Joe Weisenthal on strong US economic data, winner-take-all talent markets, and the AI aqua-hire wave

Call me a mo. Call me a whimo to take me to the grass. I need to touch it. Take uh take me to Central Park. Yeah, the home of our next guest, Joe Weisenthal. Welcome to the stream, Joe. How are you doing? I'm doing great. Thanks for uh thanks for having me back.

It's always somebody commented earlier on you you shared the the guest lineup and they were like, "Yeah, Joe goes on tpn more than I call my mom. " And I love you guys. But maybe that person that I think that person needs to get a build a better relationship with their mother for sure. But we are family.

This is the brother. We are family. We are family. You are a technology brother. Yes. Financial brother. Thank you. Um what's what what's the latest in your world? What has been um uh capturing your attention this week?

You know, here's an interesting thing is that um the economy just like the setting aside the markets which we all go nuts every day, the lines always go up. There's the economy itself like the it it was a good week for economic data. Um today we got better than expected economic sentiment.

Yesterday we got better than expected retail sales. We got better than expected initial jobless claims. We got better than expected um the Philadelphia Fed manufacturing survey.

There has been this assumption I would say um in recent weeks that recent months really that the economy would slip and then the question would be would the Fed uh cut rates in time to forstall a recession and that maybe that's still a debate certainly we know the White House really wants to see rate cuts but actually at least like as a snapshot right now actually it looks like there might be a little bit of a tailwind to this economy which I think is really interesting and maybe unexpected.

That's fantastic. I have your post here. Boom. More strong economic data. June retail sales rise gong for the American economy hit for Joe and the economy. Love it. I need a gong. My producer Kale is in the room with me. I think everyone needs a We We have We have variety of gongs. We can actually send you a gong.

We have We have three now and we're thinking about getting a fourth. So, we have spare gongs if you need to borrow one. I think the guests need a gong. Yeah. I think the big thing is uh it it's not necessarily that you need a gong.

It's that you need to get into prop comedy generally broadly and OddLots needs a whole prop department with a variety of things. Have we showed you Have we showed you our props? We have We have the crystal ball for tough for knowing the future. Of course. Careful with that. We now have Yep. Put it on John.

If you ever if John ever wants to steal man an argument. Steel man something. We have a steel man. Cover. Do you have a uh do you guys have a tungsten cube? We don't have a cube, but we have a tin foil hat. We have a tin foil hat for when we're discussing uh conspiracy theories. Yeah, it gives you a little coverage.

I'm not saying this. I'm wearing the tin foil hat. Yeah, you guys for all the different scenarios, all the different How was uh you dropped your you dropped your uh interview with uh Eric Adams. It was this morning. Yes. I haven't had a chance to listen yet. You guys seem like you were having fun.

I don't think it's possible to not have fun talking to Eric Adams. Eric Adams is one of these guys where it's like even the people who hate Eric Adams love Eric Adams to some extent.

He is uh you know you talk to him and there are some people you talk to and it's like you instantly get why they've been successful in politics. He has a great smile. He's very funny. He sort of speaks extemporane extemporaneously very well. You never really know what he's going to say.

And look, you know, he presents I would say not popular right now. His approval rating is pretty low, but I would say he uh he makes his case well that he's had a a good mayorship between crime numbers, between the volume of uh housing that's been built in the last four years. I don't know.

Like the the rats the rat numbers are real. I talked about it last time. The rat numbers are real. So again, I think there there was a poll out this week that actually showed him in fourth place, but is there really a rat census? Do we have good data on rats? So the way they measure it, yeah, they do.

Um I mean, this is what the collapse, this is what collapse looks like, by the way, is when you start measuring the rat population. Are hedge funds trading against the rat index? On the rats, the proxy that they use for u measuring rats uh rats is three 311 calls.

So 311 calls is like our way to like call the police about something that's not an urgent crime or other things going on. And if there's like a rat infestation or a lot of rats uh place and they dropped like 40% in 2024 and then if you look at the annualized data through now it's like down another 25%.

I think on things like rats and trash containerization which I know you know trying to get into the modern era here in New York City.

Um, I think there was a widespread agreement that actually real progress has been made and Eric Adams has a lot of funny videos about his war on rats and I think uh I think he deserves credit for it.

Was there ever uh you you I don't know if this is an apocryphal story but the whole story of like the Indian cobras where there was a a bounty. Have you heard the story? Uh so it's a classic it's a classic economic example of uh of like unintended consequences essentially.

There's actually a particular term for it, but basically there was a snake problem, a cobra problem, poisonous snake problem in India. And as the legend goes, as the story goes, um the the government said, "Hey, look, we're going to take a decentralized approach. We are going to put this in the hands of the free market.

We are going to create a bounty for every dead cobra or dead snake that you bring us. And so we will pay you $1 for every People started breeding them, right? " They started breeding them. Exactly. And so, and so I wonder if there's a world where, okay, I got elected.

I need to I need to crush the rat population, but then I need to climb it up once it's out of the news cycle. I got to get the rod population huge and then I can crush it right before you can keep smashing it again. Keep smashing it right on right on the cycle.

So, oh yeah, it was bad midterm, but right as you don't want to change horses in the middle of a stream because I'm the rat catcher. The rat catcher. That's right. But uh I mean yeah is there is there a secret in New York City to controlling the rat problem? Is it just like more rat?

I think it's just I think it really is just a function of how horribly we've managed our trash and you just see and I saw it you know I was walking uh to the subway today because the containerization of trash like it's it hasn't come to my part of the city. It hasn't come to the east village.

There's just a lot of trash bags that exist on the street. I and and I saw a bunch of incidentally I saw a bunch of rats last night when I was walking home. So it is a live problem.

There is still progress and you know like I would never endorse a candidate for mayor but uh I would certainly suggest that whoever is the mayor after uh November or after the inauguration. Hopefully the existing trajectory continues because the problem is not solved. Yeah. Deals with it. Jordy.

Uh who else comes on your show and talks about rats? probably not, by the way, it's probably just me. Well, you're you're you're a new rat correspondent. Emily Sunberg is a helpful is a helpful New York reporter to understand what's going on the East Coast.

I mean, the the big thing that I've been pulling on, I talked to a couple hedge fund folks out on the East Coast in Manhattan. We had one guest on from CO2 who was had a very beautiful scenic view out the window uh from hedge fund alley. I guess that's a street or something like that.

Um and and my rea I was I was pulling on what has the reaction been in the finance world in the on the east coast to these crazy aqua hires that are going on on the west coast. So uh we saw that Google acquired Windsurf for $2. 4 billion. It was this kind of zombie aqua hire that's becoming more and more standard.

Mark Zuckerberg's paying hundred million $200 million for single AI researchers. It's kind of shaking Silicon Valley. for the news cuz now one what would have been one acquisition is now two. Oh yeah. So we got to cover it Friday and then we also got to have Scott Woo who bought the the the ghost ship on Monday.

I guess yeah the question is just like what's the reaction uh because for Wall Street with the pods it feels like it's standard.

Yeah, it's that's really you know it's funny literally just before we got on here and I was just uh talking here it just feels like you know if you think about the sort of broad phenons in the economy that what we're seeing is more and more sectors of the economy are experiencing this sort of like winner take allness phenomenon where it's not that the sector is doing good or bad.

is that there are a handful of talented people in any industry that just, you know, capture extraordinary sums. And, you know, we've seen it for years in professional sports. The pod shops, um, the hedge funds that we talk about a lot about on the podcast have had it for years.

That's our equivalent at Bloomberg, you know, like the stories that, uh, read Spike on the terminal. It's always about like some guy it's like oh so and so who you know is a transportation portfolio manager at this pod shop is like going there and they're getting a $50 million bonus etc.

It feels like um you know we see it in media of course uh in various ways and star newsletter writers and star podcasters and star broadcasters and so forth and then clearly like obviously you know software people have um been getting paid well for a long time but this phenomenon where now it's like no the value is not in the company per se the value is in just that inner uh individual talent who can get up and walk and take that value out with them.

Yeah. It feels like it's uh replicating elsewhere and like I don't know where it's going but this seems to be a phenomenon of the world. Yeah.

that that that's why anybody freaking out about like the the comp packages of individual re researchers, it's like yes, if you look at it on an individualized level, one person getting nine figures, but if you look at it and say, well, Zuck just spent 15 on scale AI and he which which was heavily talentoriented.

uh and would he pay $4 billion for one of the top teams if he could just aqua hire one of the top teams and in this case he just pieced it together from a variety of labs.

It's really interesting to one thing I think is interesting to think about is that a lot of in the finance world a lot of talentdriven businesses often aren't particularly great for shareholders.

So if you look at like the history of like investment banks that are standalone investment banks that never had like a trading arm etc. Almost all of the enterprise value like ends up acrewing to the talent and there's not much frequently like the equity component when these companies are publicly traded.

You look at like boutique investment banks that from time to time are publicly traded. They've never like been particularly those have never done particularly well.

or you think about a law firm of course which doesn't have public equity but like you know it's like all the money sort of like acrru to the talent and so I do think there are some like interesting implications like maybe down the line not yet in public markets but it's pretty obvious um from windurf that in private markets this has got to be a you know change the way investors are thinking that you know what really is left over for the poor downtrodden shareholder if the uh if the uh most talented workers at the company are the ones who really get to capture all of the value.

Yeah, there's Yeah, you you've seen this with uh the the podcast networks of the world, the true networks. If you know Dave Portoi builds up some talent, he starts paying them 100k. So, why share why share it at that point with Dave at that point, right?

Like if you are superstar podcaster under um that particular network eventually you get to a point where it's like you know you take maybe you start off and you take 20% of the cut and then 50 and then you're like why am I sharing it all at all? Yeah.

Alex Cooper basically Alex Cooper's market value is about the same as an AI researcher like over the last over the last few years. Yeah.

My so my I I've been thinking about this a lot since we last talked and you said the power laws are popping up everywhere and and I was and I was just going through my daily life thinking like how is that true? I see it everywhere.

I agree in a lot of things but I was thinking about like you know there's this meme of like after AI the last job will be like the plumber and I was like is there a power law compensation curve in plumbing like that's interesting or driving because if you think about the value of of of driving it's really a lot of there is a ton of equity value in Uber there is a ton of there's value it's a leverage thing that the highest paid plumber will be somebody who has like a a like scaled plumbing enterprise that you you you can only like install so much pipe in but if they lose their talent like there's still equity value because you've aggregated demand and that's the difference between the AI research labs and Instagram every they could have 100% turnover at Instagram slot other people in it's a network effect there's an audience there there's habitual I know I have a fan base on Instagram or I open it and I know that I get funny memes or videos or family connections there.

I'm not leaving just because the software engineer who works on this particular button leaves. And so there's a ton of equity value in Instagram relative to the talent. And and and I think that there I think that it's not as it's not as universal as we think.

I think we're just seeing it more in media and finance and research and places where there are either secrets that you can take with you or relationships that you can take with you or or fandom that you can take with you.

And so it's not it's not entirely 100% universal, but it certainly is something that it's it's more on display. It's than ever before. I don't know. Yeah, I think that's good. Look, I I I think this is a a useful uh corrective the phenomenon.

There are many parts of the economy where the sort of distribution between equity and talent um is not as skewed as it seems to be in uh some of these areas. It does seem on display. I mean it's weird that we know the names of software engineers in general, right? Yeah. Like trading card memes.

We put up these trading card millions of views. It's crazy. You guys nailed it. Like Yeah.

And I, you know, when I think about, well, you guys, not to, you know, blood much smoke, but when I think about like, okay, like when I think about TBPN and like what is it about this moment and why has it worked and why has it worked as well as it has, I do think, you know, it's obvious that just like so much of this thing is like it's a, you know, you guys do like a quasi sports show and so much of uh what we're talking about is de facto sounding like sports, including the degree to which people just get uh traded, so to speak, from or big uh signing transfers from uh one firm to the next.

Yeah. I mean to me to me business like anybody that is like sufficiently nerded out about business and markets and tech is like it's always been you could always comp it to sports, right? You have personalities, you have effectively coaches, you know, like the elder VCs, you have the the teams, the companies, etc.

Um, switching gears a little bit. Uh, what's up with what's going on with general solicitation right now? Seems like it seems like there's a bull market in general solicitation. There's there's this guy Eric Jackson who's just been basically going out saying, "Yeah, I'm just looking for 100 X's.

And by the way, if you want to if you want to if you want to join the ride, you can.

" And a lot of people I'm going to try to be uh careful when I talk about this topic but the idea of like you know we are going to pick a ticker try again trying to be careful we are going to pick a ticker and just sort of manufacture momentum for it has probably some always existed in markets and we seem to be in an age in which uh this sort of behavior is people don't try to hide it as much and that's I think not the surprise.

Have there always been people attempting to like, all right, we're going to like try to uh I'm trying to think of a word that wouldn't land me in legal trouble. We're going to try to move this stock for sort of noneconomic reasons because we gather and buy it. Um, has that always existed?

I'm sure we seem to live in an age where not only are people comfortable with just sort of doing that in the public, you have a lot of people who uh sort of say, "Yeah, you know what? Everybody's got to eat and everything is corrupt these days and everything is a scam. I don't really believe that for what it's worth.

I actually think American capital markets are the best in the world from a sort of transparency and regulatory side. I actually think it would be sad if uh we lose that. Um but I do think there's this wide perception it's all a scam. Everybody is corrupt. Everybody has inside information.

you're not, you don't have that information and therefore why can't you participate in your own form of uh you know driving the market to your will.

Social media obviously allows that and no one seems to everyone seems to be sort of cool with that these days and like I said I actually do think American capital markets are deep and fantastic and well regulated generally and if you look anywhere else in the world let's give it up for capital markets we'd love them.

Um, I was talking with Jordy about this this morning. Well, it's funny that when when somebody is doing uh or you know, basically doing general solicitation, the the reaction is for a bunch of guys who love finance to go and dunk and quote tweet the person and be like, "Look," and it just drives more attention.

That's the thing. How do you cover it? Like I I I've thought this is the problem. Like how do you even like begin to cover it?

Because I've wondered about this like with doing the podcast over the years where it's like certain like certain you know I'll hear a story someone will tell me about like some meme coin or something and the schemes that they like concoct to like pump it basically straight up manipulate it or like gather in a group etc.

And it's really interesting but it's like it feels a little you know like I would love to talk to you on the podcast.

On the other hand, I no matter how much that person is straight up admitting to market manipulation, the mere fact that they would be getting attention would almost certainly drive the whole thing higher. So, it creates this very like weird tension from this. Yeah.

Remember when the when there was that Argentinian presidential meme coin that like Malay kind of endorsed and then the guy that created it like went on like a started going on podcast immediately breaking it down. Yeah.

You know, I there's that famous uh George Soros quote and I don't know it exactly but he talked about it. He's like, "When I see a bubble, I run towards it. " And I think everybody is now adopting that where they look at something and they want to get in. They see a scam and rather than, "Oh, I want to avoid that scam.

" It's I want to get in on the scam. I want, in other words, it's like, I want to be in on the next M. I remember this during I remember this during the crazy crypto era of like 2021.

Uh they uh I remember Coffeezilla, this YouTuber who would talk about these scams, would interview some of the uh like victims who lost a lot of money and they were like, "Well, I knew it was a Ponzi scheme, but I thought I was early. I thought I was early.

" Yeah, you want it's I think I wrote I got to go find that cuz I hadn't thought about it.

I think I literally wrote once like the new thing is like getting in on the next maid off getting because if you are early and if there's sort of like we're in an era where regulators whatever just don't care about this stuff and or the expectation is like you play everyone gets to play the game everyone knows what the game is and you just don't want to be the last bag holder the game is to get in early.

I was thinking about this in the context of the Coldplay concert that went viral. The CEO of Astronomer took over the internet and I was like, "Okay, it's a private company, but if it was a public company, what would have happened to that stock?

" Is there a world where someone's like, "Let's turn this into a meme stock because it's a small company. Let's buy the Coldplay IP. " Yeah. Roll it in and turn it into a Coldplay IP treasury play. And uh I'm sure there'll be something out there in the near future. I don't love it.

But, you know, I'm old and like I'm a boomer at this point. So, maybe I just need to sort of embrace the new generation. You know, you know crazy some somebody messaged me and they were like, "Do you know Andy Byron?

The guy at the Coldplay concert was previously the president at Lace Work, which went from zero to 7 billion in the P or 8 billion in the private markets, back down, ended up selling for uh like I think around 150 million. " Um, so he's been on he's been on ride.

So, that's someone who that's someone who knows the roller coaster of life, huh? Yeah. So, he'll he'll be back, I'm sure, probably uh uh in in another marriage. Um what's going on with the 230 spread? I saw you posting that uh the 230 spread is at its highest since October 2021.

I remember October 2021 there were top signals blaring everywhere. Uh we have our own top signal tracker that we're working on internally uh that we should we should roll through as well. But but you guys going to get into proprietary data? No.

So like you know the way to think about you know the president has been out calling for rate cuts and we might get rate cuts at some point in the next year but the way to think about the yield curve is that um at any given point on the curve that number reflects like the sort of average rate over that time.

So the 2-year yield, for example, is essentially what the market expects the Fed will will have rates on average over the next two years. The 30-year is what the market expects Fed rates to be on average over the next 30 years.

And what you see is this uh you know, even at this time of calling for rate cuts, that number at the long end keeps going higher and higher, which suggests that, you know, the Fed could cut rates right now.

could get rights aggressively if Trump replaces Powell sometime next year or perhaps tries to fire him before that with someone who's sort of a lackey or a loyalist. We might get this situation of sort of like aggressive rate cuts now.

But if people perceive that to be inflationary and so forth, one possibility is that rates go up at the long end because they'll eventually have to compensate that u compensate for that by higher rates to fight that inflation. And so you see that now.

And what that means though is that even if you got rate cuts right now, you might not actually get lower mortgage rates or lower car rates because those are the rates that actually matter towards where people are borrowing.

So I think perhaps maybe the market is telling Trump a signal you're not even going to get what you want even if you get what you want.

You could get that Fed chair who immediately cuts rates for you, but if the goal is lower rates to stimulate the economy, it may not even work because you might see longer rates rise in compensation. Interesting. Um, yeah. Can you talk about the decision uh for who runs the Fed?

Uh the it's been kind of wall- to-all co uh coverage from the Wall Street Journal. All different bank CEOs coming out. There's been memes about like you know the school walk out don't fire Jerome Pal like what what are the arguments on on the sides of like hey let's not intervene from the executive branch.

Yeah there's a bunch of interesting dimensions. I mean look I'll say a few things. There's always been pressure um put on the Fed from time to time from the White House.

It's not new to Trump, but it is really stepped up and it's the the sheer number of attacks, the demands for immediate rate cuts, the sort of uh the attacks on Powell for the cost of renovation um of the of the uh Federal Reserve building, which interestingly there was a story by AP out today that said one of the drivers of the cost is that in 2000 um the uh administration officials wanted there to be more marble instead of glass in the building their aesthetic preference.

It's very Trump-like and so that could be so there's some why the renovations have been so expensive. That's one possibility. But then the you know there's a range of so there's this guy Kevin Wars who for my entire career has been a hawk always calling for higher rates. Suddenly he's calling for lower rates.

Interesting. The battle of Kevin there's two Kevins that are in in Yeah. Right. Right.

Then there's Kevin Hassid who I think is generally um you know considered to be like a respectable economist um by and large and you know if he if he were to get the nod I don't think there would be too much anxiety but the assumption is that whoever uh replaces Powell would be much more inclined to cut rates sooner and faster.

And if it if it's and if it's true that like the economy has some upward momentum right now, then you could see how uh people might perceive that to be uh inflationary. And another name I wrote about him today, uh Christopher Waller, he's a governor on the board. He is probably um he's calling for rate cuts.

He thinks there should be a rate cut as soon as the next meeting. But in Waller's defense, um he's had really good intuitions this whole cycle. So he's very hawkish. Shivan to fight inflation aggressively even while others on the board were calling it transitory.

He predicted that inflation could come down from its highs without a meaningful increase in the unemployment rate which has been proven correct. So, you know, there are some who are suspicious and cynical and say he's openly campaigning for that Fed chair job.

But he's been no one could really deny that he's uh he's he's had his finger on the pulse about as well as anyone else for the last 5 years. And this is important which is that the FOMC, you know, it's 12 people. It's not just the rates aren't just decision of the Fed chair.

Waller is someone who would probably have a pretty decent amount of credibility with the other 11 people on that board because he comes from there. So, it's possible that, you know, maybe he's the most uh logical choice. But what's likely, I have no idea.

Uh, off the top of my head, if I'm going to steal man rate cuts, I'm going to say something I'm going to say something like, uh, yeah, the economy is doing well, the retail sales are good, and jobless claims are fine, but uh, it's still really expensive to buy houses and, uh, mortgages are really high, and so I want to help Americans buy more houses.

Getting people on the housing ladder is the way that they start accumulating capital. That's good.

If I do the the tinfoil hat, I'm struggling with this because I I imagine that, you know, if I'm, you know, want to if I want my party to win in the midterms, if I want my party to win a re-election, I want the economy to be really strong, I want markets to be booming.

So despite all of the different, you know, uh, social issues that might be floating around, everyone says, well, like my IRA is up, my 401k is up, my market portfolio is up, but it feels like it's too soon to be putting to to be playing that card.

To go back to our rat analogy, if I was completely cynical just saying this is all about politics, I wouldn't be demanding rate cuts now. I'd be demanding them right before the midterms, which I believe next year. Right. So yeah, re react to those steel man, the tin conspiracy.

So look, you know, like I said, you know, the the issue with rate cuts from a housing perspective is that mortgages, mortgage rates may not go down if there are rate cuts because they're tied to the long end of the curve, which might go up in expectations of future inflation.

The strongest argument what could we could we pos what could we do like couldn't you just go in with like Figma and edit the long end of the curve basically bring it down?

Yeah, you could uh well, you know, the equivalent of the equivalent of Figma, I guess, would be yield curve control, which that's not unprecedented, where the Fed actually just goes out and says, "We are not going to let the 10-year rise above X level, and we will buy treasuries with our unlimited balance sheet and um and they could do that.

The issue then is you probably that means letting inflation run hot. " It's tricky. Um but the steel man for rate cuts is that the labor market has slowed and uh the rate of hiring really has declined um quite a bit.

I mean I think there have been several stories about how low hiring is particularly for college grads and so forth.

So this I think the the the argument for rate cuts there's a straightforward one which is that you could make the argument that the economy needs support or that it's over the rates are overly restrictive which is the argument that Fed Governor Waller made yesterday.

But you know just to your point um about you know the elections and IA look like what was it uh I think yesterday there was the news that President Trump was going to allow people to you know invest in crypto in their 401ks or something like that. There was some headline about that and access to private credit.

You know I do think it looks like this is an administration that is very comfortable with letting asset prices rip and it people like that. People like when their 401ks and their IAS and all that go up and their cryptocurrencies go up and I think this is an administration that is like pretty happy to see that.

We said this early, give Jane Street direct right at access to the Fed funds, right? Let the high solves it all. It solves it all. Just solve for market prices. Just make the market go up as much as possible. How's how's Jane Street doing with their little little PR serious PR crisis? I actually haven't followed.

No, the Indian the Indian options and then on the Sudan stuff too. That whole that whole thing. Wait, what? Oh yeah, we talked about that. No, it was just like you go from not hear you only hear about Jane Street really on the Darkh podcast.

Yeah, you know, a nice ad read and then you start hearing about, you know, all these other things. It seems like I don't know. I got to I I I I'll check in on Jane Street for you guys. Thank you. Thank you. What jersey are you wearing, by the way? Yeah, bring Oh, I got this. I was in Mexico earlier this year.

By the way, I got your hat. I have I and I have it in the office. I wasn't sure if that would be a little I was thinking about wearing your TBPN hat. But is that I was like, is that like wearing the t-shirt to the band when you're going to see the band? I wasn't totally sure, but I'll put it on next time.

I just want to I want to see a suit at some point. Maybe it would be cool. We got to get some hot tuxedo so we can wear hot. You know what? I will wear a suit or at least a shirt, jacket, and tie next time you guys have. It's so great. It's we we've been we try to wear white suits when the market's ripping.

The S&P 500 was at an all-time high yesterday, right? We didn't even think to We didn't even think to put it on because it's just we're so normalized to every day here. Anyway, thanks so much for stopping by. Thanks. Anytime. Always love it. Have a good weekend. Love it, dude. Have a great weekend. Bye. Cheers.

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