Episode Summary: "Nick and Jessica’s 3 Big Lessons From 2025, Sam Altman Orders a Code Red at OpenAI, Adam Parker on Broken Compounders, the Case for Adobe"

The Compound and Friends | December 3, 2025
Hosts: Downtown Josh Brown, Michael Batnick
Guests: Nick Colas & Jessica Rabe (DataTrek Research), Adam Parker (Trivariate & Trivector Research)

Episode Overview

In this jam-packed episode, Josh and Michael kick off with Nick Colas and Jessica Rabe from DataTrek, who break down their top three investing lessons from a tumultuous 2025. The crew then welcomes Adam Parker to dissect the phenomenon of “broken compounders”—once-beloved stocks that falter. The hosts also discuss OpenAI’s “Code Red,” Apple’s resilience, and cap off with a lively debate on Adobe’s prospects, energy stocks, and some surprising historical inflation predictions. The conversational tone remains witty, skeptical, and data-driven throughout.

1. The "Master Class of 2025" — Three Investing Lessons with Nick & Jessica

[00:00–35:38]

1.1. Lesson 1: Policymakers Prioritizing Growth Over Dogma

[07:13–11:59]

Summary: Despite huge stresses (U.S. government shutdown, trade shocks, and rate policy uncertainty), policymakers acted swiftly to stabilize markets—e.g., rate cuts, easing trade rhetoric.
Key Data: Unemployment up to 4.4%, “find job” Google searches at 20-year highs, but S&P is up 15–16% for the year.
Quote
“Earlier this year with President Trump capitulating... and Powell cutting rates, 2025 has taught us that policymakers really err on the side of caution with respect to economic stability.”
— Jessica Rabe [07:13]

1.2. Lesson 2: Context Matters in Valuations

[12:52–27:27]

Nick Colas walks through S&P 500 forward P/E history:
Multiples swing widely (22× in 2000, as low as 9× post-‘08), but should always be interpreted in context—both macro and sector composition.
Profit Margins at Record Levels:
Q3 2025 net margins hit 13.1%, matching stimulus-boosted peaks of the pandemic—in a restrictive policy environment.
Quote
“Talking about valuation of the market without mentioning what profit margins are like... is a big mistake. That’s like your kid coming home and telling you they got a 3 on a test—3 out of what?”
— Josh Brown [20:07]
Earnings Estimates Bucking the Trend:
Instead of the usual “guide down then beat,” 2025 has seen analysts revising up as companies consistently outperform guidance.

1.3. Lesson 3: A Return to Old-School Corporate Strategy?

[27:31–35:38]

Corporate Strategy Shifts from Disruption Back to Scale/Sophistication:
Classic Chandler corporate theory (scale/scope/management) is resurging due to the capital intensity of GenAI. Companies like Google, with vertical integration, may have renewed advantages versus nimble disruptors.
Clayton Christensen’s disruptors (start at the low end, climb up the value chain) still relevant, but AI’s demands are swinging the pendulum.
Quote
“We’re living in a hybrid world now... it’s no longer just Christensen, it’s shifting back probably 50/50 to Chandler.”
— Nick Colas [32:47]

2. Broken Compounders with Adam Parker

[39:16–58:21]

2.1. What Are Broken Compounders?

Definition: Stocks up 100%+ over five years with low volatility that then fall 30%+ in a single month—recently happening at record levels (third most since ‘08 and COVID).
Method: Systematic screen; 520 occurrences in 20 years studied.

2.2. Should You Buy "the Dip"?

Finding:
On average, these stocks continue to underperform by another 10% vs. their industry over the next year.
- Dead cat bounces may occur in the first month, especially among high-quality or mega-cap names, but six- to twelve-month returns are statistically negative.
Most common in tech and consumer discretionary, often driven by excessive earnings growth expectations.
Quote
“The basket underperforms even after the one month it’s down 30 or more... the asset class itself is an inferior asset class.”
— Adam Parker [45:53]
Corollary: “If you short one of these in advance, there’s no reason to cover—you probably stay short.”
— Adam Parker [51:56]
Notable Names on Most-Recent List:
Oracle (debated), Fiserv, Super Micro, Elf Beauty, Riot Blockchain, Marathon Digital, Synopsis—mix of meme-type and quality stocks.
Rule of thumb:
“A broken compounder is not an opportunity, except maybe for a quick trade. Pick a peer, not the one that just broke.”
— Josh Brown paraphrased [56:04]

3. OpenAI "Code Red" & The State of AI

[89:01–94:41]

OpenAI’s Code Red:
Sam Altman reportedly told staff to focus all efforts on product improvement in response to rising competition (notably Google’s Gemini AI), pausing other projects.
Personalization, speed, reliability are under scrutiny.
Business Model Squeeze:
OpenAI is under pressure as their compute costs soar and whispers of launching a full ad system appear, risking user alienation.
Quote
“The leak shows a fully formed ad system waiting for the green light... I do not think they’re launching an ad network from a position of strength.”
— Josh Brown [93:08]

4. The Adobe Debate: Killer Value or AI Roadkill?

[72:03–84:23]

Context: Adobe stock is down 55%, at PE decade lows, despite record EPS and a “beat & raise” quarter.
Bull Case (Michael):
- “Adobe is the operating system for creative work; creative work is the epicenter of AI disruption... I think they're going to be a massive beneficiary.”
Bear Case:
- Market clearly prices risk of AI disruption and competitive alternatives, scepticism baked in.
Key Chart:
- Earnings at ATH; forward PE at decade low.
Quote
“If you think you’re the first genius to be like, ‘Adobe’s threatened by AI...' Not just the stock price, but the valuation—it's crazy.”
— Josh Brown [78:52]
History:
Adobe has reinvented its business before—famous for moving to subscriptions in 2014, which Wall Street at first doubted.
Strategic Question:
Can Adobe “reinvent vertical AI”—create user interfaces on top of LLMs creative professionals will pay for?

5. Other Notable Segments

5.1. Market Breadth, Apple, and Bullish Surprises

[59:56–66:41]

Apple sets fresh all-time highs despite management churn and AI retooling; market breadth (rsp, equal-weighted S&P) looks strong—hard to get bearish when sector leadership rotates rather than money flowing to cash.
Quote
“How do you get bearish when you look at your fellow investors shifting their bets from one stock to another, rather than from stocks to cash?”
— Josh [65:04]

5.2. Weird Years, Volatility, and Historical Context

[67:02–71:42]

2025 had more big down days than up days, yet was not a bear market—unusual but not unprecedented. Historical calm like 2017 led to media complaints about “too little volatility.”

5.3. Energy Stocks: The Contrarian Bull Case

[94:55–99:49]

Michael presents the case for energy stocks: worst performers vs S&P over 5–10 years, but minimal intra-sector dispersion—“just buy the index.”
Josh agrees, highlighting Baker Hughes’ technical strength and energy stocks as a true portfolio hedge against oil spikes.
Quote
“If you’re going to wait here, I’m just buying the index.”
— Michael [97:03]

6. Memorable Moments & Quotes

On Market Context:
“There are no super-rich bears for the most part... Long and strong is the way to be.”
— Nick Colas [06:34]
On Google/Alphabet’s AI Positioning:
“Gen AI requires so much capital... successful companies that have been successful for the last 20 years like Alphabet, potentially win a large chunk.”
— Nick Colas [32:47]
Adobe’s Potential for Reinvention:
“This is a company that's got a heritage of completely remaking itself when the gun was to its head, and Adobe did that.”
— Josh Brown [81:35]

7. Timestamps for Key Segments

| Segment | Timestamps | |----------------------------------------------------|--------------------| | Intro / DataTrek’s Three Lessons | 00:00–35:38 | | Broken Compounders with Adam Parker | 39:16–58:21 | | OpenAI “Code Red” & Ad Network Concerns | 89:01–94:41 | | The Adobe Debate | 72:03–84:23 | | Market Breadth & Apple Discussion | 59:56–66:41 | | Energy Stocks Bull Case | 94:55–99:49 |

8. Takeaways

Policy response is a powerful market tailwind—even when the headlines sound dire.
High valuations aren’t always signals by themselves; context and profit margins matter most.
The old-school rules of scale and strategic integration are resurging, especially in capital-heavy areas like GenAI.
“Broken compounders” are typically value traps, not buying opportunities.
Adobe is a battleground stock: brilliant execution and history of reinvention, pitted against real threats from AI disruption and skepticism about its ability to adapt.
Apple and sector rotation show there’s still plenty of life in the market, even if top leadership changes.
Vanguard’s willingness to offer crypto products marks a generational and competitive shift in the investment landscape.
OpenAI’s pivot to ads signals both the business challenge and the extreme cost of remaining a frontrunner in AI—users beware.

For further resources, visit the DataTrek and Trivector websites, and see the episode description for Nick and Jessica’s YouTube channel link.

End of summary.

Episode Summary: "Nick and Jessica’s 3 Big Lessons From 2025, Sam Altman Orders a Code Red at OpenAI, Adam Parker on Broken Compounders, the Case for Adobe"

Episode Overview

1. The "Master Class of 2025" — Three Investing Lessons with Nick & Jessica

[00:00–35:38]

1.1. Lesson 1: Policymakers Prioritizing Growth Over Dogma

[07:13–11:59]

Summary: Despite huge stresses (U.S. government shutdown, trade shocks, and rate policy uncertainty), policymakers acted swiftly to stabilize markets—e.g., rate cuts, easing trade rhetoric.
Key Data: Unemployment up to 4.4%, “find job” Google searches at 20-year highs, but S&P is up 15–16% for the year.
Quote
“Earlier this year with President Trump capitulating... and Powell cutting rates, 2025 has taught us that policymakers really err on the side of caution with respect to economic stability.”
— Jessica Rabe [07:13]

1.2. Lesson 2: Context Matters in Valuations

[12:52–27:27]

Nick Colas walks through S&P 500 forward P/E history:
Multiples swing widely (22× in 2000, as low as 9× post-‘08), but should always be interpreted in context—both macro and sector composition.
Profit Margins at Record Levels:
Q3 2025 net margins hit 13.1%, matching stimulus-boosted peaks of the pandemic—in a restrictive policy environment.
Quote
“Talking about valuation of the market without mentioning what profit margins are like... is a big mistake. That’s like your kid coming home and telling you they got a 3 on a test—3 out of what?”
— Josh Brown [20:07]
Earnings Estimates Bucking the Trend:
Instead of the usual “guide down then beat,” 2025 has seen analysts revising up as companies consistently outperform guidance.

1.3. Lesson 3: A Return to Old-School Corporate Strategy?

[27:31–35:38]

Corporate Strategy Shifts from Disruption Back to Scale/Sophistication:
Classic Chandler corporate theory (scale/scope/management) is resurging due to the capital intensity of GenAI. Companies like Google, with vertical integration, may have renewed advantages versus nimble disruptors.
Clayton Christensen’s disruptors (start at the low end, climb up the value chain) still relevant, but AI’s demands are swinging the pendulum.
Quote
“We’re living in a hybrid world now... it’s no longer just Christensen, it’s shifting back probably 50/50 to Chandler.”
— Nick Colas [32:47]

2. Broken Compounders with Adam Parker

[39:16–58:21]

2.1. What Are Broken Compounders?

Definition: Stocks up 100%+ over five years with low volatility that then fall 30%+ in a single month—recently happening at record levels (third most since ‘08 and COVID).
Method: Systematic screen; 520 occurrences in 20 years studied.

2.2. Should You Buy "the Dip"?

Finding:
On average, these stocks continue to underperform by another 10% vs. their industry over the next year.
- Dead cat bounces may occur in the first month, especially among high-quality or mega-cap names, but six- to twelve-month returns are statistically negative.
Most common in tech and consumer discretionary, often driven by excessive earnings growth expectations.
Quote
“The basket underperforms even after the one month it’s down 30 or more... the asset class itself is an inferior asset class.”
— Adam Parker [45:53]
Corollary: “If you short one of these in advance, there’s no reason to cover—you probably stay short.”
— Adam Parker [51:56]
Notable Names on Most-Recent List:
Oracle (debated), Fiserv, Super Micro, Elf Beauty, Riot Blockchain, Marathon Digital, Synopsis—mix of meme-type and quality stocks.
Rule of thumb:
“A broken compounder is not an opportunity, except maybe for a quick trade. Pick a peer, not the one that just broke.”
— Josh Brown paraphrased [56:04]

3. OpenAI "Code Red" & The State of AI

[89:01–94:41]

OpenAI’s Code Red:
Sam Altman reportedly told staff to focus all efforts on product improvement in response to rising competition (notably Google’s Gemini AI), pausing other projects.
Personalization, speed, reliability are under scrutiny.
Business Model Squeeze:
OpenAI is under pressure as their compute costs soar and whispers of launching a full ad system appear, risking user alienation.
Quote
“The leak shows a fully formed ad system waiting for the green light... I do not think they’re launching an ad network from a position of strength.”
— Josh Brown [93:08]

4. The Adobe Debate: Killer Value or AI Roadkill?

[72:03–84:23]

Context: Adobe stock is down 55%, at PE decade lows, despite record EPS and a “beat & raise” quarter.
Bull Case (Michael):
- “Adobe is the operating system for creative work; creative work is the epicenter of AI disruption... I think they're going to be a massive beneficiary.”
Bear Case:
- Market clearly prices risk of AI disruption and competitive alternatives, scepticism baked in.
Key Chart:
- Earnings at ATH; forward PE at decade low.
Quote
“If you think you’re the first genius to be like, ‘Adobe’s threatened by AI...' Not just the stock price, but the valuation—it's crazy.”
— Josh Brown [78:52]
History:
Adobe has reinvented its business before—famous for moving to subscriptions in 2014, which Wall Street at first doubted.
Strategic Question:
Can Adobe “reinvent vertical AI”—create user interfaces on top of LLMs creative professionals will pay for?

5. Other Notable Segments

5.1. Market Breadth, Apple, and Bullish Surprises

[59:56–66:41]

Apple sets fresh all-time highs despite management churn and AI retooling; market breadth (rsp, equal-weighted S&P) looks strong—hard to get bearish when sector leadership rotates rather than money flowing to cash.
Quote
“How do you get bearish when you look at your fellow investors shifting their bets from one stock to another, rather than from stocks to cash?”
— Josh [65:04]

5.2. Weird Years, Volatility, and Historical Context

[67:02–71:42]

2025 had more big down days than up days, yet was not a bear market—unusual but not unprecedented. Historical calm like 2017 led to media complaints about “too little volatility.”

5.3. Energy Stocks: The Contrarian Bull Case

[94:55–99:49]

Michael presents the case for energy stocks: worst performers vs S&P over 5–10 years, but minimal intra-sector dispersion—“just buy the index.”
Josh agrees, highlighting Baker Hughes’ technical strength and energy stocks as a true portfolio hedge against oil spikes.
Quote
“If you’re going to wait here, I’m just buying the index.”
— Michael [97:03]

6. Memorable Moments & Quotes

On Market Context:
“There are no super-rich bears for the most part... Long and strong is the way to be.”
— Nick Colas [06:34]
On Google/Alphabet’s AI Positioning:
“Gen AI requires so much capital... successful companies that have been successful for the last 20 years like Alphabet, potentially win a large chunk.”
— Nick Colas [32:47]
Adobe’s Potential for Reinvention:
“This is a company that's got a heritage of completely remaking itself when the gun was to its head, and Adobe did that.”
— Josh Brown [81:35]

7. Timestamps for Key Segments

8. Takeaways

Policy response is a powerful market tailwind—even when the headlines sound dire.
High valuations aren’t always signals by themselves; context and profit margins matter most.
The old-school rules of scale and strategic integration are resurging, especially in capital-heavy areas like GenAI.
“Broken compounders” are typically value traps, not buying opportunities.
Adobe is a battleground stock: brilliant execution and history of reinvention, pitted against real threats from AI disruption and skepticism about its ability to adapt.
Apple and sector rotation show there’s still plenty of life in the market, even if top leadership changes.
Vanguard’s willingness to offer crypto products marks a generational and competitive shift in the investment landscape.
OpenAI’s pivot to ads signals both the business challenge and the extreme cost of remaining a frontrunner in AI—users beware.

For further resources, visit the DataTrek and Trivector websites, and see the episode description for Nick and Jessica’s YouTube channel link.

End of summary.

Nick and Jessica’s 3 Big Lessons From 2025, Sam Altman Orders a Code Red at OpenAI, Adam Parker on Broken Compounders, the Case for Adobe

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Summary

Episode Summary: "Nick and Jessica’s 3 Big Lessons From 2025, Sam Altman Orders a Code Red at OpenAI, Adam Parker on Broken Compounders, the Case for Adobe"

Episode Overview

1. The "Master Class of 2025" — Three Investing Lessons with Nick & Jessica

1.1. Lesson 1: Policymakers Prioritizing Growth Over Dogma

1.2. Lesson 2: Context Matters in Valuations

1.3. Lesson 3: A Return to Old-School Corporate Strategy?

2. Broken Compounders with Adam Parker

2.1. What Are Broken Compounders?

2.2. Should You Buy "the Dip"?

3. OpenAI "Code Red" & The State of AI

4. The Adobe Debate: Killer Value or AI Roadkill?

5. Other Notable Segments

5.1. Market Breadth, Apple, and Bullish Surprises

5.2. Weird Years, Volatility, and Historical Context

5.3. Energy Stocks: The Contrarian Bull Case

6. Memorable Moments & Quotes

7. Timestamps for Key Segments

8. Takeaways

Summary

Episode Summary: "Nick and Jessica’s 3 Big Lessons From 2025, Sam Altman Orders a Code Red at OpenAI, Adam Parker on Broken Compounders, the Case for Adobe"

Episode Overview

1. The "Master Class of 2025" — Three Investing Lessons with Nick & Jessica

1.1. Lesson 1: Policymakers Prioritizing Growth Over Dogma

1.2. Lesson 2: Context Matters in Valuations

1.3. Lesson 3: A Return to Old-School Corporate Strategy?

2. Broken Compounders with Adam Parker

2.1. What Are Broken Compounders?

2.2. Should You Buy "the Dip"?

3. OpenAI "Code Red" & The State of AI

4. The Adobe Debate: Killer Value or AI Roadkill?

5. Other Notable Segments

5.1. Market Breadth, Apple, and Bullish Surprises

5.2. Weird Years, Volatility, and Historical Context

5.3. Energy Stocks: The Contrarian Bull Case

6. Memorable Moments & Quotes

7. Timestamps for Key Segments

8. Takeaways