💊 Stimulus pill flops

Friday, March 13, 2020 by Robinhood Snacks | Disclosures

"That wasn't the right injection! "

Dow Jones
21,201 (-9.99%)
S&P 500
2,481 (-9.51%)
Nasdaq
7,202 (-9.43%)
Bitcoin
$5,770 (-26.11%)
10-Yr US Treasury
0.795%

Hey Snackers,

COVID-19 isn't just a human problem: hundreds of hungry monkeys swarmed a Thai street to fight over one banana. The number of tourists that usually feed them has fallen dramatically.

Despite announcements of over $1.5T of new government emergency loan programs, all 3 major US stock indexes fell nearly 10% yesterday. This triggered the 2nd 15-min halt in trading this week — and it's the biggest single-day stock market drop since 1987's Black Monday.

Cure
1. Markets aren't healed by the President's speech or the Fed's $1.5T stimulus medicine

Like Advil for Strep throat... On Wednesday, the President announced a new travel ban and proposed $50B of new loans for small and medium businesses struggling from the effects of the Coronavirus. Then yesterday America's Central bank announced something 30x bigger — $1.5T of fresh loans for financial institutions that need it. Markets seemingly rejected the stimulus pill, hammering stocks down another 10% Thursday — that's the Dow's worst day since 1987.

  • The Fed's goal is to ease the symptoms of coronavirus-plunged markets (we're in a bear market now) and to increase borrowing & spending.
  • But that's exactly the problem: The market's downfall is just a symptom of the underlying illness, which is coronavirus. This is like the gov prescribing $1.5T worth of Advil for an illness that can only be cured through antivirals — treating a symptom (fever), not the cause (virus).
  • Government spending and credit relief worked in '08 and '09 when the economy was actually sick from a credit crisis. This time seems to be different.

Pouring money into a party no one wants to attend... The fundamental issue is that people aren't spending money — the spread of COVID-19 is keeping the world at home, which is like economic paralysis. The stimulus pill isn't enough to get people to a party they think is dangerous... the only thing we think will actually help: containing the spread of coronavirus ASAP.

THE TAKEAWAY

The market's cure lies in the root of the illness... Public health efforts toward preventing COVID-19's spread can get to it. The gov's ban on flights from Europe takes aim in that direction. South Korea took swift action on its outbreak, and its rate of infection has dropped significantly:

  • It's testing 20K people per day (just a total of 10K Americans have been tested so far) and they treat infected people for free — They're also tracking patients through apps (little creepy). But it's resulted in an impressively low 67 deaths out of 8K cases and 222K tests, as of Thursday.
  • Italy's outbreak happened around the same time, but it now has over 1K deaths out of 15K cases and 73K tests.
Test

First rule for fixing a problem... Be able to identify it. LabCorp and Quest Diagnostics are America's clinical-testing duopoly — they're the ones who analyze your blood/saliva/etc. after your doctor collects test samples. Now, these publicly-traded labs are producing coronavirus tests. US confirmed infections have topped 1K — keeping that number as low as possible depends a lot on these labs:

  • 3 major entities offering testing right now: Labcorp, Quest, and government-run labs.
  • Requesting a test doesn't mean you'll get one — state/local labs run through the CDC have limited testing capacity and aren't well-funded enough to scale.
  • COVID-19 tests are more complex than flu/strep tests — they take 4-6 hours to analyze, and it's challenging for small labs to run them in large batches.

This is Big Clinical's big moment... Lots of molecular testing companies are trying to develop COVID-19 kits. But only LabCorp and Quest have the capacity to scale for the amount of testing needed to crunch your bodily data. Still, both their stocks plunged over 22% in the past 5 days, since they haven't been able to capitalize on demand for testing.

THE TAKEAWAY

Off the JV bench — and in the Varsity game... LabCorp and Quest could be doing more to scale testing, but they have some "opportunity blockage" (like Hasbro with Baby Yoda).

  • Neither company lets people come into one of their thousands of locations to get tested for COVID-19. They require a sample be taken at a doctor's office, and turnaround can take 3-4 days.
  • The CDC has imposed restrictions (aka, red tape) around the rollout of testing kits and guidance for doctors on who should get the test, slowing the scaling process.
What else we’re Snackin’
  • Shopped: Shopify gives employees a $1K stipend to buy office supplies while they WFH
  • Cryptout: Bitcoin plunges 26% and hits a 10-month low as cryptos fall in a massive sell-off
  • SaaS-y: Oracle stock pops 5% after the enterprise tech giant enjoyed a 4% growth in its cloud services
  • Magical: Augmented reality startup Magic Leap — which has Google and Alibaba among its investors — could sell itself for a dreamy $10B
  • Slacking: Slack shares tumble 22% after the workplace-messaging company reported a loss more than 2X bigger than last year's (but sales grew 49%)
  • WFH Max: Amazon tells all its 750K employees worldwide to stay at home if possible through March on coronavirus fears
Snacks Daily Podcast

Casper, Brandless, Harry's Razors, Outdoor Voices... Direct to Consumer startups are having a moment right now. Not in a good way — they're flopping. Why?

D2C means ecommerce with no physical storefronts — so they have to get eyeball attention another way: digital ads.

Learn more about D2C's (ridiculously high) Customer Acquisition Cost in our 15 minute podcast, Snacks Daily.

Friday
  • The Consumer Sentiment Index tells us how we're all feeling

Disclosure: Authors of this Snacks own shares of Amazon and a Bitcoin.

ID: 1118745

Subscribe to Robinhood Snacks

Our Editorial Principles
Robinhood Financial LLC and Robinhood Crypto, LLC are wholly-owned subsidiaries of Robinhood Markets, Inc. Equities and options are offered to self-directed customers by Robinhood Financial. Robinhood Financial is a member of the Financial Industry Regulatory Authority (FINRA) and the Securities Investor Protection Corporation (SIPC), which protects securities customers of its members up to $500,000 (including $250,000 for claims for cash). Explanatory brochure available upon request or at www.sipc.org. Cryptocurrency trading is offered through an account with Robinhood Crypto. Robinhood Crypto is not a member of FINRA or SIPC. Cryptocurrencies are not stocks and your cryptocurrency investments are not protected by either FDIC or SIPC insurance.

Getting “early access” to options or Web is defined as signing up with a valid email address for a spot in Robinhood Financial’s respective waitlist queues for Web or for options. Getting “early access” to Robinhood Crypto is defined as signing up with a valid email address for a spot in Robinhood Crypto’s waitlist queue. Early access to the waitlist for Web, options, or Robinhood Crypto should in no way be construed as confirmation that a brokerage account with Robinhood Financial has been opened or will even be approved for opening. Priority may be given to Robinhood Gold subscribers and existing customers of Robinhood Financial.

Free trading of stocks and options refers to $0 commissions for Robinhood Financial self-directed individual cash or margin brokerage accounts that trade U.S. listed securities via mobile devices or Web. Relevant SEC & FINRA fees may apply. Please see the Fee Schedule.

Robinhood Financial is currently registered in the following jurisdictions. This is not an offer, solicitation of an offer, or advice to buy or sell securities, or open a brokerage account in any jurisdiction where Robinhood Financial is not registered. Additional information about your broker can be found by clicking here.

Margin trading involves interest charges and risks, including the potential to lose more than deposited or the need to deposit additional collateral in a falling market. Before using margin, customers must determine whether this type of trading strategy is right for them given their specific investment objectives, experience, risk tolerance, and financial situation. For more information please see Robinhood Financial’s Margin Disclosure Statement, Margin Agreement and FINRA Investor Information. These disclosures contain information on Robinhood Financial’s lending policies, interest charges, and the risks associated with margin accounts.

Investors should consider the investment objectives and unique risk profile of Exchange Traded Funds (ETFs) carefully before investing. ETFs are subject to risks similar to those of other diversified portfolios. Leveraged and Inverse ETFs may not be suitable for all investors and may increase exposure to volatility through the use of leverage, short sales of securities, derivatives and other complex investment strategies.

Although ETFs are designed to provide investment results that generally correspond to the performance of their respective underlying indices, they may not be able to exactly replicate the performance of the indices because of expenses and other factors. A prospectus contains this and other information about the ETF and should be read carefully before investing. Customers should obtain prospectuses from issuers and/or their third party agents who distribute and make prospectuses available for review. ETFs are required to distribute portfolio gains to shareholders at year end. These gains may be generated by portfolio rebalancing or the need to meet diversification requirements. ETF trading will also generate tax consequences. Additional regulatory guidance on Exchange Traded Products can be found by clicking here.

Options transactions may involve a high degree of risk. Please review the options disclosure document entitled the Characteristics and Risks of Standardized Options available through https://about.robinhood.com/legal or https://www.theocc.com to learn more about the risks associated with options trading.

The cash management program is expected to be offered by Robinhood Financial LLC. The cash management program, when operational, will be an added program to Robinhood brokerage accounts and will not be a separate account or a bank account. Robinhood Financial will provide additional information on the cash management program once it is operational to help customers, including those with “early access,” to determine if they want to add the program to their brokerage account.

Robinhood Snacks newsletters and podcasts reflect the opinions of only the authors who are associated persons of Robinhood Financial LLC and do not reflect the views of Robinhood Markets, Inc. or any of its subsidiaries or affiliates. They are meant for informational purposes only, are not intended to serve as a recommendation to buy or sell any security in a self-directed Robinhood account or any other account, and are not an offer or sale of a security. They are also not research reports and are not intended to serve as the basis for any investment decision. Any third-party information provided therein does not reflect the views of Robinhood Markets, Inc., Robinhood Financial LLC, or any of their subsidiaries or affiliates. All investments involve risk and the past performance of a security or financial product does not guarantee future results or returns. Keep in mind that while diversification may help spread risk, it does not assure a profit or protect against loss. There is always the potential of losing money when you invest in securities or other financial products. Investors should consider their investment objectives and risks carefully before investing. The price of a given security may increase or decrease based on market conditions and customers may lose money, including their original investment. Robinhood Financial LLC, member FINRA/SIPC.

Testimonials may not be representative of the experience of other customers and are not guarantees of future performance or success. Robinhood Financial LLC, member FINRA/SIPC.

Third party information provided for product features, communications, and communications emanating from social media communities, market prices, data and other information available through Robinhood Markets, Inc., Robinhood Financial LLC or Robinhood Crypto, LLC are meant for informational purposes only and are not intended as an offer or solicitation for the purchase or sale of any financial instrument or cryptocurrency or as an official confirmation of any transaction. The information provided is not warranted as to completeness or accuracy and is subject to change without notice. Any information about Robinhood Crypto on any Robinhood website (including www.robinhood.com and blog.robinhood.com), the Robinhood platform, e-mails, or any other communications, are meant for informational purposes only and are not intended as an offer, solicitation, or advertisement for Robinhood Crypto or any goods or services offered by Robinhood Crypto. The Robinhood website provides its users links to social media sites and email. The linked social media and email messages are pre-populated. However, these messages can be deleted or edited by users, who are under no obligation to send any pre-populated messages. Any comments or statements made herein do not reflect the views of Robinhood Markets Inc., Robinhood Financial LLC, Robinhood Crypto, LLC, or any of their subsidiaries or affiliates.

Investors should be aware that system response, execution price, speed, liquidity, market data, and account access times are affected by many factors, including market volatility, size and type of order, market conditions, system performance, and other factors.

All investments involve risk and the past performance of a security, or financial product does not guarantee future results or returns. Keep in mind that while diversification may help spread risk it does not assure a profit, or protect against loss, in a down market. There is always the potential of losing money when you invest in securities, or other financial products. Investors should consider their investment objectives and risks carefully before investing.

Cryptocurrency is a digital representation of value that functions as a medium of exchange, a unit of account, or a store of value, but it does not have legal tender status. Cryptocurrencies are sometimes exchanged for U.S. dollars or other currencies around the world, but they are not currently backed nor supported by any government or central bank. Their value is completely derived by market forces of supply and demand, and they are more volatile than traditional currencies. Trading in cryptocurrencies comes with significant risks, including volatile market price swings or flash crashes, market manipulation, and cybersecurity risks. In addition, cryptocurrency markets and exchanges are not regulated with the same controls or customer protections available in equity, option, futures, or foreign exchange investing. Cryptocurrency trading requires knowledge of cryptocurrency markets. In attempting to profit through cryptocurrency trading, you must compete with traders worldwide. You should have appropriate knowledge and experience before engaging in substantial cryptocurrency trading. Cryptocurrency trading may not generally be appropriate, particularly with funds drawn from retirement savings, student loans, mortgages, emergency funds, or funds set aside for other purposes. Cryptocurrency trading can lead to large and immediate financial losses. Under certain market conditions, you may find it difficult or impossible to liquidate a position quickly at a reasonable price. This can occur, for example, when the market for a particular cryptocurrency suddenly drops, or if trading is halted due to recent news events, unusual trading activity, or changes in the underlying cryptocurrency system. Several federal agencies have also published advisory documents surrounding the risks of virtual currency. For more information see, the CFPB’s Consumer Advisory, the CFTC’s Customer Advisory, the SEC’s Investor Alert, and FINRA’s Investor Alert.

Robinhood Crypto, LLC has a seller of payment instruments license in Georgia, with reference number 61417.

Robinhood Crypto, LLC has a money transmitter license in New Jersey, with reference number 1803456-C22.

Please note that an Alaska money transmission license does not cover the transmission of virtual currency.

Check the background of Robinhood Financial LLC and Robinhood Securities, LLC on FINRA’s BrokerCheck.

Robinhood Terms & Conditions    Disclosure Library    Contact Us    FAQ

© 2020 Robinhood. All rights reserved.