The Best One Yet - “Why stocks plummeted 7%” — Chewy’s over-eagerness. Zoom’s China drama. The Dow’s 7% drop.

Episode Date: June 12, 2020

That recovery rally hit a hard Wall Street wall, so we’re looking at why the Dow plummeted 7% for its worst day in months. Chewy is enjoying the current puppy-palooza, but it’s more focused on its anti-Amazon tactic: customer service. And in 1 day we just saw 2 opposite approaches to doing biz in China — Zoom’s way (censor) and a scrappy podcast startup’s way (don’t-censor).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 Friday, June 12th. Nick, the Dow just got walloped by 7%. Careful Snackers, Jack's spanking his palms over there. Nick, we haven't seen a plunge like this on the stock market since three months ago. Three months ago.

It's basically just been a few months. Still, Jack and I managed to whip up the best one yet for you. Our first story, Chewy.com, is loving the current puppy palozo we all got going on. The corona economy has been good to the online pet retailer. but not good enough. Our second story, Zoom, it's got a dilemma that will determine the future of its China business. Yeah, you know, the old become part of China's brutal online censorship or get banned in China by China's online censorship.

Tough, sticky situation there. Third and final story, the average U.S. stock fell a whopping 6% yesterday on COVID-queasiness. And it was for all the kinds of reasons that were, you know, 100% foreseeable. This is definitely a T-boy. Before you get to those three stories, though, let's talk. Some trademark drama. Trademark drama, courtesy of Snackers for Inovassan Sankar. The United States just launched a sixth branch of the military called the Space Force. All to protect Americans from aliens.

Yeah, pretty much. Now, Netflix also launched a Space Force. It's a show, probably its billionth TV show on Netflix. All to protect Netflix shareholders against Disney Plus. Nick, Spot On. Now, social media presence is pretty important for both Netflix's Space Force and the U.S. Territory Space Force. Yeah, you want that at Space Force handle because Netflix wants to let you know when season two of the TV show actually drops. And the government wants to be able to warn you in case falling space junk might crush your car. Real thing, real risk. But guess what, Snackers, who got the trademark

rights to Space Force abroad? This is the United States versus Netflix. Who got the Space Force handle? Netflix got the trademark rights abroad. Okay, but back in the U.S., Netflix also has the trademark, but if you look online, its status is still pending. Yeah, technically the trademark office is working from home, so they need a little more time on this thing. But just as a backup, in case that pending, like, gets converted into rejected, Netflix just snagged the real Space Force handle as a backup because, you know. Everyone knows why with the real.

Now, when it comes to tug-of-war in trademark situation, America is a first-to-use country. Just like the old Super Bowl chicken wings, you touched it, it's yours. I tweeted it, it's mine. So, Jack, what's the takeaways for our? buddies in the Padden Office? You don't need the best trademark lawyer. You just need the fastest trademark lawyer.

So true. 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. It 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 Fenra slash SIPC. For our first story, the Dow just took its worst dive since March. If you own a stock, chances are that stock fell by 6% yesterday on fears of a second coronavirus outbreak.

Honestly, this is borderline depressing that we'd to say worst since three months ago. It's really recently. So Snackers, we're going to kick things off with the health pain. Texas just reported its third straight day of record hospitalized. due to COVID-19. Florida infections doubled last week's infections. Now, there's a bit of a lag from like new actual COVID infections to them becoming official tested infections. Pretty clearly these spikes are from reopening all the state's economies last month when you get 50 people in a pizza shop. Bunch of those pizza eaters got sick, but we're only learning it now because they just finally got

tested. Not wearing a mask when you're stuffing your face with pepperoni. And this renewed sense of a public health outbreak in these states means people in those states are staying at home. That's the kind of thing that's good for Netflix, bad for the rest of the economy. Speaking of the rest of the economy, let's get to the economic pain from this renewed sense of an outbreak. Perfect timing, Jack. We got to talk about the central bank, our central bank. The Fed, they're expecting two more years before the economy recovers fully. The chairman of the Fed, Jerry Powell, spoke to the microphone on Wednesday, and he said they're planning to keep interest rates close to zero through 2022. This guy's a big time snacker, and now he wants to make it easier for businesses to borrow and people

to invest, it all comes down to low rates, more dates. Jerry Powell's basically like, economy, you're going to keep these training wheels on for at least two more years. Trust me, you're going to need it. Low rates, more dates. And then finally came the corporate pain. Oh yeah, Starbucks announced this week, it is permanently, permanently closing 400 stores in North America. Starbucks is shrinking in North America. That is a shocking stat. I couldn't believe it. Now, Snackers, what's bad for the economy? Is bad for corporate revenues? Is bad for profits? And as we saw yesterday, bad for stock prices. Now on the bright side, yesterday we learned that 1.5 million people filed for unemployment last week,

which is the lowest tally in 11 weeks since this started. A, lowest tally sounds good, but keep in mind, 21 million Americans are still collecting unemployment benefits. And Starbucks believes unemployed people are less likely to buy $4 cups of coffee. So, Jack, what's the takeaway for our buddies not having $15 lattes over in the U.S. economy? All this panic from yesterday was completely foreseeable. investors were just ignoring. Snackers, the duration of the economic and virus pain,

that has been warned to us for months on basically a daily basis. Public health experts have said that when states reopen, infections will spike. Economic experts have said that it'll take years, not months, to recover. And yet, stocks were down just 5% from their record highs this week. You got Disney World trying to get thousands of people on Space Mountain with turkey legs in their mouths like in a month. It's a sanitized world after all. We're not buying it, Disney.

Once in a lifetime economy crushing pandemics like this, they're probably worth more than a 5% bruise to the stock market. We all probably knew that, but it took yesterday for investors to snap back to the economic reality situation. Jack, I think you can smack your hands together again. For our second hypoallergenic story, investors weren't impressed with Chewy's incredible quarter. But we were impressed by its surprising differentiator. By the way, when a puppy starts barking in a minute, that is the turnaround point. It means we're halfway through the pod. Time to start running back.

We should clarify that because we've scared people aggressively with that. Yes, especially those Snackers running alone in like the woods. Yeah, you never want to hear that. Now, we're talking about the Dania Beach-based, chewy sounds nice. East Coast of Florida. That's enjoying this puppy paloza moment. In the summer you wear white, during the Super Bowl, you order wings. During quarantine, you adopt a pet.

So true. Pet adoption has searched 60% in April Snackers. And I'm looking up like 5% of it right now while we record this podcast. Roof, Roof, bark, Bark, Bark, River Says Hide, the official profit puppy of Robin and snacks. That's how we communicate when we're not preparing this podcast. So Chooey's sales jumped 46% last quarter and they snagged a $3.4 million profit. Not too bad because they were on like a pet waiting list to not get that profit until 2021. Get this. They added 2.5 million new customers to Chooey's online pet supplies website.

And one out of four of those new customers were brand new pet owners like me. The other three switched to shopping for dog food online because Tom's turtles and chew toys was shut down with COVID-19. Tough situation for Tom's local chew toy supply. One problem with this magnificent earnings report, Snackers. Everyone expected even better news than that. Yeah, Chewy stock was already up 80% this year, so it fell on the fact that these weren't like life-shattering earnings. Kind of felt like 75% up numbers, not 80% up numbers. It's like your buddy's poodle that can juggle, but it used to work for Circta Soleil.

Here's the thing about Chewy. It's got a cute, adorable obsession with customer service. Yeah, this is Wild Snackers, and we jumped in snack style to it. They promised to pick up the customer service phone you call 24 hours a day, seven days a week, within six seconds. We tested it the day of Chewy's IPO, and guess what? Live on our pod, they answered within five seconds. Jack and I did that again today, and actually they have like a feature that delays you a little bit,

apparently, but then they picked up in five seconds. Got a funny question. Why is my dog humping her big stuffed lamb I bought on chewy.com? It's a personal question from Jack and River. Yeah, I hope River's not upset. We brought her love life into this bottom. But then that Chewy company kicks up customer service like six notches because they send handwritten notes to their customers. They're touching that beautiful thing called human emotion.

Handwritten note, they even sent ice cream to a family whose cat died because they figured out that they loved ice cream. For a while, they kept like an artist on staff who was making oil paintings. of the Shibu Inus that were customers' pets. That is how you win the hearts of a puppy owner. So, Jack, what's the takeaway for our buddy scratching themselves over at Chewy? Customer service can be a competitive advantage.

Snackers, fantastic quote Jack and I found from their co-founder. If we win the customer, we win them for life. With so many new customers, Chewy customer service has been swamped the past few months. But if those customers get a really good impression from customer service, that's Chewy's retention tactic. And we've seen this work before. Best Buy has survived in the era of Amazon because its geek squad is like sending over a platoon of people to set up your TV.

Meanwhile, Circuit City had no geek squad. They went bankrupt. They're now like a skeleton online company that freaks people out. They're like a zombie online. Customer service feels squishy and emotional. But it's actually a powerful differentiator. Dare we say a profit puppy? Oh, we dared. For our third and final story, we've got Zoom and a small part. podcast app. In the same day, we just saw two companies take the opposite approach to China's censorship. It's a tale of two policies. Two policies diverged in a yellow wood. Should I stay or should I go with a different policy? Now, we're going to jump right in storytelling style. On May 31st, the San Francisco-based organization called Humanitarian China, they held a Zoom event

with 4,000 people worldwide. Was a sunny day, trees were abloom in, seemed totally normal. The purpose of the event was to commemorate pro-democracy demonstrators who perished at Tiananmen Square in 1989. We're talking about the protesters who were shot and killed by the government of China's violent crackdown 31 years ago. Nick and I were won when this happened. Yes, we don't really remember it that well. Now, by the way, China today bans any mention, any free speech about that ugly part of its history. Chinese Communist Party has erased it from the record.

It is literally illegal to be talking about it. Okay, a week later, June 7th, the humanitarian China organization tries to log into their Zoom account again, and they're encountered with a error. Error, error, error. Now, Zoom was behind this error. It wasn't an error. It was actually intentional. And Zoom shut down the organization's account to comply with the local laws of China.

That's literally how Zoom put it. They didn't flinch. They straight up said they shut this down. And when people were like, why? Are you shutting down an American organization's account because of Chinese law? The company responded this. It is not in Zoom's power to change the laws of governments opposed to free speech. So what is in Zoom's power? Perfect timing, Jack, because what is in their power is exactly what a tiny podcasting app did the other day. Pocketcasts. Pocketcast is a simple podcast playing app like whatever you're listening to this podcast on right now.

Turns out China's cyberspace administration, great name by the way. Make sure to get the handle on. that one. Well, this administration is not a fan of a lot of podcast content out there. We're thinking maybe not a fan of ours? Yeah. Hey, China's cyberspace administration, wink twice of Jack and I are not allowed in. Oh, by the way, correction. It's called Friahneman Square. Free on a men square. Exactly. And China's cyberspace administration told Apple to tell PocketCast to start censoring their podcast content. It's like a classic game of telephone. Don't kill the messenger here. But PocketCast, China wants you to censor some podcasts. on your app. Well, hey, Apple, you tell China that we think this. Well, PocketCast told China,

they are not going to do it. They will not let government sensors affect their platform, even if it means that government could end up banning it all together. So now PocketCast has taken a strong stand and they've been banned in China. So Jack, what's the takeaway for our buddies who is every business outside of China? The world has two internets, China's and the West. Snackers, we've been to China and you know, Who else has blocked in China? Facebook, Google, Slack, New York Times. Try checking your Gmail without a VPN. AKA some of the biggest and most influential companies on earth, banned in China. Other companies have kind of sneakily found a way to offer an alternative reality version of themselves to exist in China.

LinkedIn found a little bit of a loophole. They basically made a version of itself just for China with built-in sensors to block out and report to the authorities anybody who mentions Tiananmen Square. Then it turns out U.S. companies that refuse to follow China censorship rules, Chinese entrepreneurs end up building out their own copycat versions. LIBO, Baidu, WeChat, Iechi, they're all Chinese knockoffs of the American companies you and I know and love. Billions of people use China's censored version of the internet. Billions more use the West's free and open speech version of the internet. But at the end of the day, Jack and I look at it, it's two internets. Jack, and you'll whip up the takeaways for us before the weekend.

The Dow took a 7% dive on realization that COVID's still here and it's still bad for the economy. Jack, it never gets sold. A little bubble of a rational optimism kind of got popped yesterday. Second story, chewy.com had a great corner. Investors wanted a greater corner. Those two and a half a million new puppy owners are in love with Chewy's customer service. Third and final story, Zoom is supporting China's censorship laws because they don't want to get banned in China. Yeah, because there are two internets, China censored one and the West's open one. Now, time for a snack fact of the day. This one sent in by our buddy, Will Go from Warden and his fiance Ying Long, who, this is adorable, met as kids in Sunny Seattle. This snack fact, though, isn't that

adorable. Remember those securitized financial products, Nick, that almost brought down the entire world in 2008 during the financial crisis. MBS and CDOs. Mortgage-backed securities, collateralized debt obligations. But Snackers, what you may not know is that this securitization process can actually be traced back to the 1830s. The cotton industry was one of the biggest drivers of the early U.S. economy. We talked about that last week with a snack fact. Slays were cheap to keep while they were laboring, but not cheap to buy up front. So this is kind of a shocker. Banks would provide plantations expansion capital in exchange for mortgages on the enslaved humans that were doing the work. Then the banks would package up these slave mortgages into securized bonds to sell to other

investors. So essentially the same product we had for collateralized mortgage assets in 2008, just a different underlying asset. Incredibly uncomfortable, but human bodies were literally the equivalent of financial assets like a house. Even high finance is tainted with a history of oppression. Now, Snackers, before we jump into the weekend, we want to wish a happy birthday to Rene in Atlanta. And happy anniversary to Jenny and Matt from Covington, Washington. Lovely Covington, Washington. We got two Snackers, 11 years hitched and one takeaway. What is it, Jack?

Couples that snacks together, stay together. Speaking of which snackers, do you have a partner who does not snack yet? Kind of a one-sided relationship. Not going to lie, we prefer you to your partner. Pillow talk conversation tonight. Ask them H-Y-H-Y-S-D. What was that, honey? Have you had your snacks daily?

What was that, honey? If you know, you know. We'll see you Monday. Have a great weekend. This is Jack Island Stock of Amazon. 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.