly over the equator, what are the odds? Because today, September 22nd is the fall solstice. Today, September 22nd is the autumn equinox. We're talking the end of summer,

the start of fall. Fold away your caprice, whip out the wool. Today, there are exactly 12 hours of daylight and exactly 12 hours of night time. Yeah, so like our long summer days are now turning into long fall nights. Which means a few things. For example, we know that you just lit a Yankee candle because it's almost dusk. And we also know you tossed on those corduroys because it's brisk out, it's layer season. Yeah, Jack, hold my gourd. I got to wrap this thing and flannel. But the real question, are you hitting the pumpkin patch this weekend or you're hoeing down the hayride?

Uh, trick question, neither. You're going apple picking. and you're doing it with your new significant other. But this isn't just astrology, astronomy, or cosmetology, Nick. No, it is not. It's also about the economy. Because the autumn equinox kicks off the most important spending season of the year. First Halloween outfits, then Thanksgiving travel. And then Christmas gifts and then Hanukkah presents.

Yeties, toss on your slamming salmon sweater. It's spending season, baby. Let's hit our three stories. Fifteen years before this song, two boys from the Northeast met in the dawn. They had an idea to cause a cultural storm. It's the best one yet, but the best is an norm. Jack Nick, that's it. 50%.

That's a fat tip. Tea boy city on your at list. If you know, you know, because we're ready to go. We can't wait no more, so just start the show. For our first story, Smile Direct Club dropped another 10% because your mouth is sick of being told what to do. Smile Direct Club is living in the wrong matrix. During the pandemic, everyone knew what you were doing.

We were all doing these things. We were all ordering DoorDash. We were watching Netflix. We were pimper in our crib with some pottery barn furniture. Yeah, but Jack, what was everyone's dirty little secret during the pandemic that nobody knew about? For millions of us, it was braces. Braces. Invisible adult braces was your sneaky work-from-home hero.

In 2020, Inviseline sold a record 1.6 million clear retainers. That was a 40% general. And it's all because of the Zoom effect that was hell going on. The Zoom effect, because you weren't hanging out with people during the pandemic. So you weren't embarrassed by braces on your teeth. You had extra cash during the pandemic. Because you canceled the Magic Kingdom vacation. And the only part of you anyone saw at work was your face on a screen.

Because you were zooming into work. So people splurged a few thousand bucks to nudge that incisor into a straighter position. By the way, Jack, did you notice Molly's teeth the last time you saw her? No, I did not. Well, over the third. We're beautiful as always. That is what we were hoping to hear, my friend. She was using Invisaline during the pandemic.

Wait, her smile was even better the last time I saw the moment. Incisors were like an exact 90-degree angles now. I did think it must have been some kind of an optical illusion. It was the dirty secret of the pandemic. They're real and they're fantastic. But Jack, it's a different situation today for your molars. You're not stuck at home like you were before. Nope.

You have less cash than you have in years. True. And you are vacationing. Your mouth doesn't. want to feel micromanaged by like a pair of Smile Direct Club braces. That's a big reason. Direct to consumer tooth-streatening startup Smile Direct Club has come crashing down as growth of their business has stopped. Just in the past week, Smile Direct Club stock has dropped another 10% on their newest news update. They're quitting some countries and their slashing costs. But Jack and I saw this headline.

We jumped in T-boy style and it got us curious about one very particular thing. Why is Smile Direc Club doing so much worse than all the other pandemic winners. Netflix, Zoom, pellets on, their stocks went up during the pandemic and they've fallen back down. But Smile Direct Club is a different story. Nick, their smile is broken like a McJagger snaggle-tooth. Their stock has plummeted, get this, 95%. Where's a trading now, Jack? In the dollar store. That's where it's trading. The stock is a dollar.

It's a buck. It's a dollar. It's a George Washington. Their sales are one-third of where they were during the peak of the pandemic. It is unusual for a pandemic winner like Smile Direct Club for their business to shrivel to nothing so fast. We had to figure out why Smile Direct Club is so upside down. So, Jack, what's the takeaway for our buddies over at Smile Direct Club? Call Morpheus.

Morpheus. Smile Direct Club is living in the wrong Matrix. Yeties, picture a Matrix. Not like the movie Matrix, not Morpheus, not Neo. Picture. Yeah, ignore that Morpheus reference. A math matrix. Picture those four quadrants, like up on the chalkboard.

in high school algebra. And on one side of that math matrix are the two customer types. You got the budget shopper and you got the luxury shopper. And on the other side of that math matrix are two price types. You got a budget product and you got a luxury product. Well, Smile Direct Club operates in the most challenging, vulnerable, difficult, really, really hard matrix quadrant of them all. Smile Direct Club is in that awkward square that targets budget shoppers with luxury products. Even though Smile Direct Club is the cheapest option, by far to strain your teeth. It's a lot easier and faster than an orthodontist. It still costs you $2,000. The average Smile Direct Club customer is earning $65,000 a year. So $2,000, that's a non-essential

luxury splurge. That's a whole lot of money for a budget shopper. Budget customers aren't splurging on expensive things because the cost of living is surging. And that is why Smile Direct Club is so banged up. It's living in the toughest matrix. Wait, dude, did we just get through this story without doing one of these? Kianis. For our second story, oops, I did it again for the third time in a row. The Federal Reserve has increased interest rates by a record amount. Here's the one big question.

One question. Who is going to blink first? We got a game of chicken, Jack? Is this a game of chicken? It's a game of chicken, Nick. Okay, Yeties, full disclosure. This is Nick. This is Jack.

and we have one job on this podcast. What is it, Jack? Make today's pod better than yesterday's pod. That's why today's pod is the best one yet. It happens to be better than yesterday's. Well, Jerry Powell, the chairman of the Federal Reserve, he has one job, too. Yeah, and his job is to stop prices from rising. Like, freeze inflation, man. That's the job. Fix this inflation problem, stat. Your only hope. I paid $20 for a pint of ice cream. I'm not happy about this.

So yesterday, at the Fed's big policy meeting, he tried to do just that. By raising interest rates by 0.75%. That seems like a ridiculously small. It does seem like a small number. That's true. But it's actually a record interest rate increase. To sprinkle on a little more context here,

it's actually the third straight Fed meeting with a record interest rate increase. Last year, the Fed's benchmark interest rate was 0%. Today, Jack, where is the Fed's benchmark interest rate? After all those record increases, it's all the way up to 3%. Now, besties, when you hear about the Federal Reserve, don't just think of it as our nation's central bank. In reality, the Fed is an economic influencer.

It is the economic influencer. The Federal Reserve is the Kim Kardashian of cash. It's the Addison Ray of the economy. It is the Mr. Beast of Money. Jack, can we say it's the Charlie DeMelio of lending? I think it's actually Charlie DeMelio of demorgage industry. That is so good. Let's go with that.

Yet is when the Fed changes that interest rate, that influences, all borrowing rates across the whole economy. Case and point, Jack, what's going on with the 30-year mortgage? 30-year mortgage rates have jumped by three percentage points, from 3% a year ago to 6% now. Because of the Fed. Five-year car loans are over 5% for the first time since 2012. Because of the Fed. Remember how Peloton used to let you finance the bike entirely, Nick?

Oh, totally, Jack. Pay nothing now. Pay 0% interest. We got your back. That's not an option for the new Peloton Row we announced. No, it is not. You got to pay the full $3,200 cash up front for that thing. It's not getting finance. The Fed has raised interest rates by a bunch and it's influencing every borrowing rate in our economy by a bunch. It's the Charlie DeMellio of DeMoney you borrow. So, Jack, what's the takeaway for our buddies over at the Fed? This is a game of chicken. Yeah, it is. Who is going to blink first? Companies or consumers? Now, Besties, there is a way to get

prices to fall, but it's going to require someone to sacrifice. Either we consumers got to stop buying as much stuff or companies got to make less profit. The Fed is using interest rates to slow the economy down, but it's still not clear who's going to feel the most pain. Either consumers are going to be hurt by buying less or companies are going to be hurt by making less money. It's a game of chicken to bring down prices. And someone has got to blink.

Now a word about our sponsor, Robin Hood. You can do just about anything from your phone, but some industries, they've just been slow to move. The finance industry was slow to move from phone to computer and then from computer to app. Robin Hood wasn't. It's the Silicon Valley-based brokerage that's been updating app since it was born in 2015. Using the Robin Hood app for your stocks and crypto is almost as easy as downloading it. So you can invest to your pace on your terms by downloading the Robin Hood app. If you're not investing on Robin Hood yet, to get started, go to start.

to Robinhood.com slash T-Boy and choose your free stock. That's Robinhood.com slash T-B-O-Y limitations apply. Stocks are offered by Robin Hood Financial LLC, member SIPC. Crypto offered through Robin Hood crypto. All investments involve risk. By the way, this podcast is not owned by or part of Robin Hood and we are not employees of Robin Hood. For our third and final story, Spotify finally launched audiobooks growing its audio empire. But we're honestly asking the question, Why? We're going to throw that out there. Why? Why? Why are you doing this? Well, for the answer, we're going to travel back one year to November 2021. Nearly a year ago, Spotify paid $119 million to acquire Find Away. Find Away, an audiobook startup that happened to compete with Amazon's Audible.

Well, this week, Spotify finally put that acquisition to use. Boom. Launching audiobooks. Yeah, and so Jack and I jumped in T-boy style, and we, uh, we, searched for all the light we cannot see in Spotify. It's a fine novel and it's right there. 1849 a la carte. You can curl up, listen to that page, Turner. Yeah, you buy one book at a time. It's not included in the subscription. And no, you don't get any perks if you're a Spotify premium subscriber. Yeah, the book is $18.49 for free and paid users. There's no cutting in this line, people. Now, awkward situation. You can't just push by. This was an awkward situation, man. You have to ask to buy the book and then they send you an email and you open up your email and then you buy the book through a web page.

And that is because Spotify wants to avoid giving Apple a cut since they control the app store. It's clunky. It's a bunch of friction. But so far, they've got 300,000 books on there and pretty soon they're going to start recommending books based on the music you listen to. They might notice that you've been listening to Adele's songs about breaking out. They're going to be like, hey, maybe you'll enjoy a Jane Austen, novel about finding love. Yeah, but right now, it's not that yet. It's just you and Dale on a pint of Ben and Jerry's.

But Jack, it feels like we should ask that question. Can we ask a stupid question, Yetis? A podcast to a large audience feels like the perfect time to ask a stupid question, Jack. I love it. Why is Spotify doing this? Why are they launching audiobooks? Yadies, Jack and I decided we do a quick cost-benefit analysis to try to figure out why they're doing this. On the benefit side, this will be a new revenue stream for Spotify.

Spotify is going to take a small cut. every time you buy to kill a mockingbird. Another benefit, Spotify thinks this will keep you in the app longer. Podcast is 15 minutes long. A book that that's 15 hours long. But then Nick and I couldn't help but notice the negatives, the costs. For example, that startup they acquired, the audiobook startup, that cost them $119 million. $119 million is more money than Spotify has ever made in profits in the history of the company.

And honestly, the audiobook market, It isn't that big right now. Audio book revenue last year was one-twent the size of music streaming. Now, Spotify says that's an opportunity. They think they can massively grow the size of audiobooks just like they did with music streaming. But honestly, this feels like a lot of work, a lot of costs. It is. Not that much upside.

I hear you. And do you want to compete directly against the dominant player, Amazon? I feel uncomfortable now, Jack. Why is Spotify doing audiobooks? Honestly. It sounds like you want to take away. Jack, what's the takeaway for our buddies over at Spotify? Nothing feels better than sticky.

Sticky as a spider web. Yeah, it is. This is the same reason we told you why Amazon was adding free Grubhub delivery to Prime a few months ago. The more perks Amazon added to Prime, the more stuck you got to that subscription. Well, we're looking at Spotify. We're touching Spotify and it's starting to feel a little sticky. It's getting sticky too. It's getting sticky.

At first, Spotify was your source for music on your runs. and then for podcasts on your commute. And then Spotify added live audio for your weekends. And now they're adding audiobooks for your really, really, really long road trip. Each one of those additional customer touchpoints is like a silky thread keeping you connected. The more threads, the thicker the web, the stickier it is. And the harder it is to unsubscribe. And if it's hard to unsubscribe, then Spotify keeps you longer and then they can raise prices easier.

Spotify is not revolutionizing the book industry here. They are keeping you sticky. Jack, can you whip up the takeaways for us for the new Friday? Smile Direct Club is one of the worst performing stocks on Wall Street. Because it's living in the worst quadrant of the Matrix. For our second story, the Fed. As expected, hiked interest rates by another 0.75%. It's a game of chicken. Who's going to blink first, man? Consumers or companies.

Chicken. Our third and final story. Spotify just added audiobooks to the app. Why are they doing this? Because they want to keep you sticking. Now time for the best fact yet. This one sent in as a voicemail from Ben Harris from lovely St. Louis, Missouri. Pushing play. Nick and Jack told us about a flamboyance of flamingos and a parliament of owls, but there are other fun names for groups of flying creatures,

such as a cauldron of bats, a murder of crows, an unkindness of ravens, and my personal favorite, a thunder of dragons. Have a great day. Oh, then, there we go. The dragons. Extra points for creativity, Charles Darwin. Not too shabby. Alex just told me that a group of otters is called a raft.

It's called a raft. Are you kidding? Are these animals naming themselves? It's very literal. Throw a hawk fin on that thing. But Jack, here's the best part. A group of rafts is called an otter. Yeties, you look fantastic today.

And if you haven't yet, click to follow us, subscribe so you get us every single day. We'll be right in whatever app you're listening to them. I promise you, tomorrow's podcast will be the best one yet. We got a good feeling. Nick and I, we'll see you tomorrow. Can't wait. And before we go, just a shout out to a legendary family of Yetis, Sam and Mendie Mall are listening together right now.

They're a couple that T-Boys together. Big shout out to Alex Mall, too. And a big thank you to Jennifer Osmond, who's been using the T-Boy takeaways on her University of Georgia Bulldog marketing class. I'm a Gator fan. and I'm still saying go dogs. And a happy birthday to Zach Stanford over in Pleasant Grove, Utah. And happy birthday to Daniel, over in Westchester.

And a happy birthday to another Daniel, the Broncos fan, Paul, in Boulder, Colorado. That is the stepmaster. And to all our Yetis down in Puerto Rico, just so you know, Jack and I are wishing you are absolute best right now. This is Jack. I own stock of Netflix, and Nick and I both own stock of Peloton, Spotify, ETFs of the S&P 500, and Robin Hood. Now a word about our sponsor, Robin Hood. Jack, rule number one about a kitchen renovation. Tell your friends about your kitchen renovation.

We know the cabinets are expensive. Well, in the pandemic, a lot of companies renovated their businesses, focusing on apps and digital. Robin Hood didn't have to. It was built digital from the start. Robin Hood's mobile first and intuitive design makes investing a little easier for every stage of your investing journey. Whether you want to trade options, ETFs, or stocks through Robinto Financial, or buy some Bitcoin on Robin Hood Crypto. you can do all that right on the Robin Hood app. If you're not investing on Robin Hood yet, to get started, go to robin hood.com slash

T-boy and choose your free stock. That's robinood.com slash T-B-O-I. Limitations apply. Robin Hood Financial LLC, member SIPC, all investments involve risk. By the way, this podcast is not owned by or part of Robin Hood, and we are not employees of Robin Hood.