The American consumer is Europe's stimulus package

Welcome to Weird Money, a column written by me, Jack Raines, where I discuss the most interesting and, more importantly, weirdest stories I've seen in business and markets.

The American consumer is Europe’s stimulus package

The US economy bounced back from the pandemic so quickly that the “strength of the American consumer” has become a meme: Folks are now using “day-in-the-life” videos from American Zoomers — which show mid-20s women spending hundreds of dollars on expensive brunches, $47 CorePower Yoga classes, Starbucks cold brews, facials, manicures, and drinks with friends — to demonstrate the undeniability of the US economy.

Unlike the US, Europe has continued to struggle post-pandemic, with its largest economies — France, Germany, and the United Kingdom — stagnant over the last three years. If you are a European country, how do you fix your plateauing economy?

Perhaps marketing yourself as a vacation destination to American consumers willing to spend $47 on workout classes? From The Wall Street Journal:

Across southern Europe, an unprecedented tourism boom driven largely by American tourists is turbocharging growth in places that had become bywords for economic stagnation, creating hundreds of thousands of jobs and filling the coffers of governments recently shaken by sovereign debt fears…

Today, Italy, Spain, Greece, and Portugal contribute between a quarter and half of the bloc’s annual growth. While Germany’s economy is flatlining, Spain is Europe’s fastest-growing big economy. Nearly three-quarters of the country’s recent growth and one in four new jobs are linked to tourism. In Greece, an unlikely economic star since the pandemic, as many as 44% of all jobs are connected to tourism.

Historically, Germany, France, and the United Kingdom have been Europe’s strongest economies, while Portugal, Italy, Greece, and Spain were the economies that suffered the most during Europe’s sovereign debt crisis 14 years ago. How times have changed.

While Europe’s economy was slightly larger ($16.2 trillion vs. $14.7 trillion) than America’s in 2008, America’s GDP is now about one-third larger than the EU and UK combined.

Additionally, six out of seven trillion-dollar companies are American tech companies. The other is Saudi Aramco. The USD:EUR exchange rate is much stronger than its historical average. And, most importantly, the US consumer has money.

Fourteen years ago, Europe’s best path out of economic stagnation may have been to encourage business investment and increase domestic output from its strongest economies. However, with the European economy now much smaller on the global stage, its solution has been catering to international travelers, with American Gen-Zers willing to spend an outsized portion of their income on “revenge travel.”

The irony is that southern European countries with historically weak economies are the most appealing destinations for American tourists embarking on their revenge travel tours, thanks to warm weather and beach access. In Europe’s emerging “museum economy,” where vacation is the dominant export, it’s the most pleasant countries, not the most productive, that stand to gain the most.

Jason Derulo: Crypto Influencer

One of my favorite trends in crypto is past-their-prime celebrities promoting speculative cryptocurrencies, and on Sunday, we witnessed an all-time great performance when musical artist Jason Derulo tweeted the following:

This tweet was a link to buy a meme coin called $JASON, which was launched on a site called “pump.fun,” which lets anyone easily mint a new cryptocurrency. Later that evening, Derulo, whose most recent tweet before this week was two months ago, tweeted again, claiming that someone named Sahil "got him," but he was in it for the “long hall,” [sic] and he would do “everything in my power to send this shit to the moon.” In total, Derulo has tweeted about $JASON 38 times since Sunday.

If your immediate response to getting "got" is to invest $20,000 to prove that you are “in this for my fans,” and you spend the next two days promoting the meme coin to your followers, I have a hard time believing that you "got." Sahil Arora, the crypto promoter mentioned by Derulo, also claimed the whole situation was planned, per Decrypt:

But much as he's done with previous coins, Arora claims that the drama was all part of the scheme. ‘I orchestrated it lol,’ Arora told Decrypt via Telegram. When asked why Derulo is now outing him, Arora replied, “Part of the script.” Decrypt then questioned if he devised a plan for Derulo to call him out as part of the deal. ‘Something like that,’ Arora responded.

This isn't the first time Sahil Arora has been tied to to a celebrity cryptocurrency controversy. On May 26th, Caitlyn Jenner posted a tweet, which included a picture of her shaking hands with Donald Trump, that linked to a meme coin called $JENNER, also listed on “pump.fun.” Two days later, she claimed to be scammed by “Sahil,” but she continued to promote $JENNER as recently as June 19th.

Last month, Decrypt interviewed Sahil Arora, and the conversation went exactly as you would expect:

Arora claimed to Decrypt via Instagram DMs that he deployed the JENNER token. He sent a screenshot of a contract with his and Caitlyn Jenner’s alleged signature, but Decrypt hasn’t yet received a comment or confirmation from Jenner’s team.

Arora told Decrypt via Instagram DMs that he’s in contact with multiple celebrities. “Sometimes I go to them, most of the time they come and I pick,” Arora said. “It’s the only way to make crypto more mainstream and benefit from the attention economy, it’s the meta they didn’t know they needed.

I appreciate Arora’s attempt to gaslight readers into believing that celebrity meme coins somehow play an essential role in making crypto mainstream. My takeaway from this is that it's probably best to stay away from meme coins named after celebrities who are a decade past their prime. Not investment advice.

A16z wants to manage all of your assets

There are limits to how large venture capital funds can grow because they invest in early-stage companies at low valuations, and the total market size of these small companies can only grow so much. VC funds worldwide deployed $285 billion in 2023, compared to $1.8 trillion deployed in private equity. Andreessen Horowitz is the world’s largest venture fund, managing $42 billion. Where does the world’s largest venture fund turn when it wants to grow even larger? Private equity, of course. From Fortune:

Andreessen Horowitz plans to raise its first private equity fund, according to disclosures reviewed by Fortune, in yet another sign of the venture capital giant’s push into new businesses. The documents, filed with the Securities and Exchange Commission at the end of March, say that the fund will be called a16z Perennial Private Equity Fund, and that it will ‘invest in the private equity asset class,’ without revealing further details or a launch date…

Andreessen Horowitz made the disclosure through its wealth management arm, dubbed Perennial, which was set up in 2022 with the goal of managing the personal wealth and philanthropy for the families of entrepreneurs and investors it had already built relationships with…

As part of the disclosures, Andreessen also said it anticipates in the ‘near future’ a first close of two new funds from its family office division: a real assets fund, which invests in real estate, as well as a ‘diversifying investments’ fund, which focuses on ‘income-producing and diversifying strategies,’ according to the filings.

Why move to private equity (and, potentially, real estate)? Well, asset managers make money two ways: management fees, which charge clients a percent of assets under management, and carry, or a performance fee charged as a percentage of outsized returns. The typical hedge fund fee structure, for example, is a 2% management fee and 20% carry. If you’re a small fund, virtually all of your returns stem from carry, but for larger funds, management fees, such as the 2.5% fee that a16z charged investors in its $2 billion crypto fund, can be quite lucrative. A $42 billion venture fund won’t have much room to grow in the venture space, but new markets can bring billions of dollars under the a16z umbrella. More assets, more fees, more money. Outsized returns are great, but guaranteed management fees are greater.