Podcast Title: The Compound and Friends
Host/Author: The Compound
Episode: Dark Matter
Release Date: January 10, 2025
Guests: Julie Hyman, Doug Bonaparte
Description: Join Downtown Josh Brown, Michael Batnick, and a rotation of their friends every Friday for expert insight and hot takes on the latest in business and investing.

1. Introduction and Opening Banter

Timestamp: 00:02 – 04:06

The episode begins with Josh Brown and Michael Batnik discussing the unusual circumstances of the day, noting the stock market's closure. They humorously reflect on their habitual behavior of refreshing ticker pages despite the market being closed. Michael mentions enjoying a rare day free from shows to work on his newsletter, which sets a relaxed tone for the episode.

Notable Quote:
Josh Brown [00:12]: “Is this how normal people live?”

2. Introducing Guest Julie Hyman

Timestamp: 04:29 – 08:15

Josh Brown welcomes Julie Hyman, a host for Yahoo Finance Live and a seasoned financial journalist with over 20 years of experience. Julie's extensive background includes covering major financial events such as the Great Financial Crisis and the rise of meme stocks. Her introduction highlights her expertise and sets the stage for her contributions to the discussion.

Notable Quote:
Josh Brown [05:04]: “Allow me to introduce you to Julie Hyman.”

3. Bond Yields and Term Premium

Timestamp: 09:09 – 16:21

Julie authored a piece on rising 10-year bond yields, which the hosts delve into. Michael explains the complexity behind bond yields' impact on stock markets, noting the uncertainty surrounding the term premium—the portion of the yield not explained by inflation expectations. They discuss how a surge past the 5% mark could influence investor behavior, potentially triggering bond selloffs and affecting stock valuations.

Notable Quote:
Michael Batnik [10:06]: “There is debate over what level in the 10-year yield would be especially problematic for stocks.”

4. Stock Market Analysis and MAG7 Concentration

Timestamp: 19:00 – 27:12

The conversation shifts to the stock market's current state, emphasizing the ongoing bull market's third year. Doug Bonaparte presents charts illustrating different bull market paths, highlighting the concentration of returns within the MAG7 (the top seven contributing stocks). The hosts debate the sustainability of such concentration and its implications for diversification in investment portfolios.

Notable Quote:
Doug Bonaparte [20:15]: “There's nothing here whatsoever other than a lot of spaghetti on a chart.”

5. Election and Political Impact on Markets

Timestamp: 28:00 – 32:00

The hosts speculate on the 2028 presidential election, pondering potential candidates like Gavin Newsom, Donald Trump Jr., and Elon Musk. They discuss the historical impact of presidential actions on market volatility, referencing Donald Trump's first term's muted volatility despite his active communications. The conversation anticipates increased volatility with the new administration and the potential market reactions to policy changes.

Notable Quote:
Josh Brown [29:08]: “But it was the pandemic, of course, started when Trump was still in office.”

6. Employment Trends and AI’s Impact

Timestamp: 32:00 – 40:39

Julie and Michael address the evolving job market, noting a rise in long-term unemployment and the gradual impact of AI on job roles. They discuss how AI might lead to attrition rather than mass layoffs, allowing employees to transition naturally out of roles. The conversation also touches on the challenges faced by those in sectors like real estate and the broader implications for economic stability.

Notable Quote:
Julie Hyman [36:28]: “If you're in college and you're like, oh, what am I going to go? Don't go into the job that's not hiring for the last six years.”

7. Private Equity and Retirement Funds

Timestamp: 49:45 – 58:13

The discussion shifts to the private equity industry's push to access retirement savings, such as 401(k) plans. Doug Bonaparte expresses concerns about the complexity and suitability of private equity investments for average investors. The hosts debate the potential benefits and pitfalls, including higher fees and the need for increased financial literacy among investors to navigate these sophisticated investment vehicles.

Notable Quote:
Doug Bonaparte [50:34]: “It's hard enough to get people contributing and investing in their 401(k)s in the first place.”

8. Consumer Spending and Influencer Marketing

Timestamp: 58:13 – 64:05

Julie explores the surge in consumer spending fueled by platforms like Instagram, TikTok, and Buy Now Pay Later (BNPL) services. They discuss how affiliate marketing and seamless online shopping experiences drive excessive spending and debt accumulation, particularly among younger consumers. The hosts express concerns about the long-term financial habits being cultivated through these modern consumer behaviors.

Notable Quote:
Julie Hyman [62:18]: “The use of Buy Now, Pay Later as a credit option allows shoppers to split into multiple payments.”

9. Quantum Computing Stocks and Market Volatility

Timestamp: 65:00 – 73:28

The episode covers the volatile nature of quantum computing stocks following announcements from major players like Alphabet. Despite optimistic forecasts, stocks in companies like Quantum Computing Inc., Rigetti, and IonQ experienced significant drops, illustrating the speculative frenzy and the disconnect between technological advancements and market performance expectations.

Notable Quote:
Michael Batnik [66:00]: “They said getting very useful quantum computers to market could take 10, 15 to 20 years.”

10. Adrian Peterson’s Financial Troubles

Timestamp: 71:08 – 75:43

Josh highlights a high-profile case of NFL star Adrian Peterson facing financial ruin due to poor financial management and high-interest debts. The discussion underscores the importance of financial literacy, sustainable lifestyle choices, and the risks of mismanaged wealth, especially among young, high-earning individuals.

Notable Quote:
Julie Hyman [72:38]: “The importance of financial literacy, clearly. The vulnerability of exploitation by advisors and people you surround yourself with.”

11. Closing Remarks and Looking Forward

Timestamp: 75:43 – End

The hosts wrap up by sharing personal highlights and upcoming topics. Julie looks forward to advancements in AI and her work on her book "Money Together," which aims to help couples manage finances effectively. Michael expresses excitement about covering Elon Musk's ventures, while Josh humorously addresses Kevin O'Leary's unlikely bid to purchase TikTok. The episode concludes with light-hearted banter and acknowledgments to their guests and team members.

Notable Quote:
Julie Hyman [78:39]: “We're getting cool stuff, but nothing that they go, whoa, we want the next big.”

Key Takeaways

• Bond Yields: Rising 10-year bond yields and the elusive term premium pose uncertainties for stock markets, especially if yields surpass the 5% threshold.

• Stock Market Concentration: The MAG7 stocks dominate market returns, raising concerns about diversification and long-term sustainability.

• Political Influence: Upcoming elections and potential policy shifts are expected to introduce increased market volatility.

• Employment Shifts: The job market is experiencing longer-term unemployment and gradual shifts due to AI integration, affecting sectors like real estate.

• Private Equity Access: Private equity's push into retirement funds raises questions about suitability, fees, and the need for investor education.

• Consumer Behavior: Influencer-driven spending and BNPL services are altering financial behaviors, potentially leading to increased debt among younger generations.

• Quantum Computing Speculation: Quantum computing remains a speculative investment area with high volatility and uncertain market implications.

• Financial Literacy: High-profile financial failures among athletes highlight the critical need for financial education and sustainable wealth management practices.

This episode of "The Compound and Friends" provides a comprehensive analysis of current financial trends, market dynamics, and socio-economic factors influencing investing strategies. With insightful discussions and expert opinions, listeners gain a nuanced understanding of the complex interplay between bonds, stocks, politics, technology, and personal finance.