← Morning Brew Daily
Morning Brew Daily
Powell’s Job in Limbo? & Your 401K May Be Open to Private Markets
00:30:24
Powell is on the hot seat & retirement has more options
Loading summary
Transcript50 lines
- [00:02]
A
Good morning, Brew Daily Show. I'm Neal Freyman.
- [00:05]
B
And I'm Toby Howell.
- [00:06]
A
Today, the drama over Jerome Powell's job security keeps on escalating. Will Trump really give him the pink slip then?
- [00:13]
B
Ford just broke an automotive record for the most recalls ever issued in a calendar year. It's Thursday, July 17th. Let's ride.
- [00:27]
A
So people may have mixed feelings about the new Superman movie, but they are totally in love with a new character. The film introduces to the DC universe, the super dog crypto. Superman's scene stealing foster dog has led to a spike in interest for dog adoption in the real world, with Google searches for adopt a dog near me jumping 513% in the days following the release of the movie. The dog training app Woofs with a Z, which compiled the data, sent a note of caution to all the hopeful dog parents, saying adoption is a real commitment. The hype will fade, but your dog will stay. So make sure you're ready to give them the time, care and training they need and deserve. Tell me this dog is pretty cute.
- [01:07]
B
He's very cute. According to Wolf's findings, users even search for crypto. That's the dog's name breed specifically. And that breed is cgi. Now I'm kidding. The dog was entirely made of cgi, but he is modeled after James Gunn, the film's director's own rescue dog, Ozu, who looks like a mix of a schnauzer and a terrier mutt. Apparently, this is the backstory of while the director was writing the film and creating the film, he was having trouble training this dog, Ozu, and wondered how much worse it would get if Ozu actually had superpowers. Hence Krypto the super dog making it into the film. Very cute. I've only seen the trailers, but he does fly around really quickly. So if you're in the market for a dog, maybe look at the terrier and terrier mutt and schnauzer mix. Now a word from our sponsor, Morgan's matchup. Hey, Neil, what's something you can do really fast?
- [01:57]
A
You ever see me eat a whole rotisserie chicken? No, that's because it happens like that.
- [02:03]
B
That is terrifying. For speed, I think of a mortgage matchup powered by United Wholesale Mortgage. They can connect you with a mortgage broker like that. Brokers can offer a loan process that's optimized for a faster clear to close.
- [02:16]
A
Their licensed professionals can shop on your behalf and give you access to more home loan options like conventional 1% down purchase, VA loans, jumbo and more. They've saved borrowers thousands of dollars.
- [02:28]
B
So check out MortgageMatchUp.com to speak to a real home loan expert from the comfort of your own home. That's MortgageMatchUp.com and in the meantime, I'm going to watch Neal shotgun an entire chicken. Quick disclaimer United Wholesale Mortgage LLC equal housing lender and MLS number 3038 licensed in all 50 states in the District.
- [02:47]
A
Of Columbia Jerome Powell's role as fed chair is more precarious than ever Following a day of conflicting messages over whether President Trump would fire him imminently around noon, multiple outlets reported that Trump told a group of House Republicans that he would try to fire Powell soon. According to an unnamed White House official, he even allegedly drafted a letter relieving Powell of his duties and waved it around as he pulled the room. If he should do it. The response from lawmakers was enthusiastic. Less than an hour later, Trump denied he would try to fire Powell to telling reporters, we're not planning on doing it, but I think it's highly unlikely unless he has to leave for fraud. Still, Trump continued to bash Powell for not cutting interest rates, saying, I was surprised he was appointed, apparently forgetting that he was the person who appointed Powell in 2017 for a term that runs through next May. While many presidents have criticized the Fed chair for keeping rates high, none has attempted to fire them before. Central bank independence is considered an essential ingredient of America's world leading financial markets because it allows the Fed to make decisions, decisions based on what they believe will be good for the economy long term and not judge it up for elected leaders while they're in office in the short term. Even as Trump denies he's going to fire Powell, and he legally can't do that without cause, his team has been laying the legal pretext for doing so in the past two weeks. They began to criticize Powell for an HQ renovation project that went over budget, accusing Powell of mismanagement and lying to Congress. Toby the drama has reached a fever pitch with potentially global markets at stake.
- [04:19]
B
Yeah, let's talk a little bit, a lot about the markets because in this chaotic half hour when that Bloomberg report first surfaced, markets dipped a little extremely and then actually finished up yesterday after their brief downward tour. Speaking of other markets, I went to the prediction markets, Polymarket and Kalsi to see how they were processing the news. An odd shot up to 40% that Powell would not finish his term before again settling back down in that 20% range. The prediction markets actually also moved in lockstep with the 30 year treasury yield. If you overlaid them on each other, they basically followed the same spike and then settling down as investors kind of sold off these long term bonds. Right now, looking at both of the prediction markets, it looks like they are sitting at about 80% that Powell does finish its term. So take it all in the whole a lot of uncertainty for about a half an hour and then everything kind of settled right back where it was before these reports.
- [05:15]
A
Well, it's kind of a natural experiment about what was would happen if Trump does move to fire Powell. And that is looks like the stock market would sell off. I mean The S&P 500 did move down three quarters of a percentage point with a which is a significant downturn. And then as soon as Trump denied it, it went right back up to where it was. Bond yield, Bonds also sold off during that interim period. And that's why economists and even banking CEOs have come out and said we do not want this to happen. Central bank independence is a core, it's core to the entire American financial system. Because when you make economic decisions or monetary policy decisions for the short term, short term, like lowering interest rates in a somewhat inflationary environment, as we talked about yesterday, then you risk sending inflation higher over the next few years. It's exactly what you don't want to do and why there's this church and state separation that's been created over decades and centuries between the central bank and the executive branch.
- [06:16]
B
Let's talk about the renovation. What is going on with the Fed's renovation project? It was actually approved back in 2017. It was originally supposed to cost $1.9 billion. Those costs have swelled to two and a half billion dollars because of unforeseen construction conditions, like more of asbestos than anticipated, toxic contamination in the soil, stuff like that. This was a nothing burger for a long time. I mean, only people who are paying very close attention to Fed disclosures even pick up on it. But a Trump aide found it and they're now using it as this attack vector. Most people say that they don't have a great legal case here. It's not like it's going to go through the courts and Fed will be ousted that way. But a lot of analysts are saying this is a war in the court of public opinion right now. If you can put enough social pressure that the Fed is being, you know, irresponsible, fiscally irresponsible right now in a time of, you know, a dicey economic time that might make Powell eventually step down. So it's almost like socially pressuring him rather than legally pressuring them with this renovation angle.
- [07:20]
A
And in the court of public opinion, Powell did have a major defender. Earlier this week, JP Morgan CEO Jamie Dimon, during his company's earnings call, kind of went on a non sequitur towards defending Powell, saying playing around with the Fed can have adverse consequences. The absolute opposite of what you might be hoping for. So that's Dimon coming to the defense of Powell and saying, Trump, this is something you don't want to touch because the financial markets will sell off in a big way. You want yields to go down because you want borrowing costs to go down. But if, as we saw yesterday in that natural experiment, yields spiked and that leads to higher borrowing costs. So that's what Dimon is talking about, the absolute opposite of what you might be hoping for. Other reports suggest that Trump is not planning to fire Powell. He's just trying to bully him and troll him because he just wants to make life miserable. But if you think Powell will be will acquiesce to that and resign as Fed chair under this bullying, then don't think that at all. Because Powell told reporters during his first term, I will never ever, ever leave this job voluntarily until my term ends under any circumstances, none whatsoever. You will not see me getting in the lifeboat. And it doesn't occur to me in the slightest that there would be any situation in which I would complete my term other than dying. So I'm going to use that quote if my boss ever tries to fire me.
- [08:39]
B
Pretty clear. Let's move on. Most private things should not be accessible to the public. DM's Affairs. The score of Neil and I's last pre show game of ping pong. But private equity is scrambling for access to public markets and according to a report from the Wall Street Journal, the government is working to make it happen. President Trump is reportedly close to signing an executive order that would give 401ks access to private market investments. What does that mean exactly? Normal everyday investors like you and me would get to participate in deals usually only enjoyed by Patagonia vest wearing types. But for the vest wears, they might be getting a better deal. Big managers of private assets like Apollo and Blackstone want access to the money scrolled away in your 401ks. It's crazy to say, but typical institutional investors like big pension funds with trillions of dollars have already invested all they can in private markets and are all but tapped out. Meanwhile, US defined contribution plans, aka retirement accounts, held $12.4 trillion in assets at the end of 2024. And that is a tasty pot of gold at the end of the mom and pop investors rainbow for P E. Neal. There are plenty of pros and cons to this plan, but the gist is that everyday investors don't should have the same access as institutions to the large portions of the economy that remain privately held.
- [09:56]
A
Yeah, right now, if you look at the composition of your 401k, it's going to be pretty much exclusively stocks and bonds. Right now, fewer than one in 10 plans offer any kind of alternative investment. And when we're talking alternative investments, it's anything other than stocks and bonds, real estate, private companies, companies that haven't gone public yet, infrastructure, things like that, that is where you don't have exposure to. And if listen to the private equity giants, they're saying, hey, you should be diversified beyond stocks and bonds in your retirement account. You're missing out on some serious returns here. That's the pitch they're making to 401k overseers. Meanwhile, there is some pushback to this saying, well, there's a reason that they're in stocks and bonds. Those are the safest investments. You don't want to mess with your retirement account. Private equity has higher fees, it is more risky, it is less liquid than stocks and bonds. There's a reason that private equity is hasn't been in your 401k and we should keep it that way.
- [10:54]
B
The other risk, as Dan Primack from Axios wrote, is that there's a big information gap between, you know, the private LPs and the public everyday investor. While portfolio companies will get stuff like the financial strategy shifts, key information that will all be kept from retail investors. So if something went south, which oftentimes it does, I mean, these are still risky investments. What if fraud happens or what if something else happens? Mom and pop investors would likely be the last ones to figure out about that and they might start panicking a little bit. You don't. Private equity might not know what it's getting into there. If there is a meltdown in retail, investors come clamoring. That can just be a big headache, a big scandal for the industry as well. So even though it seems like a really good idea on the surface, dig down a little bit and there are some cons.
- [11:42]
A
But there but this horse might have already left the barn because the 401k giant and power is already starting to allow private credit, equity and real estate in some of the accounts it administers later this year. They made that announcement in May. And then if President Trump signs this executive order, as he's reported to it would just kind of open the floodgates for all of these 401k companies to offer private equity. That might be exciting for some people if you're looking at what you're investing for your retirement account. Or it might be a little spooky and you're just say, I'll stick with the safe stuff.
- [12:13]
B
In a tough car market plagued by tariff induced headaches, Ford has set a record to forget it has issued more safety recalls in the first six months of the year than any car company ever has in a full year. Yes, with just half the year elapsed, Ford is already number one with 89 recalls issued so far. A recall occurs when either the manufacturer or the National Highway Traffic Safety Administration identifies a safety issue or defect that doesn't meet federal standards. When that happens, the manufacturer is required to inform affected owners and and provide a free repair to fix the problem. And Ford has been ripping recalls recently. In fact, its recall count is more than the next five automakers combined. Ford has said that this count looks a little worse than it actually is because 33 of those have been tied to safety issues that extend back to last year as part of a continuing safety audit. Still, the issues have been wide ranging and pervasive. Its most recent recall dealt with a faulty fuel pump affecting 850,000 models. Another recall involving rear view mirrors affected 1.1 million vehicles. And a lot of them are simple, benign things that can be solved with a software update. But all the recalls have involved either a rear view camera, steering controls, braking system, seats and door trims, among other things. The strategy seems to be iron out these issues now, Neil, maybe take a reputational hit in the process, but raise quality levels so you can reap the long term rewards. In the meantime, though, that is a lot of recall.
- [13:41]
A
It is a lot. I mean the most recent one happened yesterday. So that 89 count is, is already dated. They are recalling almost 700,000 vehicles over an issue in over cracking in a particular part that could potentially leak fuel and into the engine and cause fires. Now listen to this corporate spin. So if you're in the PR industry, take notes. Ford said that the increase in recalls reflects our intensive strategy to quickly find and fix any hardware and software issues and go the extra mile to protect customers. They're saying we are beefing up our inspections now to prevent more problems down the road. And that may be true. Jim Farley, the CEO said improving quality and rehabbing this reputation as a recall monster because they have been one or two since 2020. They are known to have some safety issues. They are beefing up these teams and trying to root out any problems so that over the long run they will have fewer recalls and hopefully never break their own record. 70 of executive annual bonuses are now directly or tied tied directly or indirectly to quality. They hired equalities are back in 2022. So this is a big push for them to to, you know, have this be the last time we talk about a Ford recall.
- [14:55]
B
I know, and we're talking a lot about Ford. But in general, recalls across the auto industry have been rising. There was more than a thousand recorded last year compared to about 800 a decade earlier. So it's been creeping up slowly over time. It and again, a lot of these are relatively minor issues where like a light isn't working inside or a sun visor isn't coming down how you want them to. Some are major though, like exploding airbags, big brake failure. So when you hear recall, it does encompass a lot of different safety issues. And Ford is trying to say that most of these we're just fixing via software update. We've been looking at them for a long time and dealers have kind of echoed that saying like hey, I'm glad that they're doing that now. I'm comfortable with what they're doing. I think they're handling this the correct way. So tough to make these headlines though.
- [15:40]
A
Because they're running up the numbers.
- [15:41]
B
We're six months into the year and they're already setting records. Up next Deal has three numbers that are going to blow your mind.
- [15:49]
A
Running small and medium sized businesses comes with a long to do list and on that list is making sure your ads reach the right audience.
- [15:57]
B
Amazon streaming TV ads help put small and medium businesses on premium content like prime Video that people are already watching.
- [16:04]
A
With Amazon ads, you don't have to sacrifice relevance for reach. Trillions of browsing, shopping and streaming signals help you reach relevant audiences and measurement.
- [16:13]
B
Tools help show you what's working the hardest.
- [16:16]
A
Gain an edge with Amazon ads visit advertising.Amazon.com/start now that's advertising.Amazon.com/start Now Toby, what do you know about mitochondria?
- [16:31]
B
Well, considering I did not flunk 10th grade biology, I know that they're the powerhouse of the cell. They're also real wiggly little guys, right?
- [16:37]
A
Yes and yes. They also might be the secret to healthier aging.
- [16:42]
B
Because of their wiggles.
- [16:43]
A
Close because of urolith and a It's a postbiotic nutrient 70% of people can't produce naturally, but Mito Pure from Timeline fills that gap. It's a pure and patented form of Urolithin A and its benefits are backed by multiple clinical studies.
- [16:57]
B
My Dopure delivers six times more Urolithin A than pomegranate juice without the sugar. It comes as these easy to take dummies that are vegan, sugar free, gluten free and clean label certified.
- [17:07]
A
They're backed by over 15 years of Swiss made science and designed to support your energy, muscle health and overall vitality as you age.
- [17:14]
B
Try M up here for yourself. Head over to timeline.com Morning Brew Daily. That's timeline.com Morning Brew Daily.
- [17:23]
A
Welcome to Neil's Numbers, the segment where I share three stats from the week's news that will turn you into a walking chat GPT. My first number puts some hard stats to the Labu Boo Toy craze and let me tell you folks, we haven't seen a growth spurt like this since Toby in seventh grade. Pop Mart, the Chinese company that makes Labubus, is projecting that over the first six months of this year, revenue grew at least 200%. That means triple and profit jumped at least 350%. Pop Mart attributed the astonishing gains to increased global awareness of its brands and ip. That's the understatement of the century. Labubu mania has taken over the world as Gen Z and Millennials scramble for the plush toy, which resembles an elf type creature with spiky teeth. The collectible craze has been fueled by celebrities such as Rihanna and Kim Kardash and showing off their Labubus, as well as a creative distribution tactic in which the Boo Boo's are sold in blind boxes. So there's a surprise waiting for you in every package you open. And while the Boob is launched In China in 2019, 2025 was the year they took over the world. In June, Labubu sales in the US were up by 5,000% compared to a year earlier, according to estimates from M Science, whose analysts said I have not seen anything like this from other toy companies. Pop Mart stock has skyrocketed in tandem with sales. Shares are up about 600% over the last 12 months and its market cap of over $40 billion is greater than the combined value of Sanrio, Hasbro and Mattel combined. The company is making hello Kitty, Transformers and Barbie. Toby, have you caught the booboo fever?
- [18:55]
B
No, I still don't like these freaky little things. I don't get it. I look at them on celebrities handbags. I go why are we wearing this? But maybe I just don't understand. I think the real question that investors are asking right now is is this a flash in the pan or does it become Barbie? I mean Barbie has endured over generations and it drives consistent revenue year over year. Is the booboo going to become one of those iconic figures like a hello Kitty? Like a Barbie? And who knows, it does face some headwinds in China as well. Chinese state media issued this kind of proclamation saying that they want to crack down on businesses that are enticing young children to spend excessive excessively on quot blind cards and mixer boxes. If you read between the lines here, what is driving a lot of Lobo sales, it is these mystery boxes. They didn't specifically mention Pop Mart and Pop Mart shares did briefly dip but then have kind of returned to their same record highs. That is something else to look forward this regulatory environment may be cracking down on their growth.
- [19:55]
A
My second number is the staggering health divergence between an air conditioned society and one that mostly shuns AC. According to the Financial Times, between 2000 and 2019 an average of 83,000 Western Europeans lost their lives each year from extreme heat compared to 20,000 North Americans. The writer John Byrne Murdoch chalks this up to North America embracing AC as a miraculous invention needed for a productive and healthy society. While Western Europe's regulations disincentivize the adoption of air conditioning over climate change concerns, the lack of air conditioning in Western Europe has become headline news this summer as a record setting heat wave stocked western and southern Europe and Data from a 2024 study show that low adoption of air conditioning has meant Europe's death rates climb far more steeply than the US during periods of intense heat. Just look at two cities, London and Portland, Oregon. The two experience the same amount of heat, but 79% of households in Portland have air conditioning, compared to less than 5% of people living in Britain. Paris is a little bit better, but not much. About 25% of French homes had air conditioning in 2020, but that compared to 90% of American homes. Toby the data show that once indoor temperatures rise above about 75 degrees Fahrenheit, humans start to suffer in terms of cognitive performance and worker productivity and it becomes a life or death issue. During hot nights, which are becoming even more frequent, a growing number of critics are telling Europe to get its act together.
- [21:24]
B
I had no idea that it was such a cognitive performance decreaser. If you look at US high school scores on tests, they dip dramatically during hot days. And if you extrapolate that, if you live in a hot climate that doesn't have air conditioning and your test scores have an impact on your future, it does start to ripple through your entire country, through your entire generation, really. And I go back to Singapore. They've had this kind of remarkable Turnaround in the 20th century and their premier said that one of the big reasons for it was air conditioning. They installed air conditioners in government offices and they said that's been a key to increasing Singapore's efficient civil service. So it sounds like you complain like, ah, the air conditioning is out. But it really does have very dramatic impacts, not just on health outcomes, but also educational outcomes, government outcomes. It is a big issue.
- [22:14]
A
For my final number, here is a question. Who do you think burns more calories per day? A desk worker in New York or a Hadza hunter gatherer in Tanzania? The surprising answer is there is no difference at all. In a major new study published this week, a team of scientists found that total daily energy expenditures were roughly the same across 34 countries or cultural groups at varying levels of economic development, from South American tribes to European suits. The goal was to resolve one of the great debates of obesity. Why do wealthy, highly industrialized countries have higher obesity rates than hunter gatherers, herder farmers and others in less developed countries? Is it the gap in physical activity or is diet more to blame? Or is it a combination of both? This study aims to put the argument to bed, showing that people burn the same amount of calories no matter where they live and in what type of society. So the divergence then must be explained by a difference in what we eat. The researchers looked into the diets of some subgroups in the study and found a strong correlation between the percentage of daily diets consisting of ultra processed foods, or quote, industrial formulations of five or more ingredients and higher body fat percentages. Toby, what do you make of this? Are you surprised?
- [23:27]
B
I was very surprised like this because just logically, you would think the desk worker would burn fewer calories than someone, you know, walking around and being on their feet all day. But to be clear, this study doesn't mean that exercise is unimportant. Exercise is still, you know, correlated with good heart or good outcomes. It's essential for health. Strong link between muscle density and longevity. Same with cardiovascular health. So it's not saying do not exercise. It is just saying that our bodies do a very interesting thing and monitor our energy expenditure throughout the day and keeps it in a pretty narrow range. So even if you are training for a marathon or just sitting at your desk. If you are doing that marathon training, what your body will do is shut off or slow down some of these less important, some tangential biological processes. One that the article mentioned was growth. It will just start devoting less of your energy resources to, you know, growing. And that is just a fascinating thing that your body does. It just self regulates and doesn't go too far one way or another. And so yeah, the, the implication to it is that diet is, is the main reason for higher obesity levels.
- [24:30]
A
Yeah, their bottom line was that increased energy intake has been roughly 10 times more important than declining total energy expenditure and driving the modern obesity crisis. So a very interesting study there.
- [24:42]
B
Now let's sprint to the finish with some final headlines. Just one headline today, President Trump is a diet Coke fanatic to the point where he has a button installed in the Oval Office that he can press to have one brought to him. And he is pushing Coca Cola to change one of his favorite beverages to taste better. Yesterday, Trump said that Coke had agreed to use real cane sugar going forward in its drinks sold in the U.S. u.S. Coke is typically sweetened with high fructose corn syrup. But in other countries like Mexico, the UK And Australia already use cane sugar. While American cane sugar producers are no doubt celebrating, corn farmers are less than enthused to be replaced with the Corn Refiners association president John Bodie issuing a statement saying it will cost thousands of American food manufacturing jobs. Neal, he does have a point. This might lead to a boost in US sugar imports.
- [25:32]
A
It might because right now US cane sugar production is expected to account for about 30% of our sugar supply. The remainder comes from sugar beets and imports from Mexico and other countries. I'm not surprised that the corn syrup guy is ticked off about this. I think a lot of people are would be very excited about this. There is a halo around Mexican Coke because it uses real cane sugar. People think it tastes a lot better. I happen to agree with them. There's still a remaining question about whether this is actually going to happen. A spokeswoman for Coca Cola came out after Trump sent this out online. He said, she said, we appreciate President Trump's enthusiasm for iconic Coca Cola brand. More details on new innovative offerings within our Coca Cola product range will be shared soon though. So that was far different than confirming that real sugar is coming to Coca Cola. If they they're reporting earnings on July 22, five days from now, early next week and we'll maybe hear more details about this. But right now it's A huge mystery. It doesn't stop people from getting excited because this would be a great development.
- [26:38]
B
And we were talking before the show, Neil, you had some pretty strong opinions on what makes a great Coke. You said there's one Coke that rises above them all. What was that?
- [26:46]
A
The one Coke that rises above them all for me is a movie theater Coke. And perhaps it's because you're eating popcorn at the same time so you're extra thirsty and it just tastes so much better. But I don't know, whatever they're putting in the formula at AMCs or regals just tastes so much better to me. And I honestly, they don't have Coke. Any other setting than that.
- [27:06]
B
Yeah, I think it might just be the fact that that's the only place you drink it. I will go to bat for any Coke in a glass bottle, though. I have had Mexican Coke and I don't know, maybe it is just this halo effect around it, but it does taste. It just hits different, especially in the glass bottle. So you have your movie theater Coke. I'm just going, any Coke in a.
- [27:24]
A
Glass bottle, Any over ice? I think tastes delicious. All right, that is all the time we have. Thanks so much for starting your morning with us and have a wonderful Thursday. If you have any thoughts on today's episode, send an email with questions, comments, or feedback to Morning Brew daily at Morning Broadcom. Let's roll the credits. Emily Milian is our executive producer. Raymond Liu is our producer. Our associate producers are Olivia Graham and Olivia Lake. Eugenia Ogu is our technical director. Always love a uchena sighting. Scoopstar Daris is back on audio for today. Got a packed control room back there. Hair and makeup is beginning the countdown to football season. 50 days, 5 0. Devin Emery is our president and our show is a production of Morning Brew.
- [28:03]
B
Great show day, Neil. Let's run it back tomorrow.