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

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.

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)

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.