Podcast Summary: The Compound and Friends – "The Worst Is Still to Come"

Episode Information:

• Title: The Worst Is Still to Come
• Release Date: April 25, 2025
• Host: The Compound (Downtown Josh Brown and Michael Batnick)
• Guest: Rebecca Patterson

1. Introduction of Guest: Rebecca Patterson

The episode kicks off with a warm welcome to Rebecca Patterson, a distinguished figure in the economic and investment community. Michael Batnick provides an extensive introduction, highlighting Rebecca's impressive credentials:

[04:25] Michael Batnick: "Rebecca is currently a Senior Fellow at the Council on Foreign Relations. She is also an Independent Director at Vanguard and on the Executive Committee of the Bretton Woods Committee and the Trilateral Commission. She has served on the New York Federal Reserve's Investor Advisory and Foreign Exchange Committees. She currently chairs the Council for Economic Education. Most recently, Rebecca was Chief Investment Strategist for Bridgewater Associates."

Rebecca reciprocates with a light-hearted remark about their similar resumes:

[05:21] Rebecca Patterson: "Our resumes are very similar."

Following her tenure at major financial institutions, including JP Morgan and Bessemer Trust, Rebecca shares her journey to the podcast, emphasizing her extensive experience and expertise in global economic policies.

2. Current Economic Situation: Tariffs and Trade War with China

The core discussion centers around the escalating trade tensions between the U.S. and China, focusing on the impact of tariffs and the broader economic implications.

[06:29] Josh Brown: "I think we're on 93 days."

Josh Brown references the ongoing trade conflict, highlighting the anticipation of significant economic events around July 4th.

Impact on Markets:

Michael Batnick and Josh Brown delve into the recent volatility in the U.S. stock market, attributing fluctuations to political rhetoric and policy announcements related to tariffs.

[07:26] Josh Brown: "The World Bank's trying to communicate... 'we have a plan. It's all going to be okay.' But the question is, until when?"

They discuss how differing factions within the White House influence market perceptions and investor confidence, with specific mentions of key political figures shaping policy directions.

3. Market Reactions and Potential Recession

The conversation transitions to the market's response to trade policies and the looming threat of a recession.

[12:13] Josh Brown: "I think there's a decent chance that'll happen."

Josh Brown articulates his concerns about a potential recession, driven by sustained tariffs and their dampening effect on consumer purchasing power. He emphasizes the resilience of the U.S. economy but remains cautious about the future.

Historical Parallels:

Michael Batnick draws parallels with the Y2K episode, illustrating how front-loaded investments can create misleading economic indicators, potentially leading to abrupt downturns.

[11:38] Michael Batnick: "That happened in the Y2K episode... companies start giving their guidance for the next quarter."

4. Impact on Small Businesses and Specific Industries

The hosts examine how tariffs disproportionately affect small businesses and specific sectors, such as agriculture and manufacturing.

[18:00] Josh Brown: "Companies with armies of lobbyists... they'll be fine, the little guys... don't have someone to go talk to the President."

Rebecca Patterson highlights the struggles of farmers and small business owners who lack the resources to lobby for tariff exemptions, exacerbating economic strain in these sectors.

[19:11] Josh Brown: "America lost market share in soy to Brazil... Now we're going to do it again."

5. Foreign Investment and the U.S. Global Brand

A significant portion of the discussion focuses on the erosion of the U.S. brand and its impact on foreign investments. The hosts emphasize how diminishing trust affects capital flows and the overall economic landscape.

[49:01] Josh Brown: "Rebecca, you're writing for the New York Times, Financial Times... Foreign investors have about $22 trillion in U.S. assets."

They explore the consequences of declining foreign investments, including higher borrowing costs and reduced market liquidity, underscoring the long-term implications for U.S. economic growth.

[53:19] Josh Brown: "This is gonna happen... It is a long-term capital drought reducing the potential gains of the U.S. stock and bond market."

6. Safe Haven Assets: Gold Investment

Rebecca Patterson and Josh Brown discuss gold as a strategic investment amidst economic uncertainty, analyzing its performance and future potential.

[59:16] Josh Brown: "Gold tends to do best at tails... safe haven flow and yields are coming down."

They debate the merits of physical gold versus gold ETFs, with a consensus on gold's role as a hedge against dollar devaluation and market volatility.

[63:40] Josh Brown: "Gold is another hedge against that. It could help Bitcoin too, but I think gold is a safer play."

7. Career Insights: Rebecca Patterson

The latter part of the episode shifts focus to Rebecca Patterson's illustrious career, offering listeners a glimpse into her professional journey and accomplishments.

[65:18] Josh Brown: "I joined in September 1997... First week on the job was during the Korean won and Indonesian rupiah crises."

Rebecca recounts her transition from journalism to JP Morgan and eventually to Bessemer Trust, highlighting her pivotal role in shaping investment strategies and policies.

8. Closing Remarks and Future Outlook

In the wrap-up, the hosts and Rebecca discuss forward-looking statements on AI integration in finance, personal anecdotes, and upcoming projects.

[70:03] Michael Batnick: "Your retirement is safe for tonight, America. You'll be okay."

They emphasize the importance of staying informed and adaptable in a rapidly changing economic environment, encouraging listeners to engage with emerging technologies like AI.

Notable Quotes:

• Michael Batnick on IMF and World Bank Meetings:

  [01:41] "It's an incredibly efficient way to just get a deep dive on where the world is."

• Josh Brown on Potential Recession:

  [13:18] "I'm gonna reduce my U.S. equity by 4 or 5 percentage points... switch to consumer staples or something else."

• Rebecca Patterson on Market Indicators:

  [12:44] "We haven't even begun to see the recession yet."

• Josh Brown on Foreign Investments:

  [52:10] "22 trillion is in the US, so I'm a global pension fund... that's a huge number."

• Discussion on Gold as an Investment:

  [60:24] Josh Brown: "Gold tends to do best at tails... safe haven flow and yields are coming down."

Conclusion:

In "The Worst Is Still to Come," The Compound and Friends delve deep into the intricate dynamics of the current U.S.-China trade war, its reverberating effects on global markets, and the potential onset of a recession. With insightful analysis from Rebecca Patterson, Josh Brown, and Michael Batnick, the episode provides a comprehensive overview of the economic challenges ahead, the vulnerabilities of small businesses, shifts in foreign investments, and strategic investment opportunities in safe havens like gold. The discussion underscores the complexity of navigating today's volatile economic landscape, offering listeners both cautionary insights and strategic perspectives.

For more in-depth analysis and expert opinions, follow Rebecca Patterson on LinkedIn and explore her contributions to the Council on Foreign Relations, New York Times, and Financial Times.

This summary encapsulates the key discussions, insights, and notable quotes from the podcast episode, providing a coherent and comprehensive overview for those who haven't listened.