Unstoppable Buying, ETF Inflow Records, Apple at War, Circle’s IPO

Summary

Podcast Summary: The Compound and Friends Episode: Unstoppable Buying, ETF Inflow Records, Apple at War, Circle’s IPO
Release Date: May 27, 2025
Hosts: Downtown Josh Brown, Michael Batnik, and Guests

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1. Market Overview: Resilience Amidst Turbulence

The episode opens with a vibrant discussion on the recent market movements, highlighting a remarkable rebound following a significant correction. Josh Brown sets the stage by noting, “[The market] fell into this 20% correction. Almost a full blown bear market rallied all the way back” (00:00).

• Major Indices Surge:

  • Dow Jones Industrial Average surged 700 points.
  • S&P 500 increased by nearly 2%, effectively recovering losses from the previous trade war-induced downturn.

• Trade War Developments:

  • Initially, market fears were stoked by President Trump's announcement of 50% tariffs on the EU, causing a temporary dip.
  • However, within 48 hours, tensions eased as Trump communicated with EU leaders, reducing tariffs back to 10%, which bolstered investor confidence.

“The market sort of reacted to that. And then on Sunday of Memorial Day weekend, he's like, no, actually just spoke with the EU, spoke to Ursula. We're good now.” — Josh Brown (05:16)

2. ETF Inflows: A Record-Breaking Surge

A significant portion of the discussion centers around the unprecedented inflow into Exchange-Traded Funds (ETFs). The hosts emphasize that investor behavior, particularly among retail investors, is a driving force behind this trend.

• Record ETF Investments:

  • Investors have poured a record $437 billion into US ETFs this year.
  • Vanguard’s S&P 500 ETF (VOO) has attracted $65 billion in net inflows year-to-date, positioning it to potentially surpass last year's intake of $116 billion.

• Investor Sentiment:

  • Michael Batnik observes, “The relentless bid into ETFs is relentlessly bidding. Here's a Wall Street Journal. Investors have plowed a record $437 billion into US ETF so far this year” (16:51).
  • This surge is attributed to a combination of generational shifts and demographic tailwinds, with younger, retail investors driving consistent buying behavior even amidst market volatility.

“Vanguard Group's S&P 500 ETF ... has soaked up 65 billion in net inflows this year on the way to becoming the world's biggest ETF by assets.” — Josh Brown (16:53)

3. Apple at War: Legal Battles and Market Impacts

The podcast delves into Apple’s current struggles, particularly focusing on its legal battles and their implications on the company's stock performance.

• Epic Games vs. Apple:
  • Epic Games sued Apple over App Store policies, challenging the mandatory 30% commission Apple charges on in-app purchases.
  • A court ruling mandated Apple to allow Fortnite players to make purchases directly from Epic Games, undermining Apple's dominant App Store ecosystem.

“Epic Games resubmitted its Fortnite app to Apple. Apple took five days and said, you know, Fortnite now most of the gamers don't care because they're On Xbox, they're on PlayStation and that's how they access it.” — Josh Brown (67:33)

• Stock Performance and Future Outlook:
  • Despite being the best-performing company for years, Apple’s growth is stagnating.
  • Ongoing legal issues and geopolitical tensions, especially concerning manufacturing shifts from China to the US, pose significant risks.

“Apple is sitting at this confluence of the absolute worst things. Worries about consumer demand staying up, worries about tariffs, worries about China versus us.” — Josh Brown (69:36)

4. Circle’s IPO: Navigating the Crypto Landscape

The hosts shift focus to Circle’s impending Initial Public Offering (IPO), analyzing its business model, market positioning, and potential risks.

• Company Overview:

  • Circle aims to enhance global economic prosperity through frictionless value exchange, primarily leveraging its stablecoin, USDC.
  • USDC holds approximately $60 billion in assets under management.

• IPO Details:

  • New York Stock Exchange is set to list Circle under the ticker CRCL, pricing 24 million shares between $24 and $26 each, aiming to raise $624 million.
  • Supported by financial giants like JP Morgan, Citi, and Goldman Sachs.

“Circle's business model relies on partnerships with entities like Coinbase.” — Josh Brown (54:25)

• Revenue Streams and Risks:
  • Revenue primarily from clipping coupons on short-term treasuries and holding cash reserves backing USDC.
  • Key risks include interest rate sensitivity, regulatory challenges, and dependence on key partners like Coinbase.

“Interest rate sensitivity to Circle's revenue is heavily reliant on interest income from reserves backing USDC.” — Michael Batnik (54:38)

• Market Sentiment and Valuation:
  • Joseph and Michael express skepticism about the valuation and sustainability, noting dependencies on the broader crypto market’s health and interest rates.

5. Goldman Sachs Under New Leadership

A detailed examination of Goldman Sachs' leadership dynamics and recent performance under CEO David Solomon.

• Leadership Tensions:
  • David Solomon, amidst internal conflicts and significant stock performance fluctuations, has taken decisive actions to consolidate power by ousting dissenters.
  • This move was met with mixed reactions, showing both the consolidation of Solomon’s control and the potential risk of isolating key partners.

“Solomon was going through a brutal stretch... He was going to start outing the naysayers who were talking.” — Josh Brown (41:33)

• Financial Performance:
  • Despite past struggles with consumer lending losses, Goldman Sachs has rebounded with strong earnings:
    • Q1 Earnings: Net income of $14.12 billion, up from $11.58 billion year-over-year.
    • Return on Equity: 16.9%, indicating robust profitability.
  • The stock has seen an annualized return of 30% over the past five years, signaling recovery and growth.

“The stock is ripping because that’s not. They know. The narrative has changed now.” — Josh Brown (44:15)

6. The Role of Retail Investors and Demographics

The discussion highlights the transformative impact of retail investors and changing demographics on the stock market.

• Demographic Tailwind:
  • A higher proportion of younger, retail investors are increasingly influencing market trends through consistent ETF investments and long-term holding strategies.
  • These investors, often utilizing platforms like Robinhood, are less swayed by traditional market fears and more focused on long-term gains.

“The booming population of retail... a growing view that S&P 500 earnings might end up being less impacted anyway.” — Josh Brown (11:53)

• Behavioral Shifts:
  • Younger investors exhibit a preference for automated investing solutions, favoring ETFs and steady portfolio growth over reacting to short-term market fluctuations.
  • This shift is seen as a backbone for the current market resilience despite external economic pressures.

“They think about this.” — Josh Brown (29:43)

7. Snowflake’s Recovery and Future Prospects

The hosts analyze Snowflake’s journey from a soaring IPO to a significant downturn, followed by a strategic turnaround leading to renewed investor interest.

• IPO Performance:
  • September 2020: Snowflake went public at $120 per share, opening at $300.
  • Peak Value: Reached $402 in late 2021 before tumbling 70% to a low of $107.

“Snowflake came public in September 2020... the stock collapsed 70% to a low of 107.” — Josh Brown (58:29)

• Strategic Shifts:
  • Leadership changes, including appointing a new CEO with a strong focus on AI, have driven 25% quarterly growth and improved net revenue retention rates.
  • Current performance shows steady recovery with net revenue retention at 124%, signifying increased spending from existing customers.

“Snowflake's net revenue retention rate hit 124% this quarter.” — Josh Brown (62:00)

• Investment Potential:
  • Hosts express bullish sentiments, noting that while Snowflake remains 50% below its all-time high, its fundamental improvements position it for future growth.

“We are here it is. I think, look, I think this is like pretty obvious that 175 level sort of meaningful.” — Josh Brown (63:27)

8. Concluding Insights: Navigating the Future

As the episode wraps up, the hosts reflect on the interconnectedness of current market dynamics, investor behavior, and broader economic factors.

• Key Takeaways:
  • The persistent ETF inflows and the demographic shift towards younger, retail investors are pivotal in sustaining market resilience.
  • Corporate strategies and leadership play crucial roles in navigating through economic challenges and achieving recovery.
  • The crypto landscape, particularly stablecoins like USDC, presents both opportunities and risks, contingent on market and regulatory developments.

“We have this demographic tailwind of people who understand long term investing, understand compounding and literally don't even read the news and don't care.” — Josh Brown (25:45)

• Final Thoughts:
  • The hosts emphasize the importance of fundamental analysis over narratives driven by short-term market sentiments.
  • They encourage investors to stay informed, adaptable, and focused on long-term growth strategies amidst evolving market conditions.

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Notable Quotes with Timestamps

• “The market sort of reacted to that. And then on Sunday of Memorial Day weekend, he's like, no, actually just spoke with the EU, spoke to Ursula. We're good now.” — Josh Brown (05:16)
• “Vanguard Group's S&P 500 ETF ... has soaked up 65 billion in net inflows this year on the way to becoming the world's biggest ETF by assets.” — Josh Brown (16:53)
• “Epic Games resubmitted its Fortnite app to Apple. Apple took five days and said, you know, Fortnite now most of the gamers don't care because they're On Xbox, they're on PlayStation and that's how they access it.” — Josh Brown (67:33)
• “Apple is sitting at this confluence of the absolute worst things. Worries about consumer demand staying up, worries about tariffs, worries about China versus us.” — Josh Brown (69:36)
• “Circle's business model relies on partnerships with entities like Coinbase.” — Josh Brown (54:25)
• “Solomon was going through a brutal stretch... He was going to start outing the naysayers who were talking.” — Josh Brown (41:33)
• “Snowflake's net revenue retention rate hit 124% this quarter.” — Josh Brown (62:00)
• “We have this demographic tailwind of people who understand long term investing, understand compounding and literally don't even read the news and don't care.” — Josh Brown (25:45)

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This episode of The Compound and Friends offers a comprehensive analysis of current market trends, investor behaviors, and specific corporate developments. Whether you're a seasoned investor or just getting started, the insights shared by Josh Brown and Michael Batnik provide valuable perspectives on navigating today's complex financial landscape.

Transcript

[Josh Brown]

Ladies and gentlemen, welcome to the compound and friends, it is Tuesday night. We have a huge show for you. Thanks to our sponsor, Betterment Advisor Solutions. More on Betterment Advisor Solutions in just one moment. Tonight's show is really about the tug of war that we're experiencing here. The market fell into this 20% correction. Almost a full blown bear market rallied all the way back. Today was another huge day. Dow up 700 points. S&P up almost 2%. We've pretty much gained back everything that we'd lost as a result of the trade war. And now the investor class is kind of laughing at these trade war headlines. Record setting pace for ETF purchases this year. They're buying the dip faster and faster and that push and pull is really interesting. And we've got some really great stuff in here about Apple. We talk about the latest conference board confidence numbers. We take a look at that relentless bid into ETFs, which I think is a really big story. And I think it's partially generational, partially based on the demography of the stock market. We look at the taco trade and a whole bunch of other stuff that I think you'll find fascinating. Thank you so much for joining us. We appreciate you. Duncan, John, Daniel, Travis, send them in. Welcome to the compound and friends. All opinions expressed by Josh Brown, Michael Batnik and their castmates are solely their own opinions and do not reflect the opinion of Ritholtz Wealth Management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ritholtz Wealth Management may maintain positions in the securities discussed in this podcast. All right. Hey, guys in the chat are talking about this core weave. What the hell is this thing?

[Michael Batnik]

Talking about it for six weeks?

[Josh Brown]

No, but. No but what is. I mean, I don't mean what is the company? What is going on? It went up 21 today.

[Michael Batnik]

I think it's got to be some knowing nothing. It's got to be some sort of thing with a very short float, market structure type of thing. Squeeze.

[Josh Brown]

Well, they report well. Nvidia reports tomorrow. So core weave is probably like a 2X Nvidia. If it's a good report is my guess.

[Michael Batnik]

I don't know, dude. It's wild. I love it. I love it.

[Josh Brown]

You love it? This thing is nuts.

[Michael Batnik]

Nuts.

[Josh Brown]

But it's in the. It's in the news. There's like news on it. But I don't know what the news is.

[Michael Batnik]

I bought it on the IPO day at 38. I sold it at 40.

[Josh Brown]

Look at you.

[Michael Batnik]

What's that? 123.

[Josh Brown]

Playing it like Buffy.

[Michael Batnik]

I mean, there's no way I was holding on to this. No way.

[Josh Brown]

All right, so there's a Baron's piece. Barclays downgraded it to equal weight from overweight, but he raised his price target from 70 to 100.

[Michael Batnik]

What is this?

[Josh Brown]

And I think. And I think the stock's 115.

[Michael Batnik]

Yeah. 120. Love it.

[Josh Brown]

What is this nonsense? Is right. I don't know. All right, shout out to all the pounders who are joining us live. What a day Dow did. What did The Dow do? 700 today. Gained back everything from last week in one day. Beautiful deal with Europe. It looks like everybody's excited. All right, the usual gangsters are here. Simon E. Is here. Buying some core weave tomorrow. Look out below. Lol. I know the feeling. Matthew Stevik. Go Knicks. That's right. Michael Griffiths trying to shout out some new people that we don't. We don't get to. Chris Landry is in the building. He's given a shout out to serve. Gotten at $6. I sold it today, Chris. I made a little bit of money, believe it or not.

[Michael Batnik]

You know what you did, Josh? You made chicken salad out of chicken shit.

[Josh Brown]

I did. I bought it at 19 and then I bought it at 7 and I.

[Michael Batnik]

That's chutzpah. I don't have that. That's cool.

[Josh Brown]

I don't care about the fundamentals.

[Michael Batnik]

Yeah.

[Josh Brown]

Anyway, I'm gone. I'm out. All right. We have a sponsor tonight. Michael, tell everybody who the sponsor is.

[Michael Batnik]

Damn right we do. Today's show is brought to you by our sponsors at Betterment Advisor Solutions. Imagining a better future. That's the first step.

[Josh Brown]

Did I say imagine in that future? Yeah. With Betterment Advisor Solutions is the next. Whether you're launching your own practice, looking to streamline client onboarding, or just searching for efficient ways to scale your firm, Betterment Advisor Solutions is here to help.

[Michael Batnik]

Listen up. They automate to make tax optimization simpler. They provide support to make administrative tasks easier.

[Josh Brown]

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[Michael Batnik]

Learn [e-mail] Such advisors investing involves risk performance not guaranteed. Let's get to the show. Joshua.

[Josh Brown]

So we're. We're back within a couple of percent of record highs. Last week was a tough week. S and P did minus 2.6%. I think the NASDAQ was A about the same. But we gained it almost all back in one shot because the quote, unquote bad news from Friday where Trump goes, 50% tariffs on the EU, they're not negotiating. And I'm getting frustrated and it's time to play my game the way I play it or whatever. The market sort of reacted to that. And then on Sunday of Memorial Day weekend, he's like, no, actually just spoke with the eu, spoke to Ursula. We're good now. We're going to pause that until July and we'll make a deal. So Europe gapped. I don't know if you saw the European opening those. So the European stocks take this more seriously than American stocks do, I think at this point. But whatever was. Look, this, this is now a joke. Like we talked about it a couple of weeks ago. We did a show called the Market is Laughing at the Tariffs. So I guess that's still the story. And we're laughing again. And the 50% tariff just became zero or back to the baseline of 10%. And that was good enough today. And people are excited about Nvidia call. Buying for Nvidia. Going into the report is gangbusters. But let me just read this. Okay, so this is the tug of war. On Friday, Trump said he's out of patience. On Monday, he said JK and then the European Commission president, Ursula von der Leyen said, I spoke to Trump. It's good, don't worry. And then, and that's all within 48 hours. And then we got a conference board data dump on consumer confidence. You tell me if you understand this. The biggest jump in consumer confidence for the month of May in four years, mostly driven by an increase in future expectations. That's a component of the survey where they ask people how they feel about the economy over the next six months. What Cali refers to as the vibes that shot up by 18 points, the biggest monthly gain since May of 09. The present conditions climbed to. That's how Americans say they feel about the economy. Currently that is now at the best level since November. What do you think? What's going on here?

[Michael Batnik]

About which part? The conference board or just everything.

[Josh Brown]

Both. So just this. I'm framing it as a tug of war. Like, and for every negative you get a positive. And it's like day it. Day to day, it's. It's like it's almost too easy.

[Michael Batnik]

You're. Well, the. You're right. The market is laughing at the tariff noise because on Friday, after a V shaped recovery, the Bears had every chance to just Take back a little bit. Right. It would have been perfectly reasonable, tariff announcement or not to just give back 4%. Right. And on Friday, the VIX got as high as 25, which is nothing close to 22. Bond yields were unchanged. Stock futures opened. I guess the market opened. I don't know if it was down 1% or more. Closed at the highs of the day. They totally looked past this and they were right now to the conference board thing. What do I make of the numbers?

[Josh Brown]

Well, they bought, so they bought, right? They're not even waiting till now the next day to buy the debit. They're like, oh, Trump spooked the futures with tariff bullshit. Buying them right now.

[Michael Batnik]

I saw. I know we're talking about this. You know, I'll save it for later. Kevin Gordon tweeted. Consumer confidence up month over month in every income bracket in May. And I think a lot. We don't need to get into the numbers here per se, but I think a lot of this is just nothing more than a rebound. I'm. I have no idea, you know, where this thing goes from here. I don't really care, to be honest, but I think that these numbers were so depressed. Turn off, please. There was just a lot of pessimism, like, a lot, a lot of pessimism in the face of hard data. And I think after a couple of weeks and months of digesting the nonsense, I think people are like, ah, all right, move over it. It's fine.

[Josh Brown]

Like, is there a such thing as a correction that ends because people get bored? Like, is that a thing? Is that a thing now? Like, we, like, think about this. Like, we're in this, like, tick tock era where it's like, scroll to the next thing, quick, quick, quick. It's like I can't watch more than nine seconds of something and I'm just, and I'm just out. Like, what's next? Is that kind of what's happening here? Like, I, I'm not. I can't focus on this Tower thing anymore. I've been hearing about it for three months. It doesn't matter.

[Michael Batnik]

Ben made a similar point this morning. Like, only digest one threat at once just because of our attention span. Like, we can't focus on too many negatives.

[Josh Brown]

Well, what's the other? There's no other threat. It's just this. We went into this tariff thing, like, full speed ahead in January. The market was ready for tax cuts, deregulation, acceleration in gdp, Fed later in the year. There is no other threat outside this.

[Michael Batnik]

Outside of the normal Talk valuations, a softening economy, peak earnings. Like outside of the usual stuff there is nothing exogenous that is in our face. It's going to take the market down right?

[Josh Brown]

Like except like the usual threat like geopolitics like the general all right, let me read this from Adam Parker. Right now it feels like no one has strong conviction, bullish or bearish about the stock market. He should go talk to a 27 year old. He fundamentals might deteriorate from here. Just look at Ross stores missing earnings and pulling guidance on Thursday. Deckers outdoors down over 20% on Friday on a reduced outlook and Walmart CFO warning that tariffs will cause them to push up prices by 8% on some products in two weeks. But at the same time there's hesitation to turn too bearish. Why retail flows are still strong, momentum remains positive. Real optimism about AI companies proving real productivity gains. Input costs like energy and metals are down and in aggregate logistics costs should not be an impediment for most companies with prices at these levels in the second half the dollar is also weaker. That helps US earnings. The top 100 US equities showed during the post Covid era they were relatively immune to rise in prices. At present investors have generally now been conditioned to ignore President Trump, blah blah blah.

[Michael Batnik]

I just can I just double click on one thing? As they say in podcast land the there's hesitation to turn too bearish. People were so freaking bearish a month ago before the V. So I think people are only now not necessarily turning bullish. But I think Adam's right in the sense that people how could you have conviction right here? I understand.

[Josh Brown]

I definitely don't.

[Michael Batnik]

I understand having conviction to the downside like we earnings are going to probably continue to come in a little bit lower expectations. I don't see I don't understand having conviction to the upside.

[Josh Brown]

So he said no investor we talked to on Friday thinks the US will have a meaningful and sustained 50% tariff on European Union goods. We tend to think and many investors agree the only tariff related conversation that really matters is what the US does with China. And then he's basically he concludes by saying taking it all in. Even if macro headwinds persist, there's a growing view that S&P 500 earnings might end up being less impacted anyway.

[Michael Batnik]

So that's the thing.

[Josh Brown]

That's the big thing.

[Michael Batnik]

That's the thing. If you are of the mind that the AI hype cycle is still being underappreciated and you don't understand Nvidia is Going to earn, blow your faces away then. Okay, fine, maybe that's, maybe that's why you're super bullish. But other than that, I don't see it.

[Josh Brown]

Here's some stuff I did over the weekend. I was talking about taking the bear trap theme further and talking about how you get out of a situation where you could potentially be forming a short term top. These charts are not updated to incorporate today's price. Let's put up the first one. This is just the three indices made a lower high relative to the original high in February. All three of them at the same time. And I think the point was like, we can get out of this. All you need is. I had a great conversation with Tim Apple, I had a great conversation with Europe and you're off to the races. I didn't predict that from Monday morning, but I literally said this could happen Monday morning at 5am I forgot that it was a long weekend and the opening day was Tuesday this week. But that's like actually what happened. It happened on Monday. The market wasn't open, but we got a barrage of tweets about how everything with Europe is fine. Put up the next chart. So we were sitting on this 200 day moving average as support going into Friday after the quote unquote fake bad news. And you know, again, the big idea here is just like, look, there's a couple of get out of jail free cards here. One of them is that earnings continue to come in better than expected. Another one is all this tariff shit is fake and nobody believes it anymore. And then the third is unlimited buying by the investor, the retail investor, the individual investor. And I honestly think that that's trumping pretty much everything at this point.

[Michael Batnik]

This was a premature post by. I'm surprised you wrote this. First of all, the gap didn't get filled number one, but.

[Josh Brown]

Well, no, we were on the way to a gap fill. I didn't say it happened.

[Michael Batnik]

Well, it's. To say it right there in the chart. I think you and I and everybody else would have been absolutely face melted if we just rocket straight to new highs. Right?

[Josh Brown]

That's what it's, that's what it's doing right now.

[Michael Batnik]

No, it's not. No. We did have a little chart back on. We did have a little bit of a, of a pullback. Dude, this is your chart.

[Josh Brown]

I know, it's. I mean you literally wrote rollover.

[Michael Batnik]

So we had a little baby rollover, which.

[Josh Brown]

I know, but it's 3%.

[Michael Batnik]

Yeah.

[Josh Brown]

We made it back in one day.

[Michael Batnik]

Which made Perfect sense.

[Josh Brown]

What's the. What's the S and P up today percentage wise? Is it a 2% day?

[Michael Batnik]

1.9%.

[Josh Brown]

Yeah.

[Michael Batnik]

Wild, wild.

[Josh Brown]

Crazy here. All right, so here's why. More important than any of this shit, this is part of the big get out of jail free card. The relentless bid into ETFs is relentlessly bidding. Here's a Wall Street Journal. Investors have plowed a record $437 billion into US ETF so far this year, unfazed by the wildest markets since COVID And if inflows maintain the current price historically, they accelerate in the summer and fall months. And it will mark the second straight record year for US ETF lows. Chart on. Look at this shit. That's why is that $260 billion into equity ETFs year to date. Another 140 billion into fixed income. Next chart. Vanguard S&P 500. This is VO, which is taking in. It looks like more, more in dollars than any other ETF on the planet. 65 billion year to date. So we've had four months.

[Michael Batnik]

Yeah, it's wild. It really is.

[Josh Brown]

Let me read this. No one fund benefited. Chart off. More than the more from the surge than the ETF industry's new champ. Vanguard Group's S&P 500 ETF. The ultra cheap index fund has soaked up 65 billion in net inflows this year on the way to becoming the world's biggest ETF by assets. It took in Batnik 116 billion last year. So it's going to break that at the current pace. And the guy from Vanguard, Greg Davis, the cio, said during that period of tumult in early April, we saw a 5 to 1 buy to sell ratio. Investors have a tremendous amount of cash sitting on the sidelines.

[Michael Batnik]

Man, I'd love to know, I would love to know what looks like. Looks like historically. Like five to one sounds crazy, but for Vanguard investors, is that crazy? I don't know.

[Josh Brown]

Well, if he's shouting out April specifically, it must be out of the norm. I'm not sure. I don't know.

[Michael Batnik]

Can't scare these people. I love it.

[Josh Brown]

Larry Fink was in the Middle east last week saying there's $11 trillion still in money market funds. So like, I don't know, does 10% of that go into IV? What's the iShares1VW?

[Michael Batnik]

I don't have a chart of this, but if you look at money market funds as a total of, as a percentage of total assets, it's you Would you would be talking about it much differently. Like it's, it's, it's fairly normal. It's not super duper. Duper. Elevated.

[Josh Brown]

Right? Well, right. Because the total assets are elevated too.

[Michael Batnik]

Yes. Yes.

[Josh Brown]

It's not elevated relative to other assets. I asked Sean for this. So VO is Vanguard's version of SPY for people that aren't aware of what we're talking about. I asked him for net flows versus total return because I really don't think the buyers give a shit and I think I'm right. So do you see what I'm doing here? The, the bars are the net flows into Vanguard and the total return is the red line. That's just like what. How the ETF is performing. I don't. They just don't care. They like. It's, it's, it's, it's, it's, it's trending up. There are a few weird months here and there. There's probably some seasonality, but this is monthly flows in into VO over the last three years versus rolling monthly returns. And it's just coming.

[Michael Batnik]

Yeah.

[Josh Brown]

I don't know. You see anything in that chart worth pointing out or. It's pretty, pretty self explanatory. Right.

[Michael Batnik]

It just, it's relentless.

[Josh Brown]

Doesn't stop the relentless bid. All right, you're up.

[Michael Batnik]

Okay. Bespoke tweeted buy. The dip is back. The S and P has gained an average of 0.31% on the day after down days this year. The strongest showing since 2020. And wouldn't you know, we had that today. So the average is now higher because market was down on Friday and we were up 1.87% today. And this is the picture of the market today from finviz. It's just, it's bright green. Not. Not a whole lot of red.

[Josh Brown]

What is even down? I don't even know what's down. Whatever.

[Michael Batnik]

Assign.

[Josh Brown]

Oh, Palantir had a, had a negative day today.

[Michael Batnik]

But like not less than one. The red is VeriSign. You had, you had. O'Reilly, I think, did AutoZone report. AutoZone was down three and a half percent. Not a lot of red out there.

[Josh Brown]

Very interesting thing about VeriSign. It's the utility of tech. It's just a. It's like web registration and it acts more like a utility than a tech stock. So it actually makes sense that that would be down on a big green day. You see this chart? It's been on the best stocks list since September, October. I haven't, I haven't managed to say a word about it. I have great taste. I never owned it, but that's like. It's like a utility for the Internet.

[Michael Batnik]

All these names got many baby was a wreckage after deep seek.

[Josh Brown]

Yeah, that was how that go.

[Michael Batnik]

Yeah. One of these days, my friend, buyers will be punished.

[Josh Brown]

But we're going to. We're going to talk about. We're going to talk about the tariff rhetoric. Losing juice. The New York Times has a piece out today called the taco trade. Taco stands for Trump always chickens out. So I mean, this is not me. This is. Nobody get mad at me. This is the New York Times, which also you probably hate if you hate that statement that I just made. But this is what Jason Carrion, who writes for the Times, had to say. Stock markets jumped on Tuesday with the S and P posting its biggest gain in weeks. The index rose 2%. Analysts attributed to President Trump proposing of delaying a proposed 50% tariff on Europe. They also talked about tacos, or rather the taco trade, which is short for Trump always chickens out. The tongue in cheek term coined by a Financial Times columnist. Who did that? Who is the FT column? Do you know anything about it?

[Michael Batnik]

Who is. I don't know.

[Josh Brown]

I'll tell you right now. Oh, Robert Armstrong. Oh, I like that guy.

[Michael Batnik]

Oh, he's good.

[Josh Brown]

We've had him on. On the channel.

[Michael Batnik]

He's the john authors of the FT. Yeah, he's good.

[Josh Brown]

So he coined this term. Mr. Trump makes tariff threats only to rebound just as sharply when he relents and gives countries more time to negotiate deals. The market dropped on Friday. Wild threats by Trump are not unusual. Given the damage the US Would do to itself with this tariff, he will probably not follow through. And of course, he did not Tak. So taco is the new yolo, I guess. Is that a good way to phrase it?

[Michael Batnik]

No, I don't like.

[Josh Brown]

What do you think it's. You're not gonna use it? No, I don't use that term. Chicken out.

[Michael Batnik]

Yeah, right. Who says either?

[Josh Brown]

That's not a. That's like an 80s term. I feel like, like people used to make like the chicken noise to each other. Yeah, I was.

[Michael Batnik]

I know. You know, crud to me. I never did that.

[Josh Brown]

Never did that.

[Michael Batnik]

I would have been way too embarrassed.

[Josh Brown]

All right. Did you read my comments at Politico Money morning newsletter today?

[Michael Batnik]

I read him in the doc.

[Josh Brown]

What'd you think? I give good quote. I really. I give great quote. I really do what I do. I spoke to Sam Sutton over the weekend, so he was trying to Write a piece about the markets, how the markets are pricing in the trade war. And I totally spun him. I was like, dude, let me help you. Nobody cares about the trade war in the stock market. It might be a little bit in the long bond, like the tax stuff, the tariff stuff. The stock market is not spending even 30 seconds on this anymore.

[Michael Batnik]

Not anymore.

[Josh Brown]

And I, and I laid out like the earning, like the earnings are outperforming and people are way more focused on that than they are about tariffs. That may or may not happen this summer. And he changed. To his credit, he realized he's missing the story. He changed what he wanted to write about.

[Michael Batnik]

Before you quote yourself, before you quote yourself, can I give you something?

[Josh Brown]

Please.

[Michael Batnik]

This is wild. So we've spoken about this a lot. I've never seen it quantified. So I'm so glad that Savita did it. Mike Zuccardi tagged this. So Savita says the US has a higher proportion of low income consumers than almost every other OECD nation. Which I didn't know that kind of wild.

[Josh Brown]

But here's the other, the highest what.

[Michael Batnik]

Proportion of low income, low income consumers.

[Josh Brown]

I would have guessed that.

[Michael Batnik]

Okay, I would not have. But here's what matters. But its contribution to total consumption is low and its contribution to S&P 500s and P 500 earnings has declined to an estimated 2%. Holy shit. So it's up to say, but just through the lens of the stock market and earnings, the low income consumer does not have an impact, doesn't exist. It's wild.

[Josh Brown]

It's not in the, it's not in the stock market. Like the companies that derive their earnings from serving that portion of the population.

[Michael Batnik]

So when people talk about like delinquencies. Delinquencies and inflation hurting the low income, we're like obviously from a human element, but that's what we're talking about. It doesn't matter to the stock market.

[Josh Brown]

I think it does eventually when the dots get connected and it, and it turns out like all these wealthy people own these mortgage bonds and things that require the lower income people to keep making their payments. I think that's where that connection becomes meaningful. But we are so far away, at least I think we are so far away from a situation where an S&P 500 financial is like talking about impairment as a result of low income people not keeping up with their bills.

[Michael Batnik]

Ally, which is the most exposed? Like this chart looks fine.

[Josh Brown]

I brought this to the show last week.

[Michael Batnik]

We talked about looks great.

[Josh Brown]

We talked about who do we Have. Who do we have on the show? We had Rich Bernstein on, on Thursday and we talked to him about like that mortgage delinquency chart. It's like, okay, you could see it now, the uptick, but it's not exactly telling you that the household balance sheet is in shreds. That's not what's happening. It's just like a lot of these things are coming off of generational lows and normalizing.

[Michael Batnik]

Right.

[Josh Brown]

They're not signaling financial crisis.

[Michael Batnik]

Give me quote.

[Josh Brown]

I don't know what it was.

[Michael Batnik]

Oh, you're about to quote yourself. You love quoting yourself.

[Josh Brown]

Well, you give us the point I was trying to make. So this, I'm going to quote Sam and then my quotes in here. I said the marginal buyer or seller of stocks is a 32 year old and they literally don't give a. They are reacting to market sell offs by adding more money to their ETFs and their investment accounts, blah, blah, blah. The booming population of retail. And this is Sam. Retail investing platforms like Robinhood, now home to 27 million investment accounts, Chicken Little forecasts about downturns have never materialized. Gave rise to a class of investors who haven't adhered to conventional logic during market moving events. To which I said, Moody's downgraded the Treasury. It I'm buying Palantir. These are all real F bombs. I'm giving him, I'm serving, I'm serving F bombs all day long to the journalists that I talk to. I think the bottom line is we do have a confluence of things like strong ETF flows, better than expected earnings, buybacks. We have buybacks. We have a more resilient class of mega cap companies that are not as susceptible to every squiggle in the economy. We have subscription based businesses versus transactional businesses. We have services, things, services of goods. And then like the biggest thing, the most important thing is we have this demographic tailwind of people who understand long term investing, understand compounding and literally don't even read the news and don't care. And they're not, they're just, oh, Moody's. I don't even know what that is. Here's another $4,000 for my VO.

[Michael Batnik]

And should I buy one time, two times levered or three?

[Josh Brown]

Yeah, maybe I'll double. Oh, there's bad news in the stock market. Maybe I'll double it.

[Michael Batnik]

Should I buy calls that expire next week or next afternoon?

[Josh Brown]

Hang on. Nicole is saying that I, they should have taken the over on my F bombs. I actually think that these statistics, these Are asterisk F bombs? Because I was just quoting something else. I'm not like actually saying them. I said them at another time and I'm just repeating what had already been said. Those are not F bombs that are endemic to the content that we're doing tonight. Do you follow me on this?

[Michael Batnik]

Mm, sure.

[Josh Brown]

What do you think? Asterisk or is that because there's like, bets, there's money involved?

[Michael Batnik]

Stop.

[Josh Brown]

I'm being dead serious.

[Michael Batnik]

Okay?

[Josh Brown]

I'm being dead serious. I think I was minus six.

[Michael Batnik]

This is not a betting platform.

[Josh Brown]

Okay. Do you agree that the demography of the stock market is underappreciated or starting to become more appreciated, but still underappreciated by the. The market watchers?

[Michael Batnik]

Under. I don't know. It's hard to say. I don't know how to gauge their appreciation over or under.

[Josh Brown]

Do you think enough attention has been paid by the people who watch the market?

[Michael Batnik]

I also think.

[Josh Brown]

I also the fact that we have.

[Michael Batnik]

So many buyers, the demographic tailwind from younger investors. We were talking about this today. Robin Hood net deposits was like a big number. Was it 57 billion over the last 12 months? 18 billion. Last quarter was like real. But that's like a drop in the bucket. That, like, that's not propping up in the market.

[Josh Brown]

But, but remember, we're not talking about the bulk of the money in the market. We're talking about at the margin, the. The daily buying and selling. But if they're is a fraction of the money that never. But never moves.

[Michael Batnik]

But if they're insta. Buying, they're not. They're not the marginal anymore. They're just. They're just there. They're like insensitive. So they're not the marginal buyer seller. They're just there.

[Josh Brown]

I sort of feel like they get really bullish when the market falls. And the guy from Vanguard just told you they were five to one buyers versus sellers in April.

[Michael Batnik]

But that's. That's not the kids.

[Josh Brown]

You don't think so? That's not. That's not. That's not kids with 401ks.

[Michael Batnik]

No, I think. I don't think they're buying Voo. I think they're probably buying Spy or IVV.

[Josh Brown]

Okay.

[Michael Batnik]

I could be wrong. All right. I want to. I want to. We good? Do you have anything else? Any more quotes of yourself?

[Josh Brown]

I do. I have more, but we'll. We'll do them another time.

[Michael Batnik]

So last week with Rich, we were talking about. Or he was talking about, like how there's too much Liquidity and the next bear market is going to be a doozy for not really market reasons per se. But I just wanted to reframe the conversation a little bit.

[Josh Brown]

That was a good show.

[Michael Batnik]

It was great because it's like, oh, even interest rates can slow us down. What could get this market to just chill? And I want to push back against that. Let me lay out the case and then I'll hear yours. Your thoughts? Let's throw this first chart up, John, please. So the 30 year treasury rate and the S&P 500, I don't want to suggest that they're moving together at all, but it's just unusual to see them both at the upper end of their range. That is not what you would expect. You would expect treasury bonds, particularly at the 10 year and longer to act as some sort of governor for risk appetite and it ain't happening at all. Next chart please. So it's like, oh, interest rates don't matter. Oh really? All right, look at this chart that that chart kid cooked up. So I had him look at the inside the S&P 500 since the first hiking cycle in March 2022. And if you look at the left hand side, the, the bottom three deciles in terms of market cap are getting rocked. Only 15% of companies in the lower. In the lowest market cap decile, only 15% are higher. And we're talking about three years removed later. Three years later. Same thing with the second decile and the third decile they're up a little bit but it's only a 50% win rate. So certainly companies that are more exposed, that have higher cost of capital are paying the penalty for higher interest rates. The next chart from Torson Slok shows growth in total employment for the Mag 7, Apple, Microsoft. Yeah, this Max 7. Okay. What a coincidence. The Fed started hiking interest rates and boom. You're telling me that people inside of the technology sector employees aren't feeling higher interest rates? They sure are. Look at us worker.

[Josh Brown]

The workers.

[Michael Batnik]

The workers. Look at.

[Josh Brown]

I agree.

[Michael Batnik]

Look at us existing home sales. Look what happened when the Fed started to hike. Are you kidding me? Absolute ice age. Ice age. And then finally we have venture capital, particularly the mega rounds. The growth equity. Demolished. Demolished since the Fed started hiking. So it's very simple in my mind. Chart off please. I think what happened was it was AI in 2022, ChatGPT hit the scene and the market bottomed a month later and we never looked back. Had that not happened, we would be singing a much, much different tune about the impact of higher interest rates on the economy and the stock market and the Fed's ability to maneuver the economy in the market. And we are looking at the market today and saying, oh, I guess interest rates don't matter. They do matter.

[Josh Brown]

I think that you and I actually said that in real time. How many?

[Michael Batnik]

You definitely did. You were the first to say it.

[Josh Brown]

We did a video. I saved the stock market.

[Michael Batnik]

It literally.

[Josh Brown]

It literally, literally did. Oh, I totally agree with your take, but I do want to. There's only one thing I disagree with, which is in your first chart. This is the 30 year treasury versus the S and P. I don't think what we're saying is that the absolute level of rates doesn't affect the stock market. I think we have a chronology disagreement. Because look at the end of 21 when it became apparent to everyone interest rates are going to have to go up. That's when we start getting these emergency level inflation reports.

[Michael Batnik]

And look. But Josh, you're right. Look at 22, the stock market got killed.

[Josh Brown]

That's exactly right.

[Michael Batnik]

So it's adjusted.

[Josh Brown]

So it's not about the level, it's the surprise. And the big surprise for people who were riding the market up in 2021 was that there was going to be a vicious hiking cycle the next year. Nobody knew it. Some people thought it might be necessary. When it became obvious that it would be necessary, you had a legitimate, although not very long lived bear market in the stock in the S and P. And I do agree with you. The only reason we have enjoyed most of the gains over the last two years is that we got a tech cycle.

[Michael Batnik]

All of it. All of it.

[Josh Brown]

We got a tech cycle.

[Michael Batnik]

And we keep acting like 2022 didn't happen. And we keep acting like the first quarter of 2025 didn't happen. Oh, these, these kids are gonna be punished one day, dumbass. In 2022, Amazon, 2022. It's like not a million years ago, Amazon had a 56% drawdown. 56. I just picked up Amazon. Amazon and Google. Google fell 44%. Okay. In 2022 and just the first quarter, Amazon and Google each fell 30% after getting cut in half. Like investors have been punished. It hasn't been one way up. Oh, easy money. For who?

[Josh Brown]

The thing is, it's been a really long time. And we had two back to back years of 20% gains. And this year we had a correction that went on.

[Michael Batnik]

This happened in the first quarter. Amazon fell 30% of the first quarter. And how much did Video Fall. We're acting like it didn't happen just.

[Josh Brown]

Because I'm talking about annual, but I'm talking about like calendar returns.

[Michael Batnik]

Yeah, 23 and 24 were great years.

[Josh Brown]

Not just great. They erased all of the pain of 22 and then some.

[Michael Batnik]

I'm just tired.

[Josh Brown]

You didn't have to wait long.

[Michael Batnik]

Of old people yelling at young people. They'll have their comeuppance. They have been having it. This hasn't been a straight up line. It just hasn't.

[Josh Brown]

Yeah, the young people also, they're taking their lumps in places that you're not aware of. If they are employee shareholders of venture backed companies, which increasingly young people are, that hurts. They, A lot of them probably thought they would have had an exit by now. A lot of them were on Zillow picking out the house they were about to buy with their stock option. Companies cannot go public at the same rate that they were. Valuations are getting smashed down. Last week there was an ipo. We talked about it for a second. What did I tell you it's called?

[Michael Batnik]

I don't remember. I never heard of it.

[Josh Brown]

Okay. Mntn. This is actually an interesting business and I'm going to start following it. So mntn is a company that enables small businesses to buy television commercial airtime via a really easy technology platform. Like you submit your 30 second video to the platform. The I make suggestions of like what, what networks and what shows that that ad might work well in based on the demographic. And it's like a way that you don't have to like call NBC and say hello, I'd like to run a commercial and then TN will help you run TV ads.

[Michael Batnik]

So what's a really, what's the point?

[Josh Brown]

The point is the last private round they did was at 2 billion and change and they came public at $1 billion valuation.

[Michael Batnik]

Yeah, well circle which we're going to discuss later.

[Josh Brown]

So now everybody was, everybody was clapping on the floor and you know, I was applauding. I think it's great. But my point is it's not like young people in the markets haven't taken their lumps or paid the price or lived through anything. They have and they are. Can you imagine somebody who put 10% of their portfolio in NFTs? You think that person hasn't undergone a correction?

[Michael Batnik]

Right.

[Josh Brown]

So I, I agree with you. I think the old people want to see like a two year bear market because that's their experience. We don't do anything for two years anymore. I just watch the final.

[Michael Batnik]

We had a two year bear market. 2022 was two years. Legitimately was. No, it literally was.

[Josh Brown]

All right, I don't know.

[Michael Batnik]

The market bottomed in October. 2023 was two years. But go ahead.

[Josh Brown]

Didn't. Didn't feel that way. I don't know. We. I just watched the last season of Last of Us. The last seven episodes.

[Michael Batnik]

Yeah, that was weird.

[Josh Brown]

No spoilers. But here's a spoiler. It was seven episodes.

[Michael Batnik]

Why'd they do that?

[Josh Brown]

Is it a miniseries now? But this is my point. We don't do anything that takes two years anymore.

[Michael Batnik]

Mission Impossible was like two. It was so long.

[Josh Brown]

You saw it in the theater?

[Michael Batnik]

Yeah, I saw it last night.

[Josh Brown]

I think I'm out. We'll talk about that at a time. I think I'm out of that. All right, let's move on. David Solomon is, like back. He's so hot right now.

[Michael Batnik]

He was in the doghouse.

[Josh Brown]

Oh, they thought he was done. So to recap, before we get to the numbers here, David Solomon is the CEO of Goldman Sachs. He won a power struggle. It was either going to be him or Harvey Schwartz. Solomon got the job. Harvey ended up at Carlisle, where Harvey's a friend of the show. He's good. David Solomon got the gig from Lloyd Blankfein. When Blankfein retired and David Solomon was doing fine, they were double and tripling down on some of the consumer stuff they were trying to do. They were trying to turn Goldman into more of a household brand. They did a credit card with Apple. They launched Marcus, which was like an online bank slash robo advisor. And they were sort of flirting with Main street stuff. And it all went terribly wrong. And they paid the stock, paid the price for it. I think Goldman got cut in half. And what happened was all these Goldman Sachs partners who have a lot of sway internally, were not liking the bonuses that they were getting. And they were calling the press like.

[Michael Batnik]

They were $7 million. How dare you?

[Josh Brown]

Like they were doing these three martini lunches with Charlie Gasparino at Pietros and talking shit. And so every day the New York Post had another story talk, you know, trashing David Solomon. Goldman's in shambles. Why are we in the consumer business? What happened to the profit sharing pool? Why is this guy in the Hamptons deejaying a Covid party when the stock prices, you know, so it was really ugly. And then here's the. Here's the news that we just got this. I guess this is like the inside baseball from the Wall Street Journal. Wanted to share this with you. So David Solomon went to the board of directors and told them he was going to start outing the naysayers who were talking. Rule number one at Goldman is you don't talk to the press. He was going to start outing the people who were responsible for all this negativity and getting rid of them.

[Michael Batnik]

Why didn't he just fire them?

[Josh Brown]

He did. Here, let me read this. Solomon was going through a brutal stretch in 22 and 23. The consumer lending expansion was generating billions in losses. Her hurting Goldman stock moneymaking partners were leaving. Solomon had taken flack for his attention grabbing side gig. Deejaying. Solomon told Goldman's board he was going to take action, pushing out troublemakers who he said were undermining him with their leaks. The board told Solomon he had their support. By last year, longtime executives who had openly criticized his strategy were gone. The departure sent a message inside Goldman. No one is safe if they go up against the CEO. And Solomon, who is now 63 years old, has cemented control for the foreseeable future. This year he got a 26% raise and an $80 million bonus to stay for the next five years. So look how quickly things turned with the stock price and the fundamentals. Let's put, let's do some charts. This is the five year price performance of Goldman Sachs. Rocking and rolling. Recently made a new high at the end of 24 and is still hanging in there. Stock has annualized at 30% a year for the past five years. No company fires its CEO if the stock price is annualizing at 30% a year. Right?

[Michael Batnik]

Right.

[Josh Brown]

Okay.

[Michael Batnik]

That's why.

[Josh Brown]

Earnings hit $14 and 12 cents for Q1, which is up from 1150, $11.58 a year earlier. Net revenue 15 billion 6% year over year. 9% over last quarter. Return on equity 16.9%. Yeah. Asset management and wealth management on fire. Net revenues 3.68 billion authorized. Up to 40 billion in common stock. So like they're, they're back. The stock is back, DSOL's back. And I think the, the instructive part of this. Tell me what your takeaway is. For me, it's like it's so easy to look at a stock price and come up with a narrative where it's just going to keep going up or down 100%. We, we have to remind ourselves like nothing lasts forever. No trend, no narrative. Like even Tesla. Like, like the narrative on Tesla is no one will ever buy a car from this jerk again because everyone's mad at him. Dude, he's back.

[Michael Batnik]

He's returned.

[Josh Brown]

To office.

[Michael Batnik]

Yeah. What a stock price.

[Josh Brown]

The stock price is ripping because that not. They know. He. The narrative has changed now. He's back. He's innovating at Tesla again. He's not running around the White House with Trump. Like, you can't ever get so positive or so negative in response to. I don't know. What do you think?

[Michael Batnik]

I think that they did a lot of damage to their brand equity. Like, that was real. That was a horrendous misstep. And Goldman, I'm pretty sure we spoke about in real time. Like, what are they doing? Goldman is like the creme de la creme. They're going down market. Like, that's not Goldman. And they fixed it. They cleaned it up. They got rid of it. And I guess all's well that ends.

[Josh Brown]

Well when you're a new CEO and Solomon is 63. So let's say at the time, he's taking the company over his late 50s.

[Michael Batnik]

But he was an insider, though.

[Josh Brown]

Yeah, but he's a Gen X. He's a young Gen X. Like, he wants to do something different. They. You know, they want to make old.

[Michael Batnik]

Gen X. Oh, is he old? He's 63.

[Josh Brown]

What was blank find, though? Was Blank find a boomer.

[Michael Batnik]

He's a young boomer, I guess.

[Josh Brown]

Okay, fine. So it's Gen X. The first Gen X CEO at Goldman.

[Michael Batnik]

He wanted to make his mark. I get it.

[Josh Brown]

Wanted to make his mark. Like they, you know, they all want. Kind of want to put their stamp on this is what we're doing with Goldman. I totally understand. That just was. It was wrong. Just didn't work.

[Michael Batnik]

All right, let's talk about circles. Potential IPO. Not potential. I'm sorry. Circle's IPO, they're going public on around June 4th, I believe. There was talks that maybe they were sniffing around Coinbase or. Or. Or Ripple for an acquisition. So before we get to Circle proper, I just want to talk about the state of the IPO market. This is from Jeff Rich. Chart on, please. Jeff Richards. Excuse me. All right. He says the last 20 IPOs, we're up 55%. Six or over 100%. So back. I mean, these are real numbers. Like, these are.

[Josh Brown]

Would you have guessed that?

[Michael Batnik]

I would have. I. I don't know. I know I knew that it was healthier, but. No, that's. That's real shit. So the story with Circle, let's give somebody.

[Josh Brown]

Let's give some of these names before we go to Circle, though, because it's really interesting. Mntn, which we talked about five seconds ago.

[Michael Batnik]

Which one? Is that the boner pills or is that something else? Oh, that's, that's the virtual digital virtual therapist therapy. Right.

[Josh Brown]

Etoro is more crypto shit. Core weave is, is like Nvidia's.

[Michael Batnik]

Hang on. Etoro is not crypto shit. It's like Robinhood.

[Josh Brown]

Right, so Robinhood is crypto shit. Yeah. Well, you want to come from dude.

[Michael Batnik]

You would describe Robin as crypto shit. So it's brokerage platform sort of just.

[Josh Brown]

No, it's a brokerage platform service titan, which I also think is a really interesting business. I was there the day that came public. That's like software for landscapers and pool companies, service companies. It's a, it's like Toast. You know how I'm invested in Toast? Yeah, it's like the software company for restaurants. Service titan is sort of the same thing but for like people that have services business. Really interesting story. Founded by two brothers. I think they were, they're immigrants or their dad was an immigrant to this country. It's worth reading. Ingram Micro is a private equity catch and release Clay Mobile spun back out from Intel.

[Michael Batnik]

Klaviyo is a big one Instacart arm. So the average of the last 20, it's a 900. It's basically $1 billion IPO size at an 8 1/2 billion dollar valuation.

[Josh Brown]

That's great.

[Michael Batnik]

Healthy.

[Josh Brown]

55% returns is phenomenal, honestly.

[Michael Batnik]

So the, the mission statement from Circle is to increase global economic prosperity through the frictionless exchange of value. And their whole business is this thing called USDC, which is the second biggest stablecoin behind Tether. There's about $60 billion in AUM I guess they call it. And there's no yield as far as I can tell. And so they, their business model is, is clipping the coupons of short term treasuries.

[Josh Brown]

Why would somebody put money into a stablecoin with no yield? Explain like what the purpose of this in the ecosystem.

[Michael Batnik]

So once you are in crypto, once you are on the rails, you are on the rails. And there's no like outside of this. There's no like crypto to dodge. You'd have to go from Coinbase back to JP Morgan wherever you want to go. So if you are in crypto, you are a crypto native or you're a crypto whatever and you've got, I don't know, whatever, $30,000 in Bitcoin and you want to sell five because you know you want to take profits, well then you're going to go Into a Stablecoin.

[Josh Brown]

If you like real crypto, not crypto easy.

[Michael Batnik]

Because that's where you go. There is no cash. You go from Bitcoin to a Stablecoin and then you want to get back in. Whatever, whatever. And as far so also like the ability to just transact seamlessly, frictionlessly, instantly, without any fees. Like it makes sense. It makes sense that this is the.

[Josh Brown]

Future of the financial Rails usdc, which is the circle. Stablecoin that we're talking about is smaller than Tether by my understanding is because they are the house solution at Coinbase. It's growing way faster than assets going into Tether.

[Michael Batnik]

There's also been a ton of allegations that Tether is up to some shady shit.

[Josh Brown]

That it's the preferred since day one.

[Michael Batnik]

Yeah. Forever.

[Josh Brown]

Okay, here's the offering. New York Stock Exchange, which I found interesting. Not NASDAQ. 24 million shares priced between 24 and 26. I'm sure that's going higher. They want to raise 624 million. JP Morgan is the lead. Citi and Goldman as well. Ticker CRCL. It's a $6 billion market cap. Six and change. If they get that valuation that many shares, which I think is also pretty impressive. I don't think this happens. If Bitcoin's not 111,000, Trump's not president, and Coinbase is not one of the. One of the biggest companies in finance right now. Like you needed all those dominoes to fall for people to be excited to invest in a Stablecoin company, Right?

[Michael Batnik]

Yeah.

[Josh Brown]

Okay. And that's how they make money is they're holding cash that people have no expectations on. It's one earning a yield on it.

[Michael Batnik]

It's one for one backed by dollar. So let's up these two charts. So this is the market cap. It's just the amount of dollars in the system got drained during the crypto pullback pocket apocalypse. But look at this revenue. It's pretty wild. So in 2022. In 2022, it was $735 million.

[Josh Brown]

And two years later, 735 million in revenue. Just clipping bond interest, cash deposits. What a business.

[Michael Batnik]

And then two years later, boom. 1.6 billion.

[Josh Brown]

Kaisha, stupid question. Are Schwab and Fidelity asleep? Why would neither of them have bought this company out? They're afraid of the regulatory, I would assume.

[Michael Batnik]

Yeah.

[Josh Brown]

Is that what it is? Because that's the business they're in. They're in the same business.

[Michael Batnik]

Fidelity is a very conservative business. I just. Yeah.

[Josh Brown]

I mean, Schwab Is in this business, I'll hold your cash.

[Michael Batnik]

Up to now, there was no chance with the Gensler the way that he.

[Josh Brown]

Was behaving, they could have done this in January. They probably should have. Honestly, now that now this is another. Another off ramp away from trad fi with tons of money in it. I would say they could have controlled it.

[Michael Batnik]

So I would guess the biggest risk to a company like this is interest rates. If the Fed cuts twice, that's, you know, directly less money.

[Josh Brown]

They actually list that as their second biggest risk. So in every. Every company that goes public has to file what's called an S1. And the S1 is a document by lawyers for lawyers. Basically, it's just, don't sue us. We have no control over the price. And here are the biggest risks that you're taking. If you buy the stock right. And they exaggerate, they'll put in 700 different risks. Just because when the lawsuits start after the first quarter, where the company under, you know, misses. Expectations are like we told you this was the risk. Number one, regulatory uncertainty. I would argue that risk is pretty much gone. Yeah, but I get why they would put that at number one. Potential legal challenges. Blah, blah, blah. Okay. Interest rate sensitivity to circles. Revenue is heavily reliant on interest income from reserves backing usdc. Fluctuations in rates can significantly impact profitability, make the company vulnerable to macroeconomic changes. Okay. That's a risk factor for every publicly traded financial institution, crypto or otherwise. Number three, market volatility. Crypto is known for its volatility. I would argue that is the basis of the popularity of crypto. Number four, dependence on key partners. All right, this one's big for me. This is what kept me from being interested in Core Weave. By the way, I don't love investing in businesses that are built on other people's businesses. And I know that's a little bit naive because to some extent, everybody relies on everybody. This one seems acute. Circle's business model relies on partnerships with entities like Coinbase. I don't know what percentage of the money coming into USDC is coming from Coinbase. I guarantee you it's a lot. And it's growing faster than other sources because what else is there? Who else is. Who else is funneling money into USDC right now? Who are there other key customers? I don't know.

[Michael Batnik]

Probably crack. I'm probably. I don't want to crack it. Maybe. I have no idea.

[Josh Brown]

Is that important?

[Michael Batnik]

I have no idea.

[Josh Brown]

All right, what, like, in other words, what if Coinbase introduces its own stablecoin I'm sure they already have one and I just don't know about it. And what if people just decide, Coke and Pepsi, I don't care, direct my money into this? Or what if somebody says, okay, new feature, here's a stablecoin, and we're actually going to pay 5 basis points?

[Michael Batnik]

I think that's why the, that's why they're coming to market at 4 times earnings.

[Josh Brown]

Because people understand that risk, I would.

[Michael Batnik]

Assume, and others, I don't. It's not gonna. I don't know what the next product is.

[Josh Brown]

Well, here's fifth. Fifth risk. Competitive landscape. The digital asset space is highly competitive. Numerous players offering similar services.

[Michael Batnik]

It's a token backed by a dollar. Like, I, I think that one, we spoke about this. One of the, one of the things that you shouldn't say is there's no moat, right. Like if you invested in companies that you had said that about five years ago. Yeah, maybe, maybe it's anecdotal, but like, competitive landscape.

[Josh Brown]

They want one of the things. That's one of the things people, including myself, have consistently gotten wrong.

[Michael Batnik]

Yeah.

[Josh Brown]

They said Netflix had Netflix, right? Yeah, and I've said that shit too. And I was dead wrong, by the way. I was dead, dead, dead wrong on Coinbase. My argument was, if we're really going to get ETFs, then why the hell would anybody transact in coins? Yeah, wrong. Concentrated voting here. So public investors, if they buy the stock of Circle, they're buying the A class, which is one vote per share. That's what's being sold. The three founders control the B shares, which are not currently being sold to the public. They have 30% of the vote because those B shares are five votes per share.

[Michael Batnik]

I like that.

[Josh Brown]

Like, as founders retain, they don't have total control, they can be outvoted by the A class. Just very unlikely. If they have a 30% voting interest. Like it's. It's hard to picture the rest of the shareholders.

[Michael Batnik]

And you know what, if you, if you don't like it, you can sell a stock. That's not like a giant risk to me.

[Josh Brown]

Net income of 156 million on revenue of 1.68 billion in 2024. That's versus net income of 268 million on 1.45 billion in revenue the previous year. So net income is falling, I guess, because on the, over on the money, on the.

[Michael Batnik]

There's levers that they can pull in the expenses. Like, that's.

[Josh Brown]

All right, here's my bottom line. I actually think stable coins are the most useful. Maybe only useful things come out of all this crypto stuff. Over 16 years of this. Now they actually.

[Michael Batnik]

That's a little bit. That's a little bit dismissive. It's a new asset class that's like not. That's not nothing.

[Josh Brown]

No. I think that this is the most useful part of everything that's been launched. This is the actual thing that works and is needed. If you come out of Bitcoin with a huge gain, you need to go into something else or else it's going into the traditional finance sector. And a lot of the people that are in Bitcoin are there for a reason. They don't want to. So this thing actually does its job and it's actually useful. I don't know about a company based around it, but I guess we're all going to find out together, I think. I don't know. Can you tell me why somebody, if somebody has the choice, if they're on Kraken or Coinbase or anywhere, why would they direct money into Circle versus Tether or.

[Michael Batnik]

I don't want to make things up. There might be a yield component. I really. I don't know. Yeah, that's the answer. I don't know.

[Josh Brown]

All right, you're buying the IPO if it opens roughly high 20s where, where they're pricing it.

[Michael Batnik]

I am not. There are too many other things for me to invest in right now.

[Josh Brown]

Too many fish in the sea. All right, guys, let us know if you're buying. We want to see in the, in the chat and let's, let's get. Let's get a little bit of the gauge of whether or not people are bullish on this thing. All right, I'm going to make the case. I wrote, we wrote up Sean and I wrote up Snowflake for, for best stocks in the market at CNBC Pro.

[Michael Batnik]

One of the poster childs of the. Of the excess in 2021.

[Josh Brown]

So funny. We were talking about that 2021, 2022 comeuppance. This was it.

[Michael Batnik]

This was it.

[Josh Brown]

A quick recap. Snowflake came public in September 2020, about a year before the top.

[Michael Batnik]

Was it 100 billion?

[Josh Brown]

It was. They raised 3.36 billion. $120 per share. The stock opened at $300 per share. So I think it was worth 100 something billion out of the gate.

[Michael Batnik]

Nuts.

[Josh Brown]

75 billion right out of the gate. That was a multiple of 75 times its projected full year revenue.

[Michael Batnik]

Revenue.

[Josh Brown]

Your revenue. It was the first time I Can remember seeing Berkshire Hathaway on the holders list of a hot new issue.

[Michael Batnik]

Everyone was Berkshire.

[Josh Brown]

Berkshire's sold it way lower than 300. They're out of it. But if you thought that was the top, this is what's interesting. If you thought 300 was the top on IPO day it went to 400.

[Michael Batnik]

Right.

[Josh Brown]

A year later the stock topped Snowflake topped in September of 21 or November of 21 at 402 and that was it. Then the stock collapsed 70% to a low of 107. When do you think it made that low?

[Michael Batnik]

Probably around like June of 2022.

[Josh Brown]

Last September.

[Michael Batnik]

Oh, my bad. Okay.

[Josh Brown]

So was that. In other words, it came Public September of 2020. Bottom September of 24. It had a three year period where if you held it you actually lost money. A funny thing happened though. The CEO stepped back. The found like the, the main CEO was super popular guy in Silicon Valley, very well respected. But when you have a stock price collapse from 400 to 100, nobody cares. Yeah, he promoted the company's head of AI to become the new CEO. Forget the guy. I don't know the guy's name. And they started to put together a few quarters in a row of 25% growth. And surprising the street like the estimates got pessimistic enough that they started to beat them. Which is why Sean and I chose to write this name up. It hit the best stocks in the market list last week. Made a new year high. It's still 50% below its all time high but it's a double off the lows. And the argument we're making is like professionals don't care if it's 100% off its lows so long as the fundamentals are improving at a faster rate than the expectations. The stock has room. So we do we have a chart of this? I don't know if we did a chart. Doesn't matter. We are here it is. I think, look, I think this is like pretty obvious that 175 level sort of meaningful. So if you're playing this as a trader, I don't know that's where I would pivot off of. And if you're a little bit more of a longer term investor, wait for that, that 200 day to start rising a little bit and maybe use that on a weekly closing basis. What do you, what do you think about this as an entry?

[Michael Batnik]

Here's what I would do if I was looking to get longer than wait three days. I would, I would see how if it gets into the gap. See how it behaves at the gap. If it doesn't get into the gap over the next three or four days, it's going way higher.

[Josh Brown]

That's what we said. Low volume pullback to see how it handles that, that, that. The bottom of that rally.

[Michael Batnik]

Yeah. Which looks good.

[Josh Brown]

Fundamentals, you're gonna. You're gonna be hearing more about this name as an AI story than you have previously. Because again, the guy running the AI on the AI side of the business, and now here. Here were two things, Sean Paul, that I thought were important. The first is they have over 600 companies paying them more than $1 million each. That reminded me of CrowdStrike, which I now have, I think, a double or more in the stock today, Right? Yeah. Gross margins are expanding. So they're not at full year profitability yet. That's why this is not in the S and P. But that's where they're driving toward and they'll get there. And when they do, this will be an S and P component because market cap wise, it's too big. But the other one, and I love this, that Snowflakes net revenue retention rate hit 124% this quarter. Net revenue retention means the existing customers spending. Not only are they staying, they're upping how much they're spending with Snowflake. And I think that's because of the AI stuff. So you need your data clean, organized, unified. You can't do anything AI if your data is not in good shape. And that's kind of what Snowflake's business is. So if they can get closer and closer to profitability, I think the stock can stay, you know, in this. In this area. So that's our make the case. What do you think?

[Michael Batnik]

I do like it.

[Josh Brown]

Bullish.

[Michael Batnik]

Bullish.

[Josh Brown]

How many shares can I put you down for?

[Michael Batnik]

Not yet. Not yet. No. Good. To make the case. I like it. Okay. Mystery chart. I sent this to you, John, over the weekend. Okay, Here we go. I was. I forgot what it looked like. All right, Josh. So would you buy this stock or would you buy this chart? Excuse me, does this look bullish?

[Josh Brown]

No.

[Michael Batnik]

Okay.

[Josh Brown]

I hate charts like this.

[Michael Batnik]

It's just sloppy. Range bound, Right.

[Josh Brown]

What? This is a ratio chart?

[Michael Batnik]

Yeah.

[Josh Brown]

Okay. Is it two stocks, two ETFs? What is it?

[Michael Batnik]

It's. It's a. It's a company versus the index and.

[Josh Brown]

Versus its own sector versus.

[Michael Batnik]

Versus the S& P. Okay. And so what you could see is that over the last five years you would have been no Better off owning this versus the index.

[Josh Brown]

No, better off or you'd be down.

[Michael Batnik]

Well, yeah, whatever. Same diff. Flat down.

[Josh Brown]

Okay. I'm gonna say Apple.

[Michael Batnik]

Love it. Great call.

[Josh Brown]

Look at that.

[Michael Batnik]

Really good guess.

[Josh Brown]

Yeah, this, I mean this thing is.

[Michael Batnik]

I mean this is, this is a really big story. I think that it's not being discussed. This company is not growing anymore.

[Josh Brown]

No, they hit the. It's a replacement cycle business. They hit it. Everyone said it would happen. It did, it happened.

[Michael Batnik]

And it's. And we were speaking about this a lot last year as it made that run, right. It was like, it was like the anti deep seat. Like they were not in the business and they were getting the premium, they were getting the benefit for that. But, but the multiple never didn't make sense. Like why was Apple trading at 35 times next year or wherever, however high it got up to?

[Josh Brown]

I'm going to tell you, way worse, Way worse than their failure to be at the forefront of AI So far they got, they're getting their ass handed to them in court over this antitrust stuff. They lost to Fortnite. And this is quite, this is actually crazy. I don't even think people know that this is going on. Epic Games sued Apple because Apple would not allow Epic Games to sell things in game and bypass the App Store. And Apple basically said, these are our terms and conditions. If you want to have an app in our App Store, we take a 30% cut of whatever your sales are if it's an in app purchase. This applies to every app you can think of. Okay. You want a Spotify subscription using the Apple App Store, Spotify is going to take a chunk of that money and give it to Apple. Even though they're in there, they compete because of Apple Music. Like this is just the rules. And Epic said, we don't think that's, we don't think that that's fair. And they took them to court. It's been going on for years. And Epic Games, which is the parent company of Fortnite One and a judge said Apple has to allow Fortnite players to be able to buy things from Epic Games in game. That goes around the payment mechanism of the App Store. And Apple refused to allow Fortnite to have an app at its App Store. And that is against the judge's order. So, so after the court case, Epic Games resubmitted its Fortnite app to Apple. Apple took five days and said, you know, Fortnite now most of the gamers don't care because they're On Xbox, they're on PlayStation and that's how they access it. But people do like, it's a big deal. And the judge wrote this like fire and brimstone missive back to Apple. Like, what gives you the right to defy a court order? You have to reinstate the game and give it permission to. So Apple losing that for the first time ever jeopardizes this cash machine. They have like, they had a stronghold on every app that wants to reach Apple users and now they might not.

[Michael Batnik]

So no. So no shit. The App Store is their crown jewel. It is the highest margin component. Everything else that they do is hardware. And every business line from AirPods to the watch to the imac to the iPad to the phone, they're all massive, amazing businesses. But guess what? They're not growing. And not to mention the threat from OpenAI and I've. Whatever the hell they're building, if they build the next generation of whatever user products we're going to do, that's not in the stock price. And so Apple's the best company in the world, but it's not growing and it might still make money. Shareholder yield and all that they have. They're going to buy back a ton of stock, they're going to pay the dividend. But is Apple going to outperform the S and P over the next five years? Over the next ten years? I'd be not surprised.

[Josh Brown]

You know what's so crazy? It's still a 30 multiple. Like you can't even come out and say there's so much pessimism around Apple. I want to buy.

[Michael Batnik]

There's none.

[Josh Brown]

Does not.

[Michael Batnik]

And, and, and, and it hasn't outperformed over the last five years. What's to think it will over the next.

[Josh Brown]

Yeah, and then they have the China stuff and they want to pivot some of the. They only make one product. They only make one hardware product that matters in America. They make the Mac Pro, not the MacBook Pro, not the laptop, the desktop. Highest end product computer is made in Houston. And Trump is like, hey, don't shift the iPhone from China to India because that's not what we talked about. Make the iPhone here. People look at each other like, no way. Cannot make an iPhone here.

[Michael Batnik]

Yeah, you could.

[Josh Brown]

Maybe you could make more of the computers here. I don't know. I would be the last person that would know. But so they are sitting. So Apple is sitting at this confluence of the absolute worst things. Worries about consumer demand staying up, worries about tariffs, worries about China versus us.

[Michael Batnik]

How about not being an AI and being threatened by it potentially failing to.

[Josh Brown]

Implement consumer AI in a meaningful way. No AI on the phones in China. All the Chinese made phones have AI. And Apple is trying to compete in China without it, like, and then losing, losing in court, something that could literally jeopardize their profit margins from the greatest services business in the history of the world. That's where Apple is right now. And it's not great.

[Michael Batnik]

That's not great.

[Josh Brown]

It's not great politically, geopolitically. It's all. It's and, and it's. And it's expensive. So.

[Michael Batnik]

But other than that, other than that, bye. Bye, bye.

[Josh Brown]

All right, guys, that's it from us this week. We, we appreciate everybody who came out for the live. You guys are hilarious. Looking at your comments, literally, we have the best audience on YouTube. Thank you so much. To those of you listening in Podcast land on Spotify and Apple Podcasts, we appreciate you. We love you too. Please make sure to listen to an all new edition Animal Spirits tomorrow morning. That's right, Michael and Ben. Yeah, yeah. And then we'll have the usual slate of content here on YouTube across the compound and, and the Rithold Cinematic Universe. We'll do Ask the Compound. We'll do the Compound and Friends and you guys are gonna love it. Okay, that's it. Thank you so much. We'll talk to you soon.

[Michael Batnik]

Good.

[Josh Brown]

Whether you're just getting started as an investor or you're managing a multi million dollar portfolio, Ritholtz Wealth Management has the solution for you. It all starts with building the right financial plan. To speak with a certified financial Planner today, visit ritholtswealth.com don't forget to check us out at YouTube.com thecompoundrwm. Make sure to leave a rating and review on your favorite podcasting app. If you love investing podcasts, check out Michael and Ben every Wednesday morning on Animal Spirits. Thanks for listening.