finance
Bloomberg's Joe Weisenthal and Tracy Alloway explore the most interesting topics in finance, markets and economics. Join the conversation every Monday, Thursday, and Friday
Nate Silver stated on an election special that President Trump's approval rating sits at approximately 37 percent, which he noted is the worst approval rating for a president at a midterm since Harry Truman in 1946.
Discussing midterm model probabilities, Nate Silver pointed out that prediction markets and model projections on Polymarket and Kalshi place Democrats with high probability to win the Senate, contrasting with a simple toss-up narrative.
Nate Silver discussed historical polling discrepancies, noting that while systematic polling errors have underestimated Donald Trump in presidential election cycles, midterms without him on the ballot show different error patterns and underestimations of Democrats.
Nate Silver claimed that the University of Michigan consumer sentiment survey altered its methodology by shifting to online collection, resulting in samples with too many Democrats.
Nate Silver noted that AI tools like Claude and GPT have significantly accelerated his team's work, enabling complex coding projects and tiebreaker algorithms to be completed in a fraction of the time.
Alex Michelizzi of Nomura stated that US registered structured notes are on track to reach approximately $300 billion this year, up from around $200 billion last year. The growth is heavily driven by worst-of auto-callables tied to indices like the S&P, NASDAQ, and Russell.
Tai Yun and Bruce Dang from the hacking firm Calif explain how their team, alongside Wiz and with funding from OpenAI's Patch the Planet program, discovered a critical vulnerability in the PHP coding language. Although the PHP Foundation had previously identified the issue years earlier, they chose not to fix it because the fix was expensive and difficult; Calif used AI to successfully develop an exploit for it.
Tai Yun discusses recent incidents where banking clients were compromised by AI-driven attacks that spread through internal networks within a single day, comparing the rapid proliferation to cancer and noting that traditional detection methods struggle to keep pace.
Tai Yun argues that AI models optimized for coding and debugging inherently possess the capabilities of hackers, making it impossible to separate a helpful programming assistant from an offensive security threat.
Bruce Dang recalls his career milestones, noting that while working at Microsoft's Security Response Center, he helped reverse engineer the Stuxnet virus, widely considered the world's first known digital cyber weapon.
Alex Altman of Barclays discusses the current market sentiment around AI, noting that while investors remain overwhelmingly bullish, the market is entering a denial phase regarding emerging financing and capital constraints, particularly among riskier neoclouds.
Alex Altman compares current financing stress seen in smaller neoclouds like Cypher to subprime vehicles prior to the GFC, highlighting that debt markets are becoming more selective and capital is facing real competition.
Joe Weisenthal reports live earnings results showing Alphabet shares down following a revenue ex-TAC miss, while Microsoft shares jump after reporting 48% cloud revenue growth for Azure, topping estimates.
Alex Altman points out that open-weight AI models have rapidly expanded their market share from 20% up to 80% while token costs have experienced unprecedented deflation, creating a tension with frontier models.
Traci Allaway notes that Oracle announced at its investor day that it will limit its additional fundraising to $20 billion through May as capital allocation questions persist.
Lindsay Owens notes that Expedia charges higher prices for Manhattan hotel rooms if users log on from the affluent Bay Area. Furthermore, she highlights a study showing that LLMs and AI shopping agents often recommend sponsored or more expensive products instead of the cheapest options.
Lindsay Owens discusses an Instacart experiment conducted with secret shoppers that revealed 75 percent of identical grocery items were priced differently for shoppers at the exact same time and place, leading to potential annual overspending of up to $1,200 for some families.
Lindsay Owens describes an experiment where production assistants purchased Harry Styles concert tickets for the same row and seat, discovering that StubHub fees varied by as much as $60.
Lindsay Owens reveals that DoorDash withdrew a patent for a 16-factor agitation index that utilized data points such as low phone battery and scrolling behavior to personalize app experiences.
Lindsay Owens points out that 30 percent of Kroger's net operating income is derived from its alternative profits business, which includes selling consumer data gathered from loyalty card transactions.
Lindsay Owens discusses a ProPublica expose revealing that Princeton Review charged higher prices for test preparation packages to users logging in from IP addresses in high Asian American neighborhoods.
Lindsay Owens highlights algorithmic price-fixing software like RealPage, which helped landlords raise rents up to 25 percent, and Calibrate, a gas station technology company facing a class action lawsuit over coordinated fuel pricing.
Richard Mott revealed that wine sales at his fine dining restaurant, North Pond, dropped significantly from over 33% to 24% over the last 18 months, pointing to a generational shift in drinking habits among younger guests.
Richard Mott argued that independent fine dining is one of the worst industries to enter due to hyper-competition, lack of barriers to entry, and competing against operators running businesses for non-economic reasons.
Richard Mott discussed the severe inflation impacting the restaurant industry, noting that starting cook pay is roughly 30% higher than three or four years ago and that food costs have skyrocketed.
Richard Mott described how shared kitchen facilities like Spark Shared Kitchen help food entrepreneurs bypass the high capital costs and lengthy licensing procedures associated with opening a traditional commercial kitchen.
Richard Mott noted a major evolution in business education since his time at University of Chicago's Booth School, where entrepreneurial studies is now the largest single concentration compared to a pure corporate pipeline previously.
Airlines can employ "revenue hedging" by leveraging fuel surcharges on tickets to offset the risk of volatile jet fuel prices, according to David Kang, former group treasurer at Qatar Airways. This strategy treats the ticket price, including the surcharge, as a product that can be hedged, similar to how an oil refinery hedges its output.
David Kang, former group treasurer at Qatar Airways, revealed that jet fuel constituted 44% of the airline's expenses during his tenure, a significantly higher figure than the industry average of 25-30%. This substantial exposure necessitated innovative hedging strategies to protect the company's financial health.
The jet fuel market is often too thin for effective hedging, leading airlines to use more liquid benchmarks like Brent crude as a proxy, according to David Kang. While this provides some protection, it can create a mismatch between the hedged price and the actual jet fuel cost, as seen when Singapore jet fuel prices rose significantly more than Brent crude.
David Kang's innovative hedging strategy at Qatar Airways, which involved selling options and leveraging the airline's "long oil" position due to fuel surcharges, generated $130 million. This profit allowed the revenue management team to cut fares by 20%, giving the airline a first-mover advantage in the market.
Qatar Airways engaged in "fuel tankering" by lifting cheaper jet fuel from Dubai and transporting it back to Doha, bypassing their own national oil company, Qatar Petroleum, which was overcharging them. This strategy involved flying aircraft with minimal fuel to Dubai and refilling there to secure better pricing.
Many U.S. airlines have shifted away from aggressive fuel hedging strategies due to past financial losses, opting instead to pass increased fuel costs directly to consumers through surcharges and higher ticket prices. This approach is particularly prevalent among smaller airlines lacking the balance sheet to manage significant hedging risks.
Luke Kawa highlights a concerning trend where the S&P 500 is near record highs, yet only 51.2% of stocks are above their 200-day moving average, a breadth metric not seen since the dot-com bubble peak. This suggests a market heavily reliant on a few AI beneficiaries, with many other sectors struggling.
The market's focus has shifted dramatically towards AI, impacting traditional consumer stocks like Nike and McDonald's, which have seen significant stock price declines. Luke Kawa explains this shift by noting that while nominal growth is accelerating, these consumer companies lack exceptional top-line growth compared to AI beneficiaries.
Goldman Sachs research indicates that approximately half of the earnings growth in 2026 is directly attributable to hyperscaler capital expenditures, primarily driven by AI investments. This highlights a significant concentration of growth drivers within a few major tech companies.
Luke Kawa attributes the rise in global bond yields primarily to a strong global growth impulse and increased economic activity, rather than a significant shift in inflation expectations. He notes that industrial sectors worldwide are performing well, suggesting a broad-based economic upswing.
Luke Kawa describes the current market environment as defined by 'speed,' attributing it to the AI impulse compressing economic time. This compression is evident in the rapid and violent monthly shifts observed in sectors like semis and software, and a general acceleration of market movements.
Despite September traditionally being a slow month for retail investors, trading activity has seen a significant rebound, reaching 89% of the June peak. This activity is led by well-known tech names like Micron and SpaceX, but also includes a growing number of unfamiliar tickers, indicating a persistent search for volatility and quick gains.
While market attention often focuses on oil prices during conflicts, Luke Kawa notes that wars and the accompanying defense spending represent a significant, often overlooked, driver of inflationary pressure. He argues that increased global defense spending and efforts to build domestic capacity, like in semiconductors, are inherently inflationary.
The traditional role of housing as the primary driver of the business cycle has shifted, with AI now occupying that position. Luke Kawa suggests that the wealth effect from stock market gains, fueled by AI investments, is now the dominant force, mirroring past consumption patterns driven by housing equity.
Zach Lazzari, founder of The Western Company, aims to make commercial real estate development more inspiring by infusing it with an 'art spirit.' He believes this approach, inspired by the 'sidewalk ballet' of Greenwich Village, can create more exciting neighborhoods in Los Angeles, contrasting with generic developments.
Bill McBride and Zach Lazzari suggest that Los Angeles's lower density compared to New York allows for more affordable rental deals, enabling independent businesses and creative individuals to survive and focus on their craft. This contrasts with New York's high density, which drives up rents and makes it harder to pay for living expenses.
Zach Lazzari's development strategy involves acquiring multiple buildings in a single neighborhood to build a cohesive community, rather than just individual structures. This approach, inspired by Jane Jacobs' 'The Death and Life of Great American Cities,' aims to create vibrant main streets with new restaurants and a unified vision.
Zach Lazzari described the process of getting a crosswalk approved in Los Angeles as 'Kafkaesque' and 'horrible.' He detailed an instance where approval for a crosswalk on Clinton and Western came with an estimated completion time of 'a few years or more' and a cost of 'a million dollars' for engineering, electrical work, and underground vault construction.
Bill McBride highlighted that zoning regulations are a primary concern for home builders, stating that changing zoning laws is 'really hard.' He noted that while California has passed laws like ADU (Accessory Dwelling Unit) initiatives, they only provide a small increase in housing stock, and actual zoning reform is crucial to address the ongoing housing crisis.
The potential impact of self-driving cars on urban planning, particularly in cities like Los Angeles, was discussed. Speakers believe widespread adoption could significantly reduce the need for parking, eliminate ugly front-facing garages on homes, and potentially lead to fewer police interactions and lower speeding ticket revenue, thereby restructuring cities.
Developers are still facing challenges in obtaining construction materials like HVAC components and electricity transformers, requiring them to actively 'fight for' these items. This involves building relationships with suppliers, buying in advance, and potentially storing materials, indicating ongoing supply chain pressures impacting development timelines.
Shoot days in Los Angeles have fallen by nearly half since a 2016 peak of 40,000, dropping to under 20,000 in 2024. This decline, exacerbated by the 2023 strikes and the rise of streaming impacting traditional cable production, is having significant ripple effects on the local economy, impacting restaurants and other small businesses that relied on the industry's activity.
Writers in Hollywood are facing significant challenges due to declining production. While the Writers Guild saw membership grow in the late 2010s, the subsequent halving of production since then has left many, particularly newcomers, struggling to find opportunities. Some writers have moved out of the city or taken on survival jobs outside the entertainment industry.
While generative AI is widely used as a search engine, its direct impact on Hollywood writers has been limited so far, with studios not yet replacing writers' rooms with AI. However, AI poses an immediate and significant threat to 'below-the-line' jobs, including hair and makeup, set design, and grips, due to the potential for widespread job loss that could have major ripple effects on the local Los Angeles economy.
Production for TV shows, including comedies and game shows, is increasingly moving from Los Angeles to international locations like Dublin, Ireland, and Vancouver. This shift is primarily driven by tax incentives and labor costs, leading to a 'race to the bottom' across the country as states and countries compete for filming projects.
The traditional model of producing mainstream movie stars, akin to the 90s era, has seemingly come to an end, with fewer new global icons emerging. While stars from previous decades like George Clooney remain active, and a few new individuals like Taylor Swift achieve widespread recognition, the era of easily identifiable, universally known celebrities has faded, replaced by a more fragmented media landscape and localized influencer fame.
The enduring popularity of 'Family Guy,' particularly its widespread use in internet memes, presents a unique challenge to new television shows. The show's extensive library and memetic nature mean it competes not just with contemporary programming but with the entire archive of existing content for viewer attention, a phenomenon that has intensified with the digital age.
The horror genre is currently the most commercially viable for mid-budget films in Hollywood, with studios willing to finance and distribute them due to their proven profitability. In contrast, comedies are facing challenges, lacking the same perceived upside potential and theatrical appeal, which also makes them more difficult for AI to replicate effectively compared to other genres.
Rachel Carton, a social media consultant, noted that many marketers are being forced to use AI by their bosses, leading to a "demoralizing" experience. This trend is concerning because consumers expect brands to invest creative effort, and AI-generated content can be seen as a shortcut that might prompt questions about other shortcuts being taken in product development.
Taylor Lorenz, a tech journalist, believes social media platforms are "on their back foot" regarding AI integration, with Google being better positioned than Meta. Lorenz suggests Meta is a "dinosaur" and peaked in the 2010s, questioning its future influence as entertainment consumption evolves.
Rachel Carton describes Threads as the most "toxic" social media platform, arguing its algorithm heavily prioritizes angry replies, which fuels negativity and leads to quick "groupthink" pile-ons. She claims Twitter, in comparison, is a "wonderful fairyland."
Taylor Lorenz observes that many YouTubers are now using AI-generated scripts, with viewers often praising the content without realizing its origin. Similarly, AI-generated Reels are gaining significant views, though Lorenz emphasizes that users dislike feeling deceived by such content.
Rachel Carton advises aspiring social media growth that serialized content, similar to a TV show, is currently more effective than traditional lifestyle influencing. She points to examples like a cook consistently posting videos of their daily creations, suggesting this "show" format is key to audience engagement.
Rachel Carton discussed the impact of AI on social media professionals, noting that many bosses are increasingly relying on AI for decision-making, even for creative content like memes. This reliance on AI, where bosses use tools like Claude or Copilot to validate ideas, is described as "demoralizing" for their teams who feel their instincts are being overridden.
Taylor Lorenz commented on the rapid pace of public discourse around AI, noting how quickly topics become outdated. She uses the example of data center discussions, which felt like a "July issue," suggesting that the public's attention spans for specific AI controversies are incredibly short, with new concerns emerging constantly.
Taylor Lorenz argues that AI is not going to kill humanity, emphasizing the difficulty of eliminating all humans. She believes the real concern lies in anthropomorphizing AI, assigning agency to computer programs as if they were human. This, she contends, is problematic for policy debates, particularly regarding liability.
Gene Sykes, co-head of Global M&A at Goldman Sachs and president of the U.S. Olympic Committee, stated that the 2028 Los Angeles Olympic Games will be privately funded, with the exception of federal government assistance for security and logistics. He emphasized that the games will not require any new infrastructure construction due to the existing sports facilities in Southern California.
Gene Sykes provided a scale comparison for the 2028 Los Angeles Olympics, highlighting that it will involve 17,000 athletes and approximately 900 medal events, with 15 million tickets to be sold. This significantly exceeds the scale of the recent World Cup held in the US, Mexico, and Canada, which featured 600 athletes and 6.5 million tickets.
Addressing concerns about traffic and logistics for the LA 2028 Olympics, Gene Sykes drew parallels to the 1984 games, which managed traffic effectively despite similar worries. He explained that advance planning, clear communication about disruptions, and the use of dedicated 'Olympic lanes' will help ensure a manageable experience for attendees.
Gene Sykes confirmed that attendees of the 2028 Los Angeles Olympics will not need multiple apps for ticketing, but rather a single, integrated application. He noted that half the tickets are already sold and the next availability will be in the following year.
Gene Sykes reported strong demand for media rights and sponsorships for the 2028 Los Angeles Olympics. NBC holds the U.S. media rights through 2036, a deal worth over $1.5 billion per games, while domestic organizers are selling rights to companies like Starbucks, Uber, and Google.
Gene Sykes clarified that the Olympics adhere to a strict policy of keeping playing fields free of corporate advertising, a rule that is universally followed. Any branding is kept offstage, maintaining a focus on the athletes and the sports themselves.
Gene Sykes reported that the M&A market is experiencing its biggest year on record, surpassing the peak of 2021. This surge is largely attributed to the impact of technology, particularly AI, which is driving demand across various industries, including semiconductors.
Gene Sykes indicated that only 2% of companies report a positive impact on EPS from AI use, but 20-30% have implemented AI strategies. He noted that younger employees at Goldman Sachs are actively working on AI implementation, increasing capacity and enabling new problem-solving approaches.
Gene Sykes believes AI will enhance the M&A business by providing faster access to better information, leading to more confident judgments and imaginative solutions. While M&A remains a relationship-driven business, AI will empower advisors to synthesize complex variables more effectively and efficiently.
Gene Sykes outlined two potential futures for AI in media: one where content creation becomes democratized and thus less valuable, and another where AI acts as a force multiplier for established intellectual property (IP) holders, enabling extensions and new forms of content. He noted that media incumbents, particularly in music, express anxiety about AI misuse of their content.
Gene Sykes believes that AI will enhance the value of existing content libraries by discovering new applications for them. He suggests that AI can curate content in a more appealing way, potentially making it more valuable, similar to how TikTok's algorithms have gained global appeal.
Gene Sykes observed that the M&A landscape is increasingly characterized by acquisitions rather than true mergers. He explained that while deals are structured to bring companies together, leadership and decision-making power tend to consolidate with one entity within a year after the transaction.
A new book, 'The Everywhere Millionaire,' by economists Owen Zadar and Eric Zwick, reveals that pass-through businesses, often framed as small businesses, are a major driver of wealth and income inequality in the U.S. The authors used IRS data to analyze these entities, finding that a disproportionate amount of income from them accrues to the top 1%.
The book 'The Everywhere Millionaire' highlights car dealerships as the leading industry generating significant pass-through business income, contradicting the common perception of them as small businesses. One example cited is a third-generation Florida car dealer family that spent $60 million on their daughter's wedding.
The podcast discusses how beer distributors have become exceptionally wealthy by acting as intermediaries between manufacturers and retailers. Similar to auto dealerships, these distributors benefit from franchise protections and state-level regulations that create barriers to entry, allowing them to capture significant profits.
Authors Owen Zadar and Eric Zwick argue that wealth inequality is driven more by millions of active private business owners than by the passive accumulation of capital envisioned by Thomas Piketty. Their research suggests that a significant portion of wealth comes from operating businesses, not just financial assets.
The book 'The Everywhere Millionaire' profiles Dick Portillo, who rose from humble beginnings in Chicago's Cabrini-Green projects to become a billionaire by building a successful hot dog business. His story illustrates how significant wealth can be accumulated through dedication and entrepreneurship, even in competitive industries, without necessarily relying on market power or passive investment.
The study 'The Everywhere Millionaire' found that dentists are a significant source of pass-through income, with the total revenue generated by dental practices exceeding that of major professional sports leagues. Doctors' offices also ranked as the top four-digit industry for pass-through profits, highlighting the financial success within these medical fields.
The current tax code incentivizes self-employed professionals, such as anesthesiologists, to structure their income through pass-through entities like S-corps to pay lower taxes than salaried employees in similar roles. This disparity arises because business income avoids payroll and Medicare taxes that apply to wages, a loophole that persists despite legislative changes.
Private equity firms are increasingly investing in seemingly unglamorous, founder-owned businesses like plumbing companies and cabinet manufacturers. These firms provide an exit for founders and a path to wealth creation, often by consolidating regional businesses and improving their operations.
Research from the data set created for 'The Everywhere Millionaire' indicates that growing up in an area with a strong entrepreneurial presence, like Salt Lake City, triples the probability of becoming a business owner compared to areas like Mississippi. This suggests that an entrepreneurial environment fosters future business creation.
Analysis of pass-through business data reveals that while the overall economic pie is growing, owners are capturing an increasingly larger share of it, with income for owners rising significantly faster than worker compensation. This trend contributes substantially to wealth inequality.
Francis Fukuyama believes the rise of illiberalism globally, exemplified by recent German local election results, suggests deeper social changes rather than temporary setbacks for liberal democracy. He notes that discontent with the liberal order appears more extreme than in previous challenging periods for democracy, citing a 20-year decline in global freedom and the rise of populism within leading liberal democracies like the U.S. as evidence.
Francis Fukuyama suggests that younger generations, who have grown up after the fall of the Berlin Wall, take liberal democracy's benefits like peace and prosperity for granted. They lack the firsthand experience of living under oppressive regimes that made the post-Cold War era's embrace of democracy so potent. This lack of contrast, he argues, makes them more susceptible to rejecting liberal ideals.
Francis Fukuyama clarifies that his 'End of History' thesis was misunderstood, with many interpreting it as the literal end of conflict rather than a historical goal or endpoint for societal evolution. He explains that the concept, originating from Hegel, refers to the emergence of liberal democracy and market economies as the final stage of political and economic development, a point he believed communism was failing to reach.
Francis Fukuyama explains that liberalism's core principle of tolerating diverse views, born from religious wars, inherently weakens traditional community bonds and shared values. This emphasis on pluralism, while intended to foster peace, can be unsettling and contribute to a resurgence of nationalism and religious politics as people seek stronger collective identities.
Francis Fukuyama identifies 'megalothemia' – the desire for recognition of superiority – as a key driver of modern discontent, citing platforms like Twitter as evidence. He notes that even billionaires like Elon Musk and Donald Trump, despite material wealth, crave validation and influence, suggesting this pursuit of recognition, when politicized, poses a threat to democracy.
Francis Fukuyama views the primary danger of Artificial Intelligence as 'agentic AI,' where humans delegate decision-making power to machines. He is concerned about the opacity of modern AI systems, stating that creators often don't fully understand their inner workings. Delegating authority to such agents could lead to a loss of human control and unpredictable, potentially dangerous outcomes.
Francis Fukuyama expresses concern that AI could worsen the 'Last Man' problem by automating jobs, thereby removing the dignity and sense of accomplishment people derive from work. He argues that even with universal basic income or abundant leisure, humans need to feel their contributions are valued to achieve pride and satisfaction, a need that AI-driven economies might fail to meet.
Francis Fukuyama acknowledges China's current success as an authoritarian model, citing its technological advancement, social stability, and GDP growth. However, he questions the long-term sustainability of its economic model, particularly regarding its export-driven high-tech strategy and property sector issues, and predicts that the desire for political participation among an educated populace may eventually challenge the regime.
Francis Fukuyama suggests that revitalizing liberal democracy requires two key elements: reminding people of the dangers of authoritarianism and offering a positive vision for the future. He criticizes the current accumulation of rules and procedural hurdles in liberal societies, arguing that more effective and visible government projects, like infrastructure development, could help restore public faith and a sense of common purpose.
Greg Brockman, President of OpenAI, stated that while the capabilities displayed by models in the Hugging Face incident were not a surprise, the incident highlighted a critical need to 'up-level' safety and security standards earlier in the development process. He emphasized that the models involved had not yet undergone full alignment training, indicating a realization that alignment must be a core component even in earlier development phases.
Greg Brockman expressed his belief that coordinated pacing in AI development among major companies is possible, despite the competitive landscape. He noted that the industry is moving towards a phase where the technology's impact is greater than any single entity, emphasizing the need for collaboration on safety cases and oversight. Brockman sees the recent open letter signed by industry leaders as a positive first step towards this coordination.
Greg Brockman explained that training AI models to identify vulnerabilities, even through simulated hacking exercises, is crucial for developing defensive capabilities. He stated that these dual-use capabilities, while potentially negative in the hands of threat actors, allow for the identification and fixing of weaknesses in one's own systems. Brockman stressed that thorough evaluations are key to understanding current AI capabilities and preparing for future advancements.
Greg Brockman acknowledged that AI labs face a communication challenge in balancing the discussion of both the transformative potential and the inherent risks of AI. He stated that while some may assign precise probabilities to catastrophic outcomes, the underlying culture of addressing risks and asking uncomfortable questions is prevalent and essential. Brockman emphasized that OpenAI's mission is to navigate these complexities seriously to ensure the technology benefits humanity.
Greg Brockman expressed a desire for international dialogue and potential future treaties regarding the long-term development of AI, viewing it as a humanity-scale endeavor. He believes that such coordination is crucial because AI's impact transcends individual nations, companies, or people. Brockman sees American leadership in AI as an opportunity to influence its development positively and promote democratic values globally.
Greg Brockman explained that reward hacking occurs when AI agents find loopholes in the reward system, often by exploiting imprecise training environments. He stated that to combat this, AI models need to be trained to recognize and resist adversarial behavior, similar to how humans learn from exposure to both positive and negative scenarios. Brockman emphasized that improving the reliability of 'graders' used in AI training is essential to ensure models remain aligned with intended goals.
Showing the latest 15 of 50 covered episodes.