Podcast Summary: The Compound and Friends – "Liberation Day, Goldman Gets Bearish, Falling Knives"
Release Date: April 1, 2025
Hosts: Downtown Josh Brown and Michael Batnik, alongside a rotating cast of industry experts.
I. Introduction
In this super-sized episode of "The Compound and Friends," hosts Downtown Josh Brown and Michael Batnik navigate through a plethora of pressing topics in the realms of business and investing. From geopolitical events like Liberation Day and its economic repercussions to nuanced discussions on market forecasts and individual stock performances, the episode offers a comprehensive analysis for investors aiming to stay ahead in volatile times.
II. Liberation Day and Tariffs
Key Discussion: The episode opens with anticipation surrounding Liberation Day, a pivotal moment where President Donald Trump is expected to announce significant global tariffs.
Notable Quotes:
- Michael Batnik (04:08): “You've been hearing about this for weeks now. Some would say years now. But we are on the eve of the tariffs being announced.”
- Josh Brown (06:07): “The message is that tariffs are tax cuts. Tariffs are jobs, tariffs are national security. Tariffs are great for America. Tariffs will make America great again. Holy shit.”
Insight: The hosts dissect the potential implications of the tariffs, pondering whether they will truly act as economic stimulants or merely burden consumers and businesses alike. They express skepticism about the administration's portrayal of tariffs as unequivocal positives, highlighting the divide in public perception and the market's nuanced response.
III. Economic Indicators and Recession Outlook
Key Discussion: Beyond tariffs, the conversation shifts to upcoming economic indicators, particularly the non-farm payrolls (NFP) report scheduled for April 4th, which could signal the health of the U.S. economy.
Notable Quotes:
- Josh Brown (05:55): “You think this is the one?”
- Michael Batnik (08:53): “We really haven't had a bad labor market month in a long time, so...”
Insight: Referencing Michael Hartnett from Bank of America, Batnik emphasizes that the NFP report will be more consequential than the tariffs themselves, suggesting that while tariffs might already be priced into the market, the real question lies in whether the economy is decelerating rapidly enough to trigger a recession.
IV. Goldman Sachs' Bearish Forecasts on S&P 500
Key Discussion: Goldman Sachs has downgraded its earnings and return forecasts for the S&P 500, reflecting concerns over rising tariffs and economic uncertainties.
Notable Quotes:
- Michael Batnik (09:26): “We reduce Our S&P 503 month and 12 month return forecast to negative 5 and past 6% respectively based on market prices at the end of last week.”
- Josh Brown (11:27): “I don't want that information.”
Insight: The downgrade includes lowering the S&P 500's projected levels to 5,300 by June and 5,900 by year-end. Goldman cites factors like slower growth, increased uncertainty, and higher equity risk premiums. The conversation delves into the skepticism surrounding these forecasts, with both hosts questioning the accuracy and implications of such predictions.
V. The Mag7 Bear Market and Its Implications
Key Discussion: A significant portion of the episode is dedicated to the Mag7—seven of the most widely held and influential stocks in the market—which are now entering a bear market phase.
Notable Quotes:
- Michael Batnik (18:02): “The Mag7 is in, we're going to talk about this next. The Mag7's in a bear market.”
- Josh Brown (19:07): “We're not getting there. So the 13 times number, that's real bad.”
Insight: The Mag7 comprises tech giants and growth stocks that have historically driven market performance. Their downturn signals a shift in investor sentiment and market dynamics, raising concerns about the sustainability of recent market rallies and the broader economic outlook.
VI. Core Weave IPO and AI Market Dynamics
Key Discussion: The Core Weave IPO is examined as a case study in the AI infrastructure sector, highlighting the interplay between new market entrants and established tech firms.
Notable Quotes:
- Josh Brown (28:14): “I bought it on the IPO day... It's ripping. Wow.”
- Michael Batnik (31:03): “It's like Airbnb for data centers.”
Insight: Core Weave's successful IPO and subsequent stock performance underscore the burgeoning demand for AI infrastructure. The hosts discuss the company's role in providing flexible capacity for AI initiatives, drawing parallels to the foundational impact of cloud services on modern businesses.
VII. Tesla's Vehicle Delivery Numbers and Stock Impact
Key Discussion: Tesla's upcoming vehicle delivery numbers are poised to be a critical indicator of the company's performance amid political and economic headwinds.
Notable Quotes:
- Michael Batnik (43:09): “How bad is the image of Tesla in the eyes of potential car buyers?”
- Josh Brown (44:50): “If it bombs, it would wipe out 2024's gain.”
Insight: With expectations of a potential decline in vehicle deliveries due to political backlash against Elon Musk, the hosts debate the possible repercussions for Tesla's stock. They consider factors such as product refreshes and incentives, weighing them against the negative sentiments influencing consumer behavior.
VIII. Gen X Career Meltdown Amid AI Advancements
Key Discussion: A poignant discussion centers on the impact of AI on Gen X professionals, exploring the anxieties of middle-aged workers facing technological disruption.
Notable Quotes:
- Josh Brown (47:27): “I really do feel for people that are in their 50s and should be in their peak earning years and are now just completely screwed.”
- Michael Batnik (50:43): “There's a ton of uncertainty because companies are going to use AI to spend less money on human labor.”
Insight: The hosts reflect on a New York Times article about Gen X’s struggles with AI-induced job displacement, discussing the broader implications for the workforce and the challenges of adapting to rapid technological changes. They acknowledge the emotional and economic toll on individuals whose careers are threatened by automation and AI advancements.
IX. Low Volatility ETFs and Market Performance
Key Discussion: Investment strategies are explored through the lens of low volatility ETFs, specifically the Dorsey Wright Momentum and Low Volatility ETF (DVAL).
Notable Quotes:
- Ari Wald (53:12): “Our attempt at this later stage of the equity cycle is to identify long ideas that have shown relative strength. That's momentum.”
- Michael Batnik (54:08): “This list is the best stocks in the market.”
Insight: The hosts evaluate the effectiveness of low volatility ETFs in providing stability and consistent returns amidst market turbulence. They highlight the inclusion of well-performing, less volatile stocks such as Visa, MasterCard, and Walmart, which offer a balanced approach to risk and reward.
X. Nike's Decline and Strategic Challenges
Key Discussion: A critical analysis of Nike’s significant stock decline and strategic missteps showcases the vulnerabilities of even iconic brands in shifting market landscapes.
Notable Quotes:
- Josh Brown (60:46): “I'm not gonna participate. So I wanna play a video... I sold it at the Open. I have a 16% loss in the stock.”
- Michael Batnik (64:24): “Nike is not part of it.”
Insight: The episode delves into Nike’s declining financial performance, citing shrinking revenues, deteriorating margins, and increasing competition from brands like New Balance and Alo. The hosts discuss Nike’s failed strategies, including overreliance on direct-to-consumer channels and neglect of key retail partnerships, which have contributed to its stock plummet and market irrelevance.
XI. Stock Market Sentiment and Potential Reactions
Key Discussion: The hosts analyze overall market sentiment, debating whether recent movements signify a true market bottom or merely temporary stabilization amid ongoing economic uncertainties.
Notable Quotes:
- Michael Batnik (56:25): “Tariffs are not a one off switch, it's a dial. And Trump is going to fiddle with the dial way beyond this April 2nd Liberation Day.”
- Josh Brown (58:40): “People are just like, I don't know. That's not the environment we were in two months ago. No, that's the environment now.”
Insight: They explore the idea that tariffs and economic policies are evolving variables rather than fixed events, maintaining that the market has not yet fully grappled with the prolonged economic adjustments. The conversation emphasizes the persistent uncertainty among investors and the absence of clear capitulation signals that would otherwise indicate a market bottom.
XII. Conclusion and Key Takeaways
Key Discussion: Wrapping up, the hosts stress the importance of strategic investing, cautioning against impulsive moves like buying "falling knives." They advocate for focusing on fundamentally strong stocks and maintaining a balanced portfolio to navigate the volatile economic landscape.
Notable Quotes:
- Josh Brown (68:36): “I apologize. That sounded nasty and it was because I really do feel for people that are in their 50s and should be in their peak earning years and are now just completely screwed.”
- Michael Batnik (68:51): “Don't buy falling knives. Grab carefully and wait for stabilization.”
Insight: The episode concludes with a reflection on the unpredictability of the markets and the need for investors to remain informed and cautious. The hosts encourage listeners to avoid making rash investment decisions based on short-term volatility and instead focus on long-term, stable growth opportunities.
Notable Quotes with Timestamps
- Michael Batnik (04:08): “You've been hearing about this for weeks now. Some would say years now. But we are on the eve of the tariffs being announced.”
- Josh Brown (06:07): “The message is that tariffs are tax cuts. Tariffs are jobs, tariffs are national security. Tariffs are great for America. Tariffs will make America great again. Holy shit.”
- Michael Batnik (09:26): “We reduce Our S&P 503 month and 12 month return forecast to negative 5 and past 6% respectively based on market prices at the end of last week.”
- Neil Dutta (14:58): “Retail gasoline prices are climbing. 10 rose in March. 10 cents per gallon. [...] This represents a $13.5 billion shock to income.”
- Michael Batnik (18:02): “The Mag7 is in, we're going to talk about this next. The Mag7's in a bear market.”
- Josh Brown (23:30): “But my point is you would just think that people are just gonna shoot.”
- Michael Batnik (60:36): “Don't buy falling knives. Grab carefully and wait for stabilization.”
- Josh Brown (68:36): “I apologize. That sounded nasty and it was because I really do feel for people that are in their 50s and should be in their peak earning years and are now just completely screwed.”
- Michael Batnik (68:51): “Don't buy falling knives. Grab carefully and wait for stabilization.”
Conclusion
This episode of "The Compound and Friends" provides a thorough exploration of current economic challenges, market trends, and individual stock performances. The hosts offer valuable insights into navigating investment strategies amidst geopolitical tensions, economic indicators, and technological disruptions, making it a must-listen for investors seeking informed perspectives in uncertain times.