Podcast Summary: The COUGRs Trade Takes Wall Street, America Downgraded by Moody's, Walmart vs Trump The Compound and Friends – Episode Released May 20, 2025

Hosts: Downtown Josh Brown and Michael Batnik
Guests: Rotation of friends from The Compound cast

Introduction

In this episode of The Compound and Friends, hosts Downtown Josh Brown and Michael Batnik delve into several pressing topics affecting the business and investment landscape. From the recent downgrade of the United States by Moody's to the emergence of resilient subscription-based stocks dubbed "Cougars," the discussion offers comprehensive insights for investors navigating turbulent times.

1. Moody's Downgrade of the United States (05:13 - 16:05)

Key Discussion Points:

• Historical Context: Josh Brown provides a backdrop by referencing past downgrades by Standard & Poor's in 2011 during the debt ceiling crisis and Fitch in 2023, noting that the market's reaction has grown progressively muted.

• Current Implications: The latest downgrade by Moody's has garnered limited attention from Wall Street, with the stock market only briefly acknowledging the event.

Notable Quote:

Josh Brown (06:26): "This time it's Moody's. I don't know that that means anything more or less than when S&P does it or when Fitch does it. I could tell you right now, the stock market thought about it for eight minutes."

Analysis: Michael and Josh debate whether the downgrade is politically motivated, with Josh suggesting it's tied to current fiscal policies rather than partisanship. They explore the sustainability of the US deficit, its historical patterns during recessions, and the challenges of balancing the budget without relying on stock market bubbles.

2. The US Federal Deficit and Historical Patterns (08:35 - 19:24)

Key Discussion Points:

• Deficit Trends: Highlighting that the US federal deficit as a share of GDP is at its highest outside of a recession, currently around 7%. This trend mirrors past recessions where deficits surged due to economic support measures.

• Future Risks: Concerns are raised about exacerbated deficits should a recession occur, coupled with the Federal Reserve’s potential rate cuts to mitigate economic downturns.

Notable Quote:

Josh Brown (12:00): "We're not even in a recession right now. And the deficit spend like mimics what it looks like when we are. Can you imagine what's going to happen if and when we do have a recession at the current level of deficit?"

Analysis: The hosts emphasize that the US has consistently operated with deficits, with surpluses only appearing during stock market bubbles that temporarily inflate GDP. They discuss the implications of high net interest payments and compare the US debt situation to other countries like Greece and Iceland.

3. Stock Market Resilience: The Rise of "Cougars" (29:58 - 41:43)

Key Discussion Points:

• Definition of Cougars: Josh introduces "Cougars" as subscription-based or app-based companies that demonstrate resilience, continuing to grow despite economic downturns. These are acronyms for "Canceled Only under Great Recession."

• Stock Examples: Companies like Robinhood, Sezzle, Duolingo, Netflix, Spotify, Uber, Applovin, DraftKings, Match Group, Bumble, and Peloton are highlighted as Cougars due to their strong subscriber bases and consistent performance.

• Market Trends: The shift towards subscription models is seen as a driver for the resilience of the S&P 500, making these companies integral to the market's stability.

Notable Quotes:

Josh Brown (30:00): "Robinhood. No one's going to stop. We already know from 2022. We know from the crypto crash. Nobody's going to stop doing what they're doing on Robinhood."

Michael Batnik (35:37): "Peloton smells like a ME stock. I hate that. I like it."

Analysis: The hosts argue that these subscription-based businesses create a stable revenue stream, making them less susceptible to economic shocks. They discuss how these companies have adapted during recent market downturns and their potential for future growth.

4. Impact of AI on the Job Market and Future Workforce (25:43 - 29:44)

Key Discussion Points:

• AI Adoption: The rapid advancement and adoption of AI across various professions are leading to higher unemployment rates among recent graduates.

• Generational Challenges: Discussions focus on the pressures faced by the younger generation in college admissions and the increasing difficulty of securing jobs in a market increasingly influenced by AI.

Notable Quotes:

Josh Brown (25:43): "We don't need your grunt work. Thanks. No, thanks. We don't want to train you."

Michael Batnik (29:09): "This is a pretty scary article for parents of these, of this generation."

Analysis: The conversation highlights how AI is reshaping the job market, reducing the need for entry-level positions, and increasing competition for the roles that remain. The hosts also touch on the societal implications of these changes, including the rising importance of higher education and the challenges faced by new graduates.

5. College Admissions and Pressures on the New Generation (19:26 - 27:38)

Key Discussion Points:

• Competitive Admissions: The episode covers the increasing competitiveness of college admissions, with applications to top universities skyrocketing and acceptance rates plummeting.

• Job Market Saturation: There's a parallel drawn between the hyper-competitive nature of college admissions and the burgeoning competition in the job market, especially for knowledge worker roles.

Notable Quotes:

Josh Brown (20:43): "This is what I'm living through. So I got my daughter into college last year. She just finished her freshman year at U Miami."

Michael Batnik (23:22): "The average knowledge worker job opening now receives 244 job applications, compared with just 93 as recently as 2019."

Analysis: The hosts discuss the implications of these trends on future generations, emphasizing the heightened competition and the evolving landscape of higher education and employment. They explore the broader economic and social effects of these pressures.

6. Walmart vs. White House: Tariffs and Pricing Strategy (51:32 - 54:30)

Key Discussion Points:

• Walmart's Stance: Walmart’s CFO publicly blames tariffs for rising prices, prompting a sharp rebuke from former President Donald Trump on Truth Social.

• Economic Implications: Josh Brown analyzes Walmart’s profit margins and the impact of tariffs on their pricing strategies, suggesting limited options for the retailer to manage increased costs.

Notable Quotes:

Josh Brown (53:55): "This time it's Moody's. I don't know that that means anything more or less than when S&P does it or when Fitch does it."

Walmart CFO (transcript segment): "Low prices is what we stand for, but we're going to keep prices as low as we can, as long as we can. [...] You’re going to see prices go up."

Analysis: The discussion centers on the challenges large retailers face in balancing cost increases due to tariffs with consumer price sensitivity. The interaction between Walmart and the White House underscores the political dimensions of corporate pricing strategies.

7. Venture Capital Trends and IPO Activity (55:36 - 60:33)

Key Discussion Points:

• Venture Capital Slowdown: The episode highlights a decline in venture capital funding, with a significant increase in bridge financing at the seed stage, indicating financial strains for startups.

• IPO Landscape: Despite the downturn in venture capital, IPO activity has seen a modest increase in deal count, though total proceeds remain lower compared to previous years.

Notable Quotes:

Josh Brown (56:00): "Series A deal count fell 79% between the first quarter of 2022 and this quarter. So over three years, an 80% drop off in series A rounds. That's like that. That sounds like a bottom."

Michael Batnik (58:21): "I think we're near bottom, at least anecdotally from what I'm saying."

Analysis: The hosts examine the current state of venture capital, noting the shift towards bridge financing as startups navigate financial uncertainties. They also discuss the state of IPOs, suggesting a cautious but present market for public offerings amidst broader economic challenges.

8. Energy Sector Analysis (60:33 - 41:43)

Key Discussion Points:

• Energy ETF Performance: The episode features an analysis of the energy sector ETF, highlighting its historical resistance points and the potential for growth despite current challenges.

• Individual Energy Stocks: Companies like Chevron and Williams Brothers are discussed, with a focus on their financial health and strategic moves to navigate market conditions.

Notable Quotes:

Josh Brown (62:13): "I bought some Chevron recently. It was a 6% yield. And I just said, I'm not afraid of this thing. I'm buying it all right."

Michael Batnik (64:34): "All right, here's another one. Exe. Come on, dude."

Analysis: The discussion underscores the potential for growth within the energy sector, even in a difficult economic climate. The hosts highlight specific stocks and ETFs that may offer attractive investment opportunities, emphasizing the sector's resilience and strategic importance.

Conclusion

The Compound and Friends episode provides a multifaceted exploration of current economic and investment trends. From the nuanced impacts of US debt downgrades and the persistent federal deficit to the innovative rise of subscription-based "Cougar" stocks and the transformative influence of AI on the job market, Josh Brown and Michael Batnik offer valuable perspectives for investors seeking to navigate a complex financial landscape. Additionally, the dialogue on venture capital dynamics, competitive college admissions, and the evolving energy sector further enriches the conversation, making it an essential listen for those involved in or interested in business and investing.

Notable Quotes Recap:

• Josh Brown (06:26): "This time it's Moody's. I don't know that that means anything more or less than when S&P does it or when Fitch does it. I could tell you right now, the stock market thought about it for eight minutes."

• Josh Brown (12:00): "We're not even in a recession right now. And the deficit spend like mimics what it looks like when we are. Can you imagine what's going to happen if and when we do have a recession at the current level of deficit?"

• Josh Brown (30:00): "Robinhood. No one's going to stop. We already know from 2022. We know from the crypto crash. Nobody's going to stop doing what they're doing on Robinhood."

• Michael Batnik (25:43): "This is a pretty scary article for parents of these, of this generation."

• Josh Brown (53:55): "This time it's Moody's. I don't know that that means anything more or less than when S&P does it or when Fitch does it."

Timestamps Reference:

All timestamps correspond to the transcript provided, enabling listeners to reference specific segments of the episode for deeper insight.