💵 The money pipes

ICYMI... But that's unlikely. On Friday, we covered how social-fueled stock surges have thrown the market into uncharted territory. Last week, underdog “meme” stocks like GameStop, AMC, and Nokia skyrocketed, thanks to Reddit-inspired buying campaigns. From Wednesday through Friday, multiple brokerages limited — and in some cases, paused — the buying frenzy.

• Robinhood, E-Trade, Webull, and others temporarily restricted certain trading activity in symbols like GME. Disclosure: Robinhood Snacks is owned by... Robinhood.
• Some brokerages raised margin requirements for those stocks to mitigate risk. Margin = the percentage of the purchase investors need to fund themselves (rather than borrow).
• Unsurprisingly, the price of those restricted shares dropped. Some investors were angry, shocked, and confused. And retail investing dominated the social conversation like never before.

Demystify the jargon... Brokers cited financial and regulatory reasons for these moves. Here’s what actually happens when you place a trade, and some of the requirements brokerages face (for a Robinhood-specific explainer, check out Robinhood’s blog):

• When you buy a coffee with your card, you see the transaction on your account right away. But Starbucks still hasn’t received your $$$ — it can take a few days to move. Similarly...
• When you buy a stock, you may see the transaction immediately. But you actually pay and get the shares two days after you buy. That’s because...
• All transactions have to go through "settlement" to make sure that sellers actually get paid, and buyers receive securities. AKA: to ensure everyone involved can really deliver.
• Clearinghouses, which are regulated by the SEC, ultimately ensure that trades get settled. Brokers often need to deposit cash to meet day-to-day collateral requirements with clearing firms, in order to back customer trades.
• When buying becomes concentrated in a handful of volatile stocks, risk increases for everyone involved. So clearinghouses can ask firms for more cash deposits, to mitigate risk to the system.
• Those deposit requirements for brokers can dramatically jump based on how many risky/volatile stocks customers are buying. Wild stat: industry-wide collateral requirements reportedly rose to $33.5B on Thursday, from $26B on Wednesday.

You used to call me on my iPhone (12).... Apple crossed the $100B quarterly sales mark for the first time, bringing in a ginormous $111B last quarter. That's nearly 3X Facebook and Tesla's quarterly sales combined. The most valuable company on Earth made $28.8B in profit, one of the largest quarterly profits for any company (ever). Every product category saw double-digit sales growth. iPhone sales, which make up over half of the Fruit's total sales, soared 18% after two years of declines. The 5G-enabled 12 inspired a wave of fresh upgrades.

Still goin' ad on you, anyway... Despite all the regulatory and public scrutiny, Facebook posted an expectation-beating $28B in sales last quarter, proving that advertising is alive and well. Ad sales soared 31% from a year earlier, making up 97% of FB's total sales. Monthly users across apps jumped to 3.3B (aka: nearly half of all humans). But Apple ruined some of the earnings fun (claaassic): privacy changes to iOS 14 could hurt FB's precious ad-targeting abilities.

Max loss... Boeing shares fell 6% for the week, after the plane-maker posted a record loss of nearly $12B last year. Refresher: Boeing's 737 Max jets were grounded for nearly two years following two fatal crashes. For basically all of 2020, they were sitting in parking lots burning cash. Meanwhile, the pandemic sapped demand for Boeing's other jets, too —  especially its newest plane, the 777X, which is meant for long-haul flights. It was supposed to roll out this year — now Boeing doesn't expect it'll debut until 2023 (read: expensive delay).

A sweet cream Cold Brew... to ease the pain. Starbucks shares dropped 7% last week, after the caffeinated legend revealed that dining restrictions hurt its biz (shocker). While you were whipping up Keurig cups and instant coffee at home, Starbs' sales fell a worse-than-expected 5% last quarter — and profit plunged 30% from a year earlier. Despite that, Starbucks' mobile-order game was strong: app orders increased nearly 50% since the start of the pandemic.

• Think: 10 powerful ideas that can shape your entire life.
• Live: There are two kinds of happy people — but neither is perfect.
• Watch: 91 movies and TV shows to stream during Black History Month.
• Live: The one thing you'll regret at 80, according to Jeff Bezos (FYI: he's 57).
• Believe: Four psychological habits to build better self-esteem.
• Wear: Why some people like wearing masks (besides the obvious).

• Monday: Black History Month begins. Earnings expected from Nintendo and Warner Music Group
• Tuesday: Earnings expected from Amazon, Google, Chipotle, Pfizer, Exxon, and UPS
• Wednesday: Earnings expected from Spotify, PayPal, and Sony
• Thursday: Weekly jobless claims. Earnings expected from Snap, Pinterest, Ford, and Clorox
• Friday: January unemployment rate released

Authors of this Snacks own shares of: Apple and Starbucks

ID: 1504485