💊 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%)
7,202 (-9.43%)
$5,770 (-26.11%)
10-Yr US Treasury

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.

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 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.

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.


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.

  • 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

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