Friday Mar.17, 2023

🚫 Biden’s Tik-ban plan

The clock’s ticking (Olivier Douliery/Getty Images)

Hey Snackers,

Silicon Valley Bank may not be a hit on Wall Street, but its merch is a star on Main Street. SVB-branded corporate swag is flooding sites like eBay (think: beanies and $86 water bottles).

Stocks rebounded after 11 big banks deposited $30B into struggling First Republic Bank, while Credit Suisse separately secured a $54B lifeline from the Swiss National Bank. The techy Nasdaq gained 2.5% as investors expected the Fed to cool (or pause) rate hikes next week.

Tok

Biden threatens to ban TikTok unless it separates from its Chinese parent (and US social stocks pop)

That escalated quickly… The TikTok-ban saga, which just a few months ago seemed to have been forgotten in a dusty corner, has intensified big-time. Earlier this month, President Biden supported a bill that would give him the power to ban (or force a sale of) TikTok in the US. POTUS urged Congress to pass the bill because of national-security concerns. This week:

Biden time: TikTok said that the Biden admin threatened to ban it in the US unless the popular app separates itself from its Chinese parent, ByteDance.
For You rage: Biden demanded that ByteDance agree to spin off TikTok. While ByteDance owns other apps — including Douyin, the Chinese (censored) version of TikTok — losing TikTok and its 100M American users would be a massive blow.
Endless scroll: Americans spend, on average, nearly an hour a day on TikTok — more than on either Facebook or Instagram.

Interesting timing… It may not be a coincidence that Biden threatened a Tik ban within a day of the Chinese government announcing an overhaul to strengthen its control over its tech sector. China’s Communist Party set up a new bureau to mine data for economic growth, and established a central technology commission to boost the party’s oversight of the sector. Chinese President Xi Jinping also encouraged the country’s private companies to “fight” alongside the Communist Party. The US is worried TikTok could share American data with China.

Bad news for one is great news for some… Meta, Snap, and Google stock surged after reports of an increasingly likely TikTok ban. The disappearance of TikTok in the US would be a dream come true for Instagram, Snap, and YouTube. Despite their efforts to replicate TikTok’s success (think: Instagram Reels, Snap Spotlight, YouTube Shorts), they’re still losing engagement (and advertiser $$) to Gen Z mega favorite TikTok.

Look

Google stops selling its smart glasses as face wearables struggle to gain traction

A glass from the past… returns to the dustbin of history. Google said it would stop selling its Glass Enterprise smart glasses. The $1K camera-equipped lab-goggle-looking wearables were marketed for industrial use (picture: warehouse workers scanning crates with their faces) and were an evolution of 2013's much-hyped Google Glass. Google stopped selling the first (consumer-focused) version of Glass two years after its debut after it elicited immediate pushback — both on privacy and style grounds.

Google pass: Glass was called antisocial and "too dorky to succeed" by the tech-forward Wired magazine.
Ogle glass: Concerns that Glass would be used surreptitiously to record patrons led several bars to ban the devices.

Face computers lose face… Google isn't the only biz to struggle with making smart glasses shine. In 2016 Snap released $130 video-recording Spectacles, but apparently overestimated demand to the tune of $40M in losses. In 2021, Meta launched its $300 Ray-Ban Stories for video recording and sharing, but despite the fashion-forward frame, they seem to have failed to catch on. Apple, one biz that could allay style and privacy objections, keeps delaying its rumored Apple Glasses. Meanwhile, VR headset sales fell last year, and Meta slashed the price of its Quest Pro just months after launch.

The higher the bar, the higher the value prop… and smart glasses have a high barrier to adoption without a high value prop. Getting a pricey tech product on a customer's face — vs. tucked inside a pocket — is a big ask. Unless wearable makers can demonstrate a compelling practical benefit, smart glasses might forever stay in their cases.

UNMIX

The Crypto Catch-Up…

📸 Flashy… US and European law enforcement shuttered ChipMixer, a “crypto mixer” that lets people commingle funds to boost anonymity. Authorities said it was used by criminals, including North Korean hackers, to launder $3B+ in crypto.

🤖 Techy… The Fed said its instant-payments service, FedNow, will go live in July. The system could overhaul how Americans move money each day. Think: not having to wait for checks to clear could cut demand for payday loans.

🪙 Coins… Fidelity quietly opened its crypto service up to millions of retail customers, with bitcoin and ether available to trade. The timing suggests Fidelity isn’t dissuaded by crypto winter and increased regulatory scrutiny.

What else we’re Snackin’

Aid: Major banks including JPMorgan, Goldman Sachs, and Citi pledged to deposit $30B to help rescue First Republic Bank. Shares of the midsize bank closed up 10% on the news, after falling 30% on Tuesday.
Shored: Credit Suisse shares surged after the Swiss central bank lent $54B to bolster the country’s second-largest lender. CS stock had hit a record low this week on financial-reporting and liquidity concerns.
Bai-Bai: Shares of Baidu (the Google of China) hit an eight-week low after it rolled out its much-hyped ChatGPT rival, “Ernie.” Investors were disappointed by prerecorded demo videos instead of a public launch.
Calm: Treasury Secretary Janet Yellen said the US banking system “remains sound” after a volatile week for global bank stocks. She said regulatory changes could be considered to avoid a repeat.
Grounded: Virgin Orbit is pausing all work (and reportedly furloughing staff) as the struggling space startup hunts for fresh $$. Virgin’s been burning $50M/quarter and its first UK satellite launch mission flopped in January.

Friday

Saint Patrick’s Day

Authors of this Snacks own bitcoin and ethereum and shares: of Apple, Google, and Snap

ID: 2798804

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Do you want to run the State Department of McDonald’s?

A couple of days ago, a tweet making fun at McDonald’s hiring a “Manager for Diplomatic Relations” went viral.

At first glance, the idea that McDonald’s, a burger franchise known for its double quarter pounders and perfectly salted fries, is expanding its diplomatic influence with policy makers in Foggy Bottom and the world at large sounds comical. But it’s actually crucial.

There are more than 40,000 McDonald’s locations spread across 115 countries around the world, and 90% of these stores are independently owned and operated franchises that pay royalties to the parent organization to operate. Tens of thousands of franchises operated by different owners with different beliefs, priorities, and values can get complicated, fast.

As we noted in Snacks in February, McDonald’s received heavy backlash from franchisees in countries including Saudi Arabia, Oman, Jordan, Kuwait, and Pakistan after McDonald’s Israel donated thousands of free meals to IDF personnel. But it wasn’t McDonald’s, as an entity, that made the donations. It was the owner of the company’s Israel franchises, who was acting under his own volition.

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For most of humanity, the thought of “nuclear-powered AI” sends a shiver down the spine. But the stock market is all for it! Just check out the list of top performing S&P 500 stocks this year. Just behind established AI plays — Super Micro Computer and Nvidia, you’ll find Constellation Energy, the largest operator of nuclear plants in the U.S. NRG Energy, which also operates nuclear plants, isn’t far behind. Bloomberg reports that CEO of power distributor Exelon — which spun off Constellation in 2022 — says in the Chicago area alone, AI could drive a 900% jump in demand for energy from data centers.

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China makes Apple remove WhatsApp, Threads, Signal and Telegram from app store

In its latest move to restrict foreign tech, Beijing has ordered Apple to remove a number of popular messaging apps from its app store there, including WhatsApp, Threads, Signal and Telegram.

These apps had only been available through VPNs but were popular nonetheless, according to the Wall Street Journal.

Apple said the Chinese government asked them to remove the apps in the iPhone maker’s second biggest market over “national security concerns.” Last week, China told its state-owned telecoms to phase out the use of US chips by 2027.

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Tesla's recall reveals just how bad Cybertruck delivery numbers have been

Thanks to a recall of Tesla’s Cybertrucks, we now know how many of them have actually been delivered: 3,878 since the EV company began releasing them to customers in November.

In its third and fourth quarter earnings report, Tesla said that its current Cybertruck production capacity was greater than 125,000 a year. Musk had previously said he expected to produce 250,000 Cybertrucks a year by 2025.

Either way, that’s a lot more than the roughly 775 it’s delivered each month so far.

The recall is over an issue with the gas pedal pad that, the National Highway Traffic Safety Administration says when pressed, “may dislodge, which may cause the pedal to become trapped in the interior trim above the pedal.” The cause of the issue: “unapproved” soap that the manufacturer used to aid in getting the pad on the pedal.

A Cybertruck customer this week posted a TikTok about a terrifying incident in which this happened and “held the accelerator down 100%” in his 6,000+ pound vehicle. Thanks to some quick thinking where he held down the brake and put it in park, he wasn’t injured.

This is the long-awaited Cybertruck’s second recall since it came out five months ago.

Tesla recalls the Cybertruck for faulty accelerator pedals that can get stuck | TechCrunch

Either way, that’s a lot more than the roughly 775 it’s delivered each month so far.

This is the long-awaited Cybertruck’s second recall since it came out five months ago.

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Cocoa hits $11,000

Cocoa prices are breaking records on an almost daily basis — with cocoa futures closing at (another) all-time high of $11,020 per metric ton yesterday.

That’s up 158% since the start of the year, and over 4x on the typical prices seen in 2022 — as crop production continues to fall short of demand.

Major cocoa-producing nations like the Ivory Coast and Ghana, which between them grow about two-thirds of the world’s cocoa, have seen excessive tree failure due to disease, changing weather patterns, and hot, dry conditions causing devastating droughts.

As such, consumers are starting to see the effects of the largest cocoa supply deficit in over 60 years: “shrinkflation” and reduced-cocoa recipes might soon hit your favorite chocolate bars, and Hershey stock was recently downgraded. Unfortunately, the worst may still be yet to come: the International Cocoa Organization expects production to lag behind demand by 374,000 tons for the 2023-24 season.

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The cost of producing the US penny rose 13% in fiscal 2023 to 3.07 cents. Yes, that means that Uncle Sam loses more than two cents for every cent it produces. (And no, you can’t make it up on volume.)

For the record, that’s the 18th-straight year the penny’s face value has been below production costs, fueling calls for abolishing the lowest value denomination coin. Canada started to phase out the penny in 2013, joining Australia, Brazil, Finland, New Zealand, Norway, and Israel, according to Smithsonian Magazine.

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Netflix is going to stop sharing subscriber numbers

After posting subscriber numbers that beat expectations today, Netflix says it’s no longer going to share those numbers starting in the first quarter of 2025. That’s a big deal since subscriber numbers have long been one of the main metrics that investors have looked at.

“In our early days, when we had little revenue or profit, membership growth was a strong indicator of our future potential,” its shareholders letter read. “But now we’re generating very substantial profit and free cash flow.” The company said that it will focus on revenue and operating margin as its main financial metrics, while it will look at time spent on the platform to gauge customer satisfaction.

Another way to read this? They’ve hit market saturation and just aren’t going to be growing that much anymore, and they thought they’d end on a good note. Going forward they’re focusing on how to get more money out of the customers they do have.

They’re doing so by cracking down on password sharing and charging for extra members. They’re also pushing people to ad tiers, which are more profitable than non-ad tiers.

“Scaling ads to become a more meaningful contributor to our business in ‘25 and beyond,” Netflix said.

Netflix’s ads membership grew another 65% in Q1 over the previous one, after rising 70% the quarter before, and 40% of signups in ad markets continue to be for those ad plans.

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