The Compound and Friends
Episode Title: How Does Apple Get Its Mojo Back?
Release Date: July 8, 2025
Hosts: Downtown Josh Brown and Michael Batnick
Guests: Cullen Roche, Eric Balchunas, Alex Cantrowitz

Introduction

In this episode of The Compound and Friends, host Michael Batnick joins Downtown Josh Brown with a special lineup of guests to delve into pressing topics in the realms of business and investing. The episode features insightful discussions on the decline of the US dollar, the evolving landscape of Exchange-Traded Funds (ETFs), and Apple's strategies to regain its competitive edge in the burgeoning field of artificial intelligence (AI).

The Decline of the US Dollar with Cullen Roche

Timestamp: 00:52 – 19:45

Overview: Michael Batnick initiates the conversation by welcoming Cullen Roche, a renowned macroeconomist, to discuss the alarming decline of the US dollar. The discussion centers around whether the dollar is truly on a downward trajectory and what factors influence its value in the global economy.

Key Points:

1. Inflation and Currency Value:

   • Cullen Roche emphasizes the importance of context when evaluating inflation's impact on the dollar. He critiques simplistic charts that show the declining value of a dollar without considering productive investments.
   • Quote:

     "If you took $1 and you put it under a mattress in, say, 1913... that dollar has technically lost, like, 98.5% of its value since then." [04:09]

2. Government Deficit and Inflation:

   • Roche discusses the relationship between government deficits and inflation, using the COVID-19 pandemic as a case study where massive deficits led to significant inflation.
   • He argues that while government spending can influence inflation, the US economy's productivity and wealth creation mitigate this effect.
   • Quote:

     "The US Economy is so enormously productive, we create so much wealth... it offsets that asset issuance by the government." [05:52]

3. Spending as a Percentage of GDP:

   • The conversation moves to government spending trends, highlighting that while deficits are increasing, they remain within manageable percentages of GDP.
   • Quote:

     "Over the course of the last 30, 40 years, the metric has been mostly, it's averaged like 21% or something. We're at 24%... we're not in a position where... there's some sort of catastrophe." [10:46]

4. Interest Expenses and Inflation Control:

   • Roche explains how the Federal Reserve's manipulation of interest rates plays a crucial role in controlling inflation, countering claims that rising interest expenses are a significant threat.
   • Quote:

     "The Fed can control interest rates with a dial. If the Fed wanted to nuke interest expenses tomorrow, they could." [16:33]

5. Dollar Selling and Alternative Assets:

   • The episode touches on the recent depreciation of the dollar and the shift of investments into assets like gold and Bitcoin as a hedge against potential dollar weakness.
   • Roche attributes this trend to changes in US macro policies and decreased global competitiveness.
   • Quote:

     "The currency market just reflects that reduction in competitiveness that we're now seeing play out." [17:37]

Conclusion: Cullen Roche provides a nuanced perspective on the US dollar's status, suggesting that while there are legitimate concerns about inflation and government spending, the overall strength and productivity of the US economy continue to support the dollar's value. He advocates for productive investment strategies, such as investing in Treasury bills, to safeguard against inflation.

ETFs: The Smart Money's Strategy with Eric Balchunas

Timestamp: 19:45 – 40:17

Overview: The podcast transitions to a conversation with Eric Balchunas, an ETF expert, who sheds light on the resilience and growth of ETFs amidst market volatility and shifting economic narratives.

Key Points:

1. ETF Performance During Market Downturns:

   • Balchunas highlights how ETF investors have thrived despite economic uncertainties like tariffs and the "Sell America" narrative, citing a 24% rebound since April 7.
   • Quote:

     "ETF investors... they are getting good at doing nothing. They are the smart money." [20:33]

2. Vanguard's Dominance and Retail Investor Behavior:

   • The discussion underscores the significant role of Vanguard funds in maintaining market stability, with substantial inflows even during turbulent periods.
   • Josh Brown adds that Vanguard's low fees and robust fund offerings make it a preferred choice among retail investors.
   • Quote from Josh:

     "We call it the Vanguard put because... these people are gonna buy no matter what." [25:52]

3. Rise of Niche and Thematic ETFs:

   • Balchunas observes a shift in ETF listings from traditional exchanges like NYSE to more innovative platforms like NASDAQ and CBOE, driven by the influx of specialized and high-yield products.
   • Quote:

     "Almost 20% of those 1,000 are going to be 2x single stock ETFs... almost 50% is not your grandfather's ETF market." [26:38]

4. The Allure and Risks of YieldMax ETFs:

   • The hosts discuss YieldMax’s high-yield ETFs, comparing them to high-risk financial instruments like casinos. While these products attract certain investors seeking substantial returns, they also pose significant risks.
   • Quote from Josh:

     "It's like a psychological phenomenon... buffer ETFs are drugs to cure anxiety." [31:04]

5. Private Credit and Emerging ETF Products:

   • The conversation touches on the underperformance of certain ETF launches, such as the private credit ETF by SSGA, and contrasts it with more successful crossover funds like XOVR.
   • Quote from Josh:

     "Private credit and CLO stolen the thunder and that's why it wasn't a big hit." [38:19]

Conclusion: Eric Balchunas articulates how ETFs have become a cornerstone for smart investors, offering diversified and resilient investment options. The emergence of thematic and high-yield ETFs reflects evolving investor preferences, though he cautions about the associated risks. The conversation emphasizes the importance of understanding ETF structures and aligning them with individual investment strategies.

Apple’s Quest for Innovation and AI Dominance with Alex Cantrowitz

Timestamp: 40:17 – 60:24

Overview: The final segment features Alex Cantrowitz discussing Apple's struggles and potential strategies to reclaim its innovative edge, particularly in the AI sector. The discussion also examines broader trends in Big Tech and the competitive landscape shaped by AI advancements.

Key Points:

1. Apple’s AI Challenges:

   • Cantrowitz explains that Apple's Siri lags behind competitors like ChatGPT and Claude, highlighting the company's dilemma in choosing between building proprietary AI models or integrating external ones.
   • Quote:

     "They have to do one of two things... do a lobotomy of the brain of Siri... or bring in some of these really good off the shelf models." [40:38]

2. Control vs. Innovation:

   • Apple’s reluctance to adopt third-party AI models stems from its desire to maintain control over user experience, leading to dependencies on potentially less effective in-house solutions.
   • Quote:

     "They're deeply concerned about control... that's completely un Apple like." [42:01]

3. Potential Acquisition of Perplexity:

   • Cantrowitz proposes that Apple could acquire Perplexity, an AI search engine company, to enhance its AI capabilities without relinquishing control. This move could fortify Apple's position amidst regulatory challenges and declining revenues from existing partnerships.
   • Quote:

     "Apple should buy Perplexity and give them $30 billion and make it happen." [44:27]

4. Impact of DOJ Decisions on Apple:

   • The Department of Justice’s actions against Google, specifically regarding default search partnerships, pose significant financial implications for Apple. An acquisition like Perplexity could mitigate potential revenue losses.
   • Quote:

     "The judge in that case has suggested that that's table stakes. As far as like the remedy here." [46:40]

5. Market Reactions and Speculations:

   • Discussing hypothetical scenarios, Cantrowitz speculates on Apple's stock performance in the event of such an acquisition, suggesting a potential stock jump due to investor optimism.
   • Quote:

     "If Apple were to announce such a deal, I think it jumps." [47:37]

6. Big Tech’s Diverging Paths:

   • The conversation broadens to include other Big Tech firms like Meta, Microsoft, and Nvidia, contrasting their aggressive AI investments with Apple’s more conservative approach.
   • Quote:

     "Mark Zuckerberg was not going to stand still as Sam Altman builds the killer consumer app of our time." [52:03]

7. Future of AI in Big Tech:

   • Cantrowitz discusses the importance of scaling in AI development and the challenges companies face in improving AI models beyond mere scaling, emphasizing the critical role of talent acquisition.
   • Quote:

     "If you're not getting the gains, so to speak, out of scale, you have to look for something else. And that something else is talent." [55:10]

Conclusion: Alex Cantrowitz paints a critical picture of Apple's current standing in the AI race, underscoring the need for strategic acquisitions and innovation to stay competitive. The potential acquisition of AI firms like Perplexity could provide Apple with the necessary tools to enhance Siri and integrate advanced AI functionalities, thereby restoring its reputation as an industry innovator. Cantrowitz also highlights the broader implications of AI competition among Big Tech giants, emphasizing the pivotal role of talent and strategic investments in shaping the future of AI.

Final Thoughts

This episode of The Compound and Friends offers a comprehensive analysis of macroeconomic trends impacting the US dollar, the strategic evolution of ETFs in modern investing, and Apple's pivotal role in the AI-driven future of Big Tech. Insights from Cullen Roche, Eric Balchunas, and Alex Cantrowitz provide listeners with a multifaceted understanding of current economic challenges and opportunities, equipping investors with the knowledge to navigate an ever-evolving financial landscape.

Notable Quotes:

• Cullen Roche [04:09]:
  "If you took $1 and you put it under a mattress in, say, 1913... that dollar has technically lost, like, 98.5% of its value since then."

• Cullen Roche [05:52]:
  "The US Economy is so enormously productive, we create so much wealth... it offsets that asset issuance by the government."

• Cullen Roche [10:46]:
  "We're at 24%... we're not in a position where... there's some sort of catastrophe."

• Cullen Roche [16:33]:
  "The Fed can control interest rates with a dial. If the Fed wanted to nuke interest expenses tomorrow, they could."

• Eric Balchunas [20:33]:
  "ETF investors... they are getting good at doing nothing. They are the smart money."

• Eric Balchunas [26:38]:
  "Almost 20% of those 1,000 are going to be 2x single stock ETFs... almost 50% is not your grandfather's ETF market."

• Eric Balchunas [31:04]:
  "Buffer ETFs are drugs to cure anxiety."

• Alex Cantrowitz [40:38]:
  "They have to do one of two things... do a lobotomy of the brain of Siri... or bring in some of these really good off the shelf models."

• Alex Cantrowitz [44:27]:
  "Apple should buy Perplexity and give them $30 billion and make it happen."

• Alex Cantrowitz [52:03]:
  "Mark Zuckerberg was not going to stand still as Sam Altman builds the killer consumer app of our time."

This summary encapsulates the key discussions and insights from the episode, providing a clear and organized overview for those who haven’t listened to the full podcast.