Podcast Summary: The Compound and Friends – Episode "Bloodbath" (Released April 4, 2025)

Hosts: Downtown Josh Brown, Michael Batnick
Guest: Steve Quirk, Chief Brokerage Officer at Robinhood

1. Episode Overview

In the "Bloodbath" episode of The Compound and Friends, hosts Downtown Josh Brown and Michael Batnick engage in an in-depth conversation with Steve Quirk from Robinhood. Released on April 4, 2025, the episode delves into the tumultuous market reactions following significant tariff announcements, Robinhood's strategic expansions, customer behaviors during market volatility, and the future trajectory of wealth management within the brokerage sector.

2. The Market's Current State

Initial Remarks on Market Quietness
The episode begins with the hosts noting the subdued activity in the markets:

• Josh Brown [00:00]: "So not much going on in the markets these days. We'll try to just come up with some stuff."

Transition to Unprecedented Volatility
The conversation quickly shifts from initial calm to the sudden market upheaval triggered by political actions.

3. Robinhood's Expansion Plans

New Headquarters in Chicago
Steve Quirk discusses Robinhood's strategic move to establish a second headquarters:

• Steve Quirk [00:24]: "Still, we have about 100 people in Chicago. Robinhood does. We're building our second HQ in Chicago, and it's opening like now, like this spring."

Enhanced Office Environment
Quirk elaborates on the new office space's features, highlighting its open-plan design and proximity to a music venue, which resonates with the company's musically inclined Chicago team.

4. Tariffs Announcement and Market Impact ("Bloodbath")

Tariff Details and Economic Implications
The core of the episode centers around the severe market downturn following a major tariff announcement by President Trump.

• Michael Batnick [09:01]: "Trump announced a weighted average tariff rate of 18.3%, around 3% higher than the bank expected... it's catastrophic. It is global economic Armageddon."

Historical Context of Tariffs
Josh Brown emphasizes the unprecedented nature of the tariff increase:

• Josh Brown [09:10]: "This is the US effective tariff rate back to 1900."

Market Reaction
Hosts and guest discuss the immediate and drastic decline in major stock indices:

• Michael Batnick [19:16]: "The NASDAQ is having its worst day today outside of COVID. This is a big drop."

Impact on Specific Stocks
The conversation highlights significant drops in prominent companies like Nike, reflecting broader economic distress.

5. Robinhood’s Customer Behavior During Volatility

Demographics of Robinhood's User Base
Steve Quirk provides insights into Robinhood's predominantly young and relatively inexperienced investors:

• Steve Quirk [09:51]: "We have 25 million customers, but they're young, just over the average age of 30. Half of them are first-time brokerage users."

Trading Patterns Amidst Turbulence
Quirk observes that Robinhood users tend to respond to market volatility by rotating out of appreciated assets into undervalued ones:

• Steve Quirk [11:25]: "Young investors... have powder for a reason, because they look for opportunities."

Behavioral Insights
The discussion touches on the tendency of both retail and institutional investors to sell high-performing stocks to realize gains, even amid broader market downturns.

• Josh Brown [09:51]: "You should never take risk that you're uncomfortable with."

6. Robinhood's Growth Strategy

Comparative Growth with Traditional Brokerages
Steve Quirk contrasts Robinhood’s rapid user growth with that of established firms like Charles Schwab and TD Ameritrade:

• Michael Batnick [43:27]: "In 2023, Schwab was 23 times the size of Robinhood by market cap. Now they’re only four times the size."

User Acquisition Tactics
Quirk attributes Robinhood's explosive growth to its user-friendly platform, zero-commission trades, fractional shares, and viral onboarding process:

• Josh Brown [43:48]: "They made it so easy for people... fractional share ownership."

Market Positioning
Robinhood's ability to attract younger investors positions it favorably for long-term growth as these users mature and expand their investment portfolios.

7. Acquisition of Trade PMR and Future Wealth Management Strategy

Strategic Acquisition
Robinhood's recent acquisition of Trade PMR is highlighted as a pivotal move to enhance its wealth management offerings:

• Josh Brown [47:39]: "They acquired Trade PMR... because they have a perfectly good one with clients, money, and a great reputation for customer service."

Integration with Wealth Management
The hosts and Quirk discuss how Trade PMR will enable Robinhood to offer comprehensive wealth management services, including financial advising and retirement planning:

• Steve Quirk [48:58]: "We have... a blank canvas in how we create."

Future Plans
Robinhood aims to build a world-class referral program and streamline advisor-client interactions through advanced technology and seamless onboarding processes.

8. Robinhood’s 24-Hour Trading and Its Effects

Implementation of Extended Trading Hours
Robinhood has introduced 24-hour trading, akin to platforms like Amazon's constant availability, catering to a global and increasingly crypto-native user base.

• Steve Quirk [63:05]: "Our biggest volume days are earnings like Nvidia... and again, customers are globally active."

Customer Adaptation and Market Liquidity
The extended trading hours have led to increased liquidity and user engagement, particularly during overnight hours when international markets are active.

• Steve Quirk [64:05]: "The spreads have always been tight... Volumes have grown."

Regulatory Considerations
Quirk addresses initial SEC concerns regarding liquidity but reassures that Robinhood manages trading through limit orders effectively.

9. Discussion on Leveraged ETFs and Speculative Products

Customer Engagement with Leveraged Products
The episode explores the surge in transactions involving leveraged ETFs and inverse funds among Robinhood users during volatile markets:

• Michael Batnick [40:24]: "Inverse ETFs are ripping Sox's triple levered bearish SEMIs up 28%."

Speculation vs. Hedging
While some users engage in leveraged products for speculative purposes, Robinhood emphasizes educating users on appropriate usage to prevent risk mismanagement.

• Steve Quirk [42:16]: "Most use leveraged ETFs for upside opportunities rather than hedging."

10. Future Steps: Wealth Management and Financial Advisors

Enhancing Advisor Partnerships
Following the Trade PMR acquisition, Robinhood is focusing on expanding its wealth management services by partnering with financial advisors and streamlining client onboarding.

• Steve Quirk [51:17]: "We're partnering with Trade PMR to enhance our wealth management capabilities."

Technology-Driven Solutions
Robinhood plans to leverage its robust technology infrastructure to offer superior user interfaces and efficient financial planning tools, differentiating itself from traditional robo-advisors.

• Josh Brown [52:00]: "Technology is the answer to scale and to get the wealth industry to care more about the outcomes of people when they're younger."

11. Closing Remarks and Future Outlook

Reflections on Market Movements
The hosts and guest reflect on the day's unprecedented market drops, emphasizing the importance of experience and risk management for investors.

• Michael Batnick [71:29]: "It's official. It's official. Bloodbath out there today."

Looking Ahead
Steve Quirk expresses optimism about Robinhood's ability to adapt and grow through strategic acquisitions and technological advancements, positioning the platform to better serve both self-directed investors and those seeking professional wealth management.

• Steve Quirk [73:10]: "We're gonna figure it out and make it an experience that like none other."

Final Thoughts
The episode concludes with mutual appreciation between the hosts and Steve Quirk, underscoring the significance of Robinhood's innovations in the evolving financial landscape.

• Josh Brown [73:52]: "Thanks, Steve. We would love to have you back."

Notable Quotes

• Josh Brown [09:10]: "This is the US effective tariff rate back to 1900."
• Steve Quirk [10:49]: "You should never take risk that you're uncomfortable with."
• Steve Quirk [16:47]: "The more you do it, the better you get at it."
• Steve Quirk [53:49]: "Our job is to let and help people do what they want to do. It's not to influence what they should be doing."
• Josh Brown [73:00]: "I really meant what I said."

Conclusion

The "Bloodbath" episode provides a comprehensive analysis of a critical market event triggered by geopolitical actions and its cascading effects on investors, particularly those using Robinhood's platform. Through insightful dialogue with Steve Quirk, listeners gain a deeper understanding of Robinhood's strategic responses, the behavioral tendencies of a younger investor base, and the company's forward-looking initiatives in wealth management and extended trading operations. This episode serves as a valuable resource for both seasoned investors and those new to the market, offering expert perspectives on navigating unprecedented financial turbulence.