Mortgage Rates Rise, 'Boomerang' Kids, Clarida on Warsh — Bloomberg Money 7/31/2026

[00:00:00] Speaker 1: Bloomberg Money? [00:00:30] Tom Keene: TOM KEENE: Good noon, everyone. Bloomberg Money is on personal finance, retirement and wealth management. I'm Tom Keene with me on a summer Friday. Scarlett Fu. You're bright and cheerful today. I'll give you that. It's lovely. I'm trying. Is this what you're wearing to the Rush concert at Madison Square Garden? I need to get tickets first. The spread is a lot less wide than the BTS concert, which is like this one. It's like ginormous. It's like huge, huge money. It's a busy weekend in New York. We're thrilled you're with us on a Friday afternoon. Lots to talk about. I want to just completely aside what's happened the last three hours here affects personal finance. Yields higher. It's not a small matter. No, it isn't. And it started after the Fed meeting. The Fed decision that was confusing to say the least for a lot of people, but especially the bond market. We're going to see. We've got a great lineup today. Esteemed Bloomberg guest. We found three people with no life. Leading the charge today. Richard Clarida will join us. The former vice chairman of the Federal Reserve System. Yes, we will speak to him about the [00:01:29] Speaker 3: Federal Reserve debacle of Wednesday. And what it means for your money. Later on this hour, we're going to talk to Lori Calvacina. She heads up U.S. equity strategy at RBC Capital Markets. She's got some insight into the role and influence of retail investors in the stock market. Apple down, Amazon up. Stocks all over the place. Yeah, they are. And we'll see if the S&P 500 finishes higher for the week. We'll have to see. Let's do stocks right now as we can. Green on the screen here. I'm going to call it a Friday, summer, possibly. But it's Scarlett says beneath the indexes. There's a lot of real significant movement going on. All right. And look at the yield picture because the 10 year yield approaching 4.7 percent. This is the fallout still from this week's Fed decision. The dollar down this week and Brent oil coalescing around 90 dollars. WTI now at 84 after starting the week below 70 dollars. Do you know how hard it is to get people in here on Friday. Oh, I know. I know. Yeah. It's amazing. It's an all week effort. And we get it out of the park today. Gers here for [00:02:29] Tom Keene: Bloomberg Bloomberg this weekend. It's wonderful to see David at Bloomberg this weekend. Allison Schrager here with an important story. And this is a real pleasure. Hannah Elliott. What you do is you go to Baylor. And if you do Baylor, you do autos. Hannah Elliott or is this working with Matt Miller on an esteemed auto podcast. Let's get it started. I walk by a lucid. A lucid? $200,000 or something. Are they selling? Are we going to buy fancy overpriced EVs with our [00:02:59] Speaker 4: health management? Apparently not. The sales say no. The sales say Americans don't want EVs unfortunately for companies like Lucid and Tesla and Rivian that are struggling. And also for our domestic automakers that are actually pulling back on a lot of EVs they had planned. Money questioning. Scarlett probably has this. I'm going to steal it from her. Should the Chinese be let into America to sell us cheap EVs? You know what? I'm not an economist. Jim Farley at Ford thinks that EVs [00:03:29] Speaker 3: from China will be here in the next five years or so. A lot of people. Keith Naughton our esteemed automotive reporter came on the podcast yesterday. Agrees it's only a matter of time. It's only a matter of time. But I mean under this president unlikely right David Gura because he is all about trade wars and tariffs and making sure that he seeks vengeance on those who have wronged him in the past. And you see this across the policy spectrum. That's absolutely correct. I mean he's somebody who loves tariffs. As he says time and time again. I would have a hard time [00:03:59] Speaker 1: imagining him welcoming Chinese autos into the United States as he invites American automakers to the lawn of the White House over and over again. We saw him put these new tariffs in place just a few days ago. So that's very much the direction of travel. You've got kids at camp. We also have a president of the United States at camp. He's at Camp David right now. Sixty miles north of the White House. The history of this cabinet room is extraordinary. I guess of everything I remember. Menachem Begin and Anwar Sadat with Carter in 79. Why is the president there? And it's a place where they talk about war isn't it? It's a great question. And were I the president I wouldn't go for the day and leave as he's going to do. He's headed to Bedminster after this. But yet this is in the Catoctin Mountains in Maryland. As you say 60 miles outside of Washington D.C. We saw F.D.R. go there during his presidency. It was called Shangri-La back then. And Dwight Eisenhower didn't like the name. He thought that was a little too a feat. So he changed it to Camp David in honor of his grandson. He went there for many weeks after he had a heart attack in Denver. There was some talk of this being the first cabinet meeting at Camp David. No. [00:04:59] Tom Keene: This one is not. Eisenhower convened them while he was there. There's a photo, Scarlett, I saw of President Obama playing pool. And you could go. I could see President Trump bowling. [00:05:09] Speaker 1: President Trump bowling? There is a bowling alley. There is a bowling alley. That would be an image. I don't know if we'll get that on Truth Social. But this is really just a venue change. It's the same kind of cabinet meeting we've seen. He's invited the press. And I'll say lastly on your point about the significance of this venue. I mean, presidents have liked this place in the past because the press hasn't been able to go. And we see President Trump kind of turning that on its head. He's got a live filmed cabinet meeting taking place at Camp David. [00:05:31] Speaker 3: Well, he's being true to his spirit. Allison, I want to bring you into the conversation because you recently had a column on how Americans are richer than ever before. But they're also angrier than ever before as well. The top one percent is richer or is everyone getting richer because you wonder how much of this is, you know, kind of relative gains. [00:05:48] Speaker 5: Well, everyone is getting richer. The top one percent has gotten way, way richer. Even if you look at the income distribution, it's true the middle class is smaller, but because more people have entered the upper middle class. But even lower income people are by most metrics better off than they used to be. But it's sort of extraordinary because all we hear is people feel like the economy is not working for them. So, you know, there's a lot of reasons why that could be. It could be some, like, necessary services are still expensive. Yeah. Could be relative gains are what matters. [00:06:19] Speaker 3: You know, I wonder whether how much of this is tied to fundamental misunderstandings about how investing or financial markets work. You think about Gen Z and they've really adopted this financial nihilism where they bet the house on crypto prediction markets, all these other things. And, you know, because why not? Everything's everything doesn't look good for them anyway. They feel like everything's rigged regardless. [00:06:38] Speaker 5: Yeah. There is more this feeling that success is sort of randomly rather than, you know, or I'm also seeing this sort of disconnect and understanding risk that risk comes from taking, you know, from risking more. Like, you get higher rewards for more taking, more risk. And I don't think this sort of that relationship has been well understood. Also, I feel like there's a dearth of risk taking in a lot of their lives in other ways. So I feel like it's expressing themselves through taking sort of outside risks in other ways. Like maybe they won't invest in the S&P 500, but they'll invest in, you know, the, you know, Calci or whatever. So it might be sort of also a lack of financial literacy or a lack of good risk training. [00:07:17] Tom Keene: Well, you mentioned financial literacy. You own the high ground on this with your book and with your academics as well. Well, we're going to have the former vice chairman of the Fed on. And with your heritage to Manhattan Institute and all that, what did you think of the press conference? [00:07:32] Speaker 5: You know, there's two things I've changed my mind about in the last five years. One is drug legalization and the other is monetary policy transparency, which I was like a big fan of, you know, actually Rich was chair of the department when I was at Columbia. So I learned all this stuff from him. And it's just, I feel like the Fed sort of started to box itself in a little bit too much with forward guidance. Okay. So to some degree, I think, you know, well, maybe it was just not communicating so well right now, you know, maybe a little mystery and a little like, hey, we think inflation. [00:08:07] Tom Keene: I use that word the other day, the mystery or how does he pull away from too much mystery? [00:08:13] Speaker 5: Well, you want a clear reaction function. You want clear rules, but you also don't want to say, hey, we're going to probably increase rates in five years or in five years. So you kind of want to strike that balance. [00:08:26] Tom Keene: The Bloomberg money angle on this is the yield. I'm sorry, where are mortgage rates in two weeks? [00:08:30] Speaker 3: The third-year fixed rate mortgage is now at 6.66%. That's a one-year high. [00:08:34] Tom Keene: Seven percent? You're going to love it. [00:08:35] Speaker 3: We're not at seven percent yet, but it does make home ownership a lot more expensive. And, David, there's a lot of talk about the affordability crisis. Has D.C. come up with any solutions that will, I don't know, resonate with voters before the midterm elections? [00:08:48] Speaker 1: No, not really. I mean, there was this housing bill that the president liked until he didn't like. And so I think that there's been some lip service to it. But we're at a point now as we approach the midterms where I think the prospect of there being any kind of real landmark legislation coming together seems pretty unlikely. But I think that, you know, going back to the meeting that's taking place right now, the president has his difficulties overseas and in the U.S. And this is certainly something I think that's what we're talking about. [00:09:11] Tom Keene: 30 seconds. Hannah, I gave you the last word. Is everybody leaving California? [00:09:16] Speaker 4: Oh, gosh. If you're rich, maybe. Yes. Yeah. Yeah. I mean, talk about personal finance. It's really tricky. Everybody's watching the mayoral race. This is a really- In L.A. In L.A., specifically. You're going to Texas. You're going to Florida. Exactly. [00:09:28] Tom Keene: Do you have Red Sox-Dodgers tickets this weekend? [00:09:31] Speaker 4: I do not. I'm a Knicks fan, Tom. Oh, okay. Nice. Very good. Mixed a smile. [00:09:35] Tom Keene: Nice. She can stay. [00:09:37] Speaker 3: All right. I want to thank our panelists. Thank you so much, everyone. David Gurra, co-host of Bloomberg This Weekend. And, of course, be sure to tune in because they will be hosting their next episode at 7 a.m. Eastern Time tomorrow and on Sunday. Allison Schrager, Bloomberg Opinion columnist. You can check out her latest work on Bloomberg.com slash opinion. And Hannah Elliott, her Hot Pursuit podcast with one Matt Miller, comes out every Friday at noon. Just tune in after the show. [00:10:01] Tom Keene: Coming up, a conversation, and after that press conference, an important conversation for global economics. Richard Clarida, the former vice chairman of the Federal Reserve. His academics is directly involved in the uproar that Chairman Moore started here on Wednesday. Richard Clarida next. From New York City, it's Bloomberg money. You studied under Clarida? [00:10:26] Speaker 3: Can EDs ever become collectibles? That's a great question. For a little bit. Did you pass the math? [00:10:31] Speaker ?: Did you pass the math? [00:10:31] Speaker 4: I did pass the math. [00:10:39] Tom Keene: Welcome back. It's Bloomberg money. Thrilled you with us. Tom Keenan, Scarlett Fu. It was going to be an important interview. But, well, maybe it's a little more important than it was Wednesday at 1 p.m. And Richard Clarida is with us, with PIMCO of Columbia University, always, and always the vice chairman, former vice chairman, I should say, of the Federal Reserve System. And I think, you know, we're going to straddle here between Bloomberg money and everything else. [00:11:02] Speaker 3: Yeah, and we've got to start with what we saw in the bond market this week because we had a sell-off, and the 30-year yield this week reached a 19-year high, 5.26 percent. Rich Clarida, does the sell-off in the long bond tell us anything about the U.S. economy and, therefore, how people's prospects might change? [00:11:17] Speaker 6: Well, there are a lot of reasons bond yields can go up and down, not just the Fed. The Fed's an important part of it. What I would point to is that, so far, Kevin Warsh has been chair really only six, seven weeks. But an important measure in the bond market, which is break-even inflation, so sort of traders' expectation of inflation, is at or below where it was at least out to 10 years when he became chairman. But, certainly, the reaction during the press conference was probably not one that was welcome. [00:11:47] Speaker 3: Right. We know the first Trump administration cared a lot about the stock market, and the second one seems to have added the bond market to its list of things that it's watching. Which part of the bond market does the administration care most about, the 30-year yield, the 10-year yield? [00:12:02] Speaker 6: Oh, my goodness. I'm not sure. I would defer probably to Secretary Besson. I do think at one point he may have said that he's focused more on the 10-year yield than he is on the Fed funds rate. Well, so much of the economy, people borrow long for car loans or mortgages or corporate loans. And so that's probably what he had in mind. [00:12:19] Tom Keene: So what we're going to do here, it's Bloomberg money. We do personal finance. We do wealth management. We do retirement. But we also have Richard Clareta with us, who's in the heart of this debate over the chairman of the Fed. So it's going to be a little bit sort of like Scarfou and Tom doing Bloomberg surveillance, like more. You can protect the children at home. [00:12:37] Speaker 3: The lines are blurry. [00:12:38] Tom Keene: Yeah, protect the children at home. Surveillance for the day. Okay. So former vice chairman, with great respect, I don't want to turn this into a history lesson, but you have Warsh, nominally of Stanford, talking about the Lucas critique and then going over. And what people don't know is you're directly involved with this. Let's first listen to chairman Warsh on Wednesday. [00:13:00] Speaker 7: Some version of the Lucas critique should remind us that when we talk about measures of inflation or something else, and we describe those measures as being consistent with our objectives, we might make them such that they're not very good measures or very good objectives. [00:13:22] Tom Keene: The chairman, before he had the questions from Michael McKee of Bloomberg, the world lit up. Anna Wong, with legit crud out of Lucas's Chicago, was fiery. The news conference was rich in philosophy, process, and institutional aspirations, but poor in operational guidance. The absence of Clareta-like analytical specificity appears to have spoken louder than Warsh's words. So Lucas did what he did, CGG, Clareta, Galli, and Gertner reinvented modern economics with something called dynamic, stochastic, general equilibrium theory. We come out now, and as Claudia Somm says, we have a chairman who's not sure what he's looking at in inflation. How does he get the rails back on? Does he need to reaffirm PCE as the inflation series? [00:14:14] Speaker 6: Well, I think what he said at the press conference is for now until next January, at least, that's going to be correct. The Fed adopted that again in January. He left open the possibility that the task forces could recommend other measures. They could go to an average. Instead of picking one index, they could look at CPI, PPI. There are a lot of things they could do, but I think Anna, as usual, raises an important point, is that an inflation targeting central bank needs to be clear about what it is it's targeting. It can and may evolve, and so I think that will be important. [00:14:46] Tom Keene: Very importantly, then, here, if we need to get the system back with a confidence about the Fed, how does he do that at Jackson Hole? Does he have to reaffirm, as Somm says, that inflation is the appropriate measurement and not a policy? [00:15:04] Speaker 6: Well, I think Jackson Hole may serve a couple of purposes. Historically, as we've seen, chairs have used Jackson Hole as sort of a sneak preview of coming attractions at the September, November and December meetings. Chairman Warsh Hennedy may do that. He's also interested in what he called some big question, big picture questions that he sort of previewed at this meeting. And he's also talking to the task forces. I think it's too early to tell what he'll do at Jackson Hole, but he may do that as well. [00:15:34] Speaker 3: I find it really interesting that he doesn't want to tell the bond market a whole lot of things, and he's kind of waiting to take his cue from the bond market. From a layperson's point of view, it feels very circular, right? The central bank sets a benchmark interest rate. The bond market takes its cue from that. What's the rationale for the Fed to take its cue from the bond market that's relying on the Fed to set policy? Help me understand that. [00:15:54] Speaker 6: So here's the way I would express it. The Fed is a very important part of 10-year Treasury yields. It's not the only thing that drives yields. So I think the chairman was important to emphasize that the Fed does want to step back and enter movements in bond yields. It could be inflation. It could be global growth, Middle East hostilities. But certainly the chairman and the Fed understands that an important part of 10-year yields is the expected path of the funds rate. And to Scarlett's point, and I actually, Ben Bernanke gave a speech on this, as did I as vice chair. It's called, sometimes called, the hall of mirrors problem in central banking, which is the central bank looks at the market, the market looks at the central bank, it can get circular. [00:16:33] Tom Keene: Let's go back to your paper. Galley and Gertler didn't know this. Richard Clarida channeling Alan Blinder. Having looked at monetary policy from Joni Mitchell's Both Sides Now, I can testify that central banking in practice is as much an art as a science. How does Warsh get back to science, to Clarida's silence, versus some mom-and-pop philosophy you learned at Stanford? [00:16:57] Speaker 6: Oh, well, I think Kevin Warsh and the committee understand that. Look, Kevin came in, Chairman Warsh came in with an ambitious agenda, and I think that they're going to both focus on implementing that agenda as well as getting to where they need to be on policy. I guess where I would try to relate Clarida Galley-Gertler to the current conversation is perhaps specifically in the domain of forward guidance. And so in the CGG model, there's actually not a role for forward guidance because the market understands the Fed's reaction function and the Fed understands the market. If you're not going to do forward guidance, then it's incumbent for the markets to have a broad understanding of how the central bank will react to data. If we had six bad months in a row of inflation data, would they hike and buy how much? They're not committing to that, but they're saying if the data comes out this way. [00:17:51] Tom Keene: For everybody on Bloomberg Money and Scarlett, I got goosebumps. This is like the real deal. I mean, this is what the adults in the room are arguing about right now. [00:17:59] Speaker 3: Well, for people who are watching this and don't quite know all the names that you and Rich are throwing out there, I want to bring it back to the real economy and to real people's concerns. Do you agree with those people who say that we have a K-shaped economy where the higher income and asset owners are doing well and everyone else is kind of struggling, that downward arm? And if so, how do we solve for that? [00:18:19] Speaker 6: Well, yes. Broadly, we do and have had a K-shaped economy for some time, but the K, the branches of the K have been diverging more widely in the last six or seven years. The way I like to think about it, Scarlett, is roughly 60 percent of Americans live in a house that's owner-occupied housing, sometimes with their parents, but it's owned, about 40 percent rent. Most of that 60 percent owns stocks. Most of the other 40 percent doesn't. So we've been in an economy for some time, but especially in the last six years when stocks have gone up, house prices have gone up. So the top of that K is doing pretty well. If you're in the other part of the K, you don't own your house, you don't own a lot of stocks. You're living paycheck to paycheck. It's been a tough six years. And so there's no doubt we're in a K-shaped economy. [00:19:05] Speaker 3: Yeah, those services costs just keep getting more expensive as well. Richard Clarida, you're going to stick with us. We're going to have more with him in just a moment. And later on in the program, a new report showing how financially dependent each generation is on their parents, how to manage your money when adult children need help when they're still on the payroll, Tom. This is Bloomberg money. Oh, look, they need help. You just got a text in you. I think we all do. Do you encounter that? Children calling you up for money? I think we all do. [00:19:38] Tom Keene: From New York City on a Friday, Bloomberg money, Tom Keenan, Scarlett Foo, and with Scarlett Foo, Richard Clarida. [00:19:44] Speaker 3: And, you know, Bloomberg money is about how you invest and make your money, but it's also about how you spend your money. So, Richard Clarida, I want to ask you on this Friday, what's your splurge, first of all? And how do you save? What do you save? [00:19:54] Speaker 6: Well, I leave the saving to my wife. She's pretty good at it. My splurge is, my hobby is music. So, I buy guitars, I buy recording equipment. Really? I spend money on recording my albums. So, yeah, that's my splurge. [00:20:10] Speaker 3: Didn't you record an album in 2016? [00:20:12] Speaker 6: I did. Available Spotify, Apple Music, stream for free on YouTube. The new album's coming out later this year. Maybe we'll do a roll out party on this show. Oh, it's a follow up. Yeah, yeah. Well, what's it called? [00:20:24] Speaker 3: It's going to be called Take Two. Take Two. Okay. And what? Folk music? Like, what's your vibe? Folk rock. Yeah. Folk rock. [00:20:31] Tom Keene: Someone who listened to too many Beatles albums. I will editorialize as I have heard it. It is not a vanity album. It is exquisite. I was shocked. [00:20:40] Speaker 3: Well, thank you. It's really, really quite. Thank you. Quite good. And you're the solo star. Like, I don't hear a band name in there. [00:20:45] Speaker 6: No, you're a band. So, I write the songs and do the vocals, but I work with professional studio musicians in London, LA, and Nashville. So, all the music you hear is really good playing, and then I do some singing on it. [00:20:55] Speaker 3: All right. Richard Clarida's new album coming out. What day? Well, by December 31st. By December 31st. Richard Clarida, thank you so much. PIMCO Global Economic Advisor, the former Federal Reserve Vice Chairman, and of course, Columbia University Professor as well. Coming up, a conversation with Lori Calvacina of RBC Capital Markets on your retirement fund. This is Bloomberg Money, that is. [00:21:25] Tom Keene: Bloomberg Money from New York City. It's a Friday afternoon, a summer afternoon, but so much going on. What you can do? Well, you can watch the show and recapitulate it starting this afternoon and then tomorrow. [00:21:36] Speaker 3: The video thing is working out. It is working out. So, please continue to go check us out on Bloomberg.com/videos or YouTube. You look at the markets right now, we're going to end the week so far if you look at if we hold the gains on an up note. We're looking at the S&P Dow and Nasdaq ending the week with gains, potentially ending two straight weeks of losses. [00:21:55] Tom Keene: We are. You know, and if you look over at cross asset, I mean, I mean, I'm watching oil. I get it. It's really a challenge here with the tensions in the eastern Mediterranean. But the bond market has to be front and center. Six basis points in the 10 year. Nothing else matters to America. Get ready for 7%. Is that a tantrum? Does that qualify as a tantrum? No, it's not a tantrum, but it's -- I'm sorry, this all started about 9:00 a.m. this morning. We had the leg up from Warsh, and now we have a new second leg up this afternoon. Yeah, absolutely. 19-year high for the 30-year yield as well. [00:22:29] Speaker 3: All right. Bloomberg Money is your new destination for personal finance. It's a cross-platform effort that extends beyond your television, including at our new digital hub at Bloomberg.com/money. And this week's story I saw on that site is focused on boomerang kids. It used to be that after the kids graduated from college, they were out on their own, off your payroll, out of your house. In 2026, that is no longer a safe assumption. Suzanne Woolley joins us now to discuss how to protect your money and maybe your sanity when an adult child requires support. Suzanne, great to see you. And I guess the first question is, how much does it cost? What is the cost, financial cost, of letting a grown child move back into your home? [00:23:07] Speaker 8: Financial planners talk about an average of $1,500 a month, which comes out to about $18,000 a year. So it's more significant than you might think. [00:23:17] Speaker 3: And it's not just recent graduates, either. I mean, your adult children could be separating or divorcing and have kids, have pets on their own and bring them back home. How do you plan for this? What are the planners saying you can do to kind of get ahead of this? [00:23:30] Speaker 8: Well, they say, I mean, an important part is to set expectations. So when your adult child wants to come back home, talk about, you know, will they pay some rent? Sure, you'll give them below market rent, of course, you know, but it may increase over time. You know, so they have sort of incentive to not make this arrangement last forever. Yeah. So setting expectations about rent and about privacy and just how things are going to work is just really important. Can I ask a question? [00:23:58] Tom Keene: Please. I'm asking for a friend. How do you get them out the door once they've moved back in? [00:24:03] Speaker 8: Well, Tom, you must have made it a little too comfortable for them. [00:24:06] Tom Keene: That's the major thing, is they'll make it too comfortable. [00:24:10] Speaker 3: Yeah. I mean, you definitely don't want to be raiding your retirement account or drawing down on your savings and perhaps not retiring because they've come home to live. [00:24:17] Speaker 8: Exactly. I mean, that's the key. If it's coming at the expense of your retirement security, you really have to think twice because your kids will have a long runway, you know, for earnings. Your runway, if you're close to retiring, is not -- [00:24:29] Tom Keene: Stop. I'm going to get upset now. I remember sitting on the bed with my father. I came home from school and all the time I said, I was going to go. And he said, you've got four weeks to move out. That was the runway. The runway was four weeks. [00:24:41] Speaker 3: Are you giving your kids four weeks? [00:24:42] Tom Keene: No. They've been very good about it, actually. But I admit, just like you say, we're all writing checks. [00:24:49] Speaker 8: Yeah, you're writing checks. And I mean, and sometimes it's great to have your kid move back, you know. For a while, at least initially. For a while. And if they're contributing rent and maybe doing chores. Oh, like emptying the dishwasher? Yes. [00:25:01] Speaker 3: Walking the dog, all of that. Suzanne, thank you so much. Suzanne Woolley is a member of our Bloomberg money team. [00:25:07] Tom Keene: Laurie Calvacina is over here taking notes. She's got young cherubs. And she says, is this what -- this is what I had with Calvacina money. We are thrilled to bring in now, Laurie Calvacina, head of U.S. equity strategy at RBC capital markets. Scary PowerPoints in the view of the equity market. There's a lot of people to be invested, given their fears. Let's do this. Let's bring it up right now as we can. Our money must read here from Calvacina. It's in front of her 80-page PowerPoints. It's like Mary Meeker on steroids. Laurie Calvacina, our main sentiment model points to a gain of 10.8% over the next 12 months. You look here at the drawdown, 50%. Great financial crisis. World War II, 40%. And then you've got to get out front and still be optimistic. [00:25:56] Speaker 9: Do you fear the big drawdown? So our base case has been we're going to be higher over the next 12 months. But it's not going to be in a linear fashion. And we assume that we're going to have at least one, maybe more drawdowns of five to 10%. We call that tier one on our tiers of fear framework. Yeah. What we do, you know, as sort of things come up in the market, right? We'll look at what we call tier two, tier three, tier four, and sort of evaluate. Is there a risk of falling into one of those? Not because we're telling everybody, you know, especially sort of in retail investor land to sell, but to be prepared for what might happen. [00:26:29] Tom Keene: Your job is to go out and talk to people and say to them, let the fear go, let it go, let it go, let it go. They're frozen because they're worried about that big drawdown. What percentage of us are worried about a negative 35% bear market? [00:26:43] Speaker 9: So if you look at the conference board survey that just came out, they actually have a question that gets very, very little attention, but I like it a lot. And it's on stock market optimism going forward. I forget the exact number, but it's still extremely elevated and it actually ticked up just a little bit. It hit a new high in late 2024, and it's been kind of hovering around that level ever since. So when we look at that as a gauge of retail investors, we think that they're not too worried. Now, if I talk about institutional investors, you know, we might look at something, say, the CFTC futures positioning data, which is easing. You had seen sort of one standard deviation above the long-term average. Basically, that's, you know, complicated speak for saying people were feeling good and well-positioned, but not crazy, not euphoric. And that's easing down. It doesn't look under-owned. And I would say there's some nervousness creeping into the institutional community, but I don't think there's panic there either. [00:27:31] Speaker 3: So you serve institutional investors, but I know that one thing that comes up a lot in those conversations is the role of the retail investor and how they influence the market overall. Retail stock ownership, I think, is at a 20-year high. How do you think that's changed the stock market over your time covering it? [00:27:47] Speaker 9: You know, it's interesting because when I started, I started back in 2000 at a different firm. And I remember being taught, you know, by a very seasoned, you know, extremely bright strategist that you would look at the retail funds flow data and do whatever the opposite was, right? So if they were all buying, you'd sell. And if they were all selling, you'd buy. And I don't think it quite works that way anymore. You know, I do think retail investors have gotten much more sophisticated in their understanding of financial markets. There's a lot of innovation in the industry that's helping people out. You know, and I, you know, we were talking earlier about how I travel. I run into people in airports. I run into, you know, people who are driving me places and, you know, and, you know, talk to people on airplanes. And people sometimes, you know, will start talking about the stock market and they know a lot. And I think that's very different from early on in my career when sort of the purview of all the intricacies of our industry were really just limited to the institutional community. [00:28:38] Speaker 3: Okay. So it's changed a lot in your 20 plus years. But is it going to look like Korea? You look at the Korean stock market and it was had it had bananas week, right? It was down 10 percent on Tuesday. So 16 percent overnight year to date. It's up massively. Retail investors are huge presence there. They love the AI trade. They love these leveraged single stock ETFs. [00:28:57] Speaker 9: Is that what the U.S. stock market is headed towards? You know, it's hard to say. I don't see that right now. I feel like we have more guardrails in place. But the reality is that if you look at sort of this theme of democratization of the equity market. I mean, we got a lot of color on that from financial companies in this reporting season talking about new instruments and why they might be doing one thing or another thing. Did retail want it? Did institutions want it? Was it something, you know, they should be doing, you know, sports. Right. For example, in prediction markets was something we saw a few companies say we're not going to do even though there might be appetite for it. But I do think this trend of getting typical Americans engaged in the stock market, I don't think that's changing. What would you do as a retiree now? The old rule is take 4 percent, be happy, move on, maybe buy an annuity, whatever. What's the RBC advice for someone with an equity pot and how to manage it given that retirees never die? Well, I think the first thing you always do is and this is always my first advice for people is work with a financial advisor. And I think even in my purview as sort of an equity person, you know, I would want sort of that device, that advice on diversification. Why? The distance? I think that I know a certain corner of the market very well. And there's a certain corner of the market I don't know very well. So I would want some advice, frankly, to come in and sort of balance me out. But I do think staying diversified is something that just makes sense. And not trying to play the short term, not trying to play every little twist and turn. How do you not play the short term if you're watching Bloomberg Surveillance or Five of Scars? Five of Scars media properties religiously, but you're supposed to be long term. How do you do that with modern media? This goes back to our tears of fear, right? And so typical drawdowns are 5 to 10 percent. Be prepared for those. And there's always a big test once you kind of get to 9 percent, 10 percent. Are you going to go lower? And what we tell the institutions, and I tell this to, you know, FAs I talk to as well, is if you don't think that there's a serious chance of a recession or these days we're also talking about interest rate shocks, then you're probably going to bottom out at 10 percent. But if there is something that's unknown that happens in the market, right? If you look back at 2018, we had tariffs for the first time. We had some concerns about the Fed. We had a 20 percent drawdown. We have these growth scares that can go to like the 15 to 20 percent range, but just kind of know what's coming. Be educated ahead of time. Be prepared and don't overreact in the moment. If you don't think that there's sort of a serious chance of a recession, and we talked a lot to hedge funds about this last year around tariffs, then you're probably not going to have like a 25 or 33 percent type drawdown, which is what you see in recessions. Kind of 20 percent might be the worst. And so it's really just being educated and knowing that markets can be volatile. And what do these different levels signify? [00:31:37] Speaker 3: And just, again, not overreacting in the moment. Individual investors seem to have mastered the art of buying the dip. They come in. They are kind of, you know, they don't get rattled by stock market declines. They come in. They're like, I'm buying. I'm buying. Have institutional investors looked at that and kind of adjusted their behavior as a result? [00:31:52] Speaker 9: One thing we've noticed is that there are certain valuation gauges. You know, we can look at P.E.s and where they typically bottom out at. And on certain charts, they make higher and higher lows. And I think that's because of these dip buyers coming in. So you do have to have it in the back of your mind. [00:32:05] Tom Keene: What you just said, I disagree with. Not you, but I disagree with the zeitgeist that we've learned something new. We haven't woken up on a Monday being down 22 percent. Is the government going to let that happen? Well, that may be. That's an Eric Belchuna's question. But, Laurie, I think we don't have a collective memory of a massive drawdown anymore. And our behavior will change if we get that. [00:32:30] Speaker 9: Well, you know, I take your point. We have a lot of conversations, you know, I would just say in the financial community about when did you start. So I started in 2000. I didn't see the tech bubble melt up, but I certainly saw the other side. You enjoyed 2008, nine. Yeah, I lived through it. Right. I remember. She didn't enjoy. She lived through it. I lived through it. I remember being in conference rooms. I want to say, like in 2006, with mice running across the floor and home building companies talked to packed rooms, you know, and you couldn't. You were violating some fire code, right, because there were too many people. So I remember the height of that bubble, you know, very clearly. And I do think there's a lot of people in the institutional community who weren't around for the GFC, right, who weren't around for the tech bubble. So I take Tom's point. But remember, we did have a massive drawdown around covid, which was a typical recession type drawdown. And it was it was interesting. I mean, we've done a lot of work around that, especially, you know, as kind of the Middle East situation has flared back up. And I reminded people, I said, you know, we did a recession's worth of decline in about a month. Good job. And, you know, and I think people have kind of forgotten about that one. But you can see how fast and steep and and and, you know, difficult, frankly, you know, those kind of declines. 2022 wasn't pretty either. No, no, that was a that was a weird one. We've had trouble classifying that one, you know, in sort of our tears. We think what essentially happened was the misery index spiked because of inflation. It felt like a recession. It wasn't. You got a recessionary type drawdown in the market. And you also had a massive interest rate shock. Just expectations of Fed hikes piled in. Yeah. And you threw a war on top of that. Right. It was it was a little bit worse than a growth scare. Not quite as bad as a recession, but pretty darn close. [00:34:07] Tom Keene: Lori, thank you so much. Really appreciate you coming in on a Friday. Really, really appreciate it. RBC Capital Markets. Get your PowerPoints exquisite. Get it from RBC Capital Markets. There's a headline out right now. Apple slides most since 2025. Tim Cook was left for dead Liberation Day. Apple is going to die. It's going to be terrible. Up, up and away. Tim Cook closes out his tenure as CEO of Apple. What a success. The last 10 years. Apple up 30 percent per year. This is Bloomberg money. Tim Cook or Tim Apple. President calls him Tim Apple. That's right. I probably would. Thank you for. [00:34:48] Speaker 3: All right. We're looking at shares of Apple down as much as 11 percent right now after component shortages weighed on the company's sales forecast. Elena Poppina of Bloomberg News joins us now to discuss. When we're talking about shortages, it's really the memory chips. And we've seen prices for those things spike up. And a company like Apple needs to contend with it. [00:35:12] Speaker 10: Yeah. And CEO Tim Cook said that memory chip shortage is similar to 100-year flat. The demand is so high. And the shortage is so widespread that, you know, in the coming quarter, there will be more shortages and some wait times for some of the key products, like including MacBook Mini. So that may weigh on the revenue outlook. Now, we're talking about the outlook for the quarter ending in September. This is the quarter when the key iPhones usually go out. This is the quarter when, you know, mom and pop investors buy apples and, you know, iPhones for their kids. They go back to school. So that supply shortage is going to weigh on sentiment. And this is what is driving shares lower today. [00:35:51] Speaker 3: OK. Apple also came out with this new innovative way of funding your iPhone purchases or maybe purchases the wrong word. You're now going to be able to lease your iPhone the way that you can lease a car. [00:36:02] Speaker 10: Yeah. That's pretty much the case. And not just your Apple. You can lease your iPad. You can lease your MacBook Mini, MacBook Pro for up to three years. And then after that point, you can decide if you want to keep it, if you want to return it, if you want to just, you know, upgrade to a new cycle. So that's pretty much, you know, Apple's way of saying, listen, just keep staying with us forever and keep upgrading. [00:36:22] Tom Keene: But from a consumption standpoint, somebody had this out on Twitter this week where everybody's, oh, gee, they don't have the chips of this supply of this. The reason they don't have the supply is they have massive demand. Do we see within our reporting, Mark Gurman and you and everybody else, do we see any way on a unit basis that they're stumbling? They're not. [00:36:41] Speaker 10: They're not really stumbling. I mean, China remains a weak spot, but it's always been a weak spot. So we cannot demand any strong numbers out of China. But, you know, when you look at the sales of the wearables, they were in line with expectations. [00:36:54] Tom Keene: I mean, Scarlett needs a blush Neo, right? I mean, that's really what this is about. [00:37:00] Speaker 10: If you look at the sales for MacBooks, they smashed expectations by a landslide, you know. So the iPhone expectations also were above estimates. So across the board, people kept buying. So consumers, your retail traders, they had, you know, nothing to do with that weak forecast. It's more of a supply constraint issue rather than a demand issue. [00:37:19] Speaker 3: Apple has had to raise prices as well. And you wonder how much these new foldable iPhones that they're going to release are going to end up costing. [00:37:25] Tom Keene: Why do I need a foldable iPhone? That's what I do. [00:37:27] Speaker 3: So you can fit it into your pocket. It won't fall out. It's the next whole thing. Your pockets are bigger than mine. [00:37:32] Tom Keene: But the Neo came out as a joke and it's the hottest thing going, right? Yeah, it's the hottest thing. I mean, you talk about Bloomberg Money, everybody watching this show on personal finance is getting a kid. I need a blue, you know, I guess I like my air, but I really need a Neo to go back to school. [00:37:46] Speaker 3: Well, the parents want to pay for the Neo, not the air. Also, the Neo is a low-cost model, so that's part of the appeal. That's a selling point. Thank you so much, Elena Poppina of Bloomberg News. All right. And, you know, it's Friday. It's Bloomberg Money, so we always talk about books. I know that I've got a huge reading list on my phone that I've got to get to. Do you read the physical books or do you, like, use the Kindle? [00:38:07] Tom Keene: No, no. I tried the Kindle and I've tried other things, and now I'm very much back to just reading hardcover books. Only hardcover, though? Well, yeah, sometimes I can't, but, you know, old-school books. How about the must-read books that we've got right now? What's yours? Mine is a foundation read if you care about Elena Poppina's technology. Chip War was my book of the year two years ago. Chris Miller's out of Tufts, up in Boston, and this is absolutely, absolutely the seminal read on the history of semiconductors, and he just captures beautifully the turf wars, whether it's obviously Silicon Valley or Charles River in Boston or even over to the Netherlands in ASML. Or Taiwan, for that matter. Or Taiwan, excuse me. The Taiwan story is actually, the invention of Taiwan's semiconductors may be the most emotional story in the book. [00:39:01] Speaker 3: Yeah, I can't wait to get to that point. I'm really excited about it. My book kind of ties into that. It's How to Rule the World and Education and Power at Stanford University by Theo Baker. This book is a lot of things, but what I enjoy the most is the picture that it paints of Stanford. For super bright and ambitious kids, Stanford's a place where the coding or hacking clubs they join have access to slush funds provided by tech companies so they can party on yachts and socialize with billionaires. VCs hang out there on campus at the cafe. I think it's called the Coupa Cafe to scout future talent, which leads to offers of funding their startups later on for billions of dollars with the NONDOS. [00:39:38] Tom Keene: I take issue with the romance of this and that. Mostly what the kids do is work. They're particularly undergraduate. They're working on first principle, heavyweight mathematics. They're operational research. I mean, so much of this is Michael Spence, the laureate's invention. But I think it's underplayed how much the bright kids at these bright schools on the West Coast, Harvey Mudd, Caltech, Stanford. I'd mentioned Cornell on the East Coast, frankly. The kids work. I mean, Scarlett slid through just in case, you know. [00:40:09] Speaker 3: There is that, but the ones that get farther are the ones who are hobnobbing with the billionaires and the VCs. Absolutely. You know, they're getting the, like, early look deals with those guys. [00:40:18] Tom Keene: I like hobnobbing better than networking. [00:40:21] Speaker 3: Sounds a little bit, like, you know, friendlier, right? All right, for the latest reviews and recommendations from Bloomberg, be sure to subscribe to the On Books newsletter. Coming up on Bloomberg Money, fresh off of their Dynamite World Cup halftime performance. You and I were texting while we were watching this. Oh, it was unbelievable. [00:40:36] Tom Keene: I was in tears. [00:40:37] Speaker 3: BTS bringing the world tour to MetLife Stadium. We're going to discuss that and what else you have to look forward to spending your money on heading into this weekend. This is Bloomberg Money. Who do you like the best out of those guys? [00:40:49] Tom Keene: I don't know. I mean, I know Black, Black. [00:40:51] Speaker ?: Black. [00:40:52] Tom Keene: Bloomberg money from New York City on a Friday a summer Friday the streets are just it's a summer Friday. It's easier to get to work and get home. Yeah. There's no traffic whatsoever. It's no no question about it. So I guess we're going to look ahead here. Can we look back. Yeah. Let's do that to this hour. Right. Yeah. This hour Richard Clarke is with us the vice chairman. We ripped it up and did a much you know Federal Reserve conversation surveillance. And the excitement of that was Anna Wong's [00:41:22] Speaker 6: work of Bloomberg economics. She was on fire. Here is Richard Clarke. He left open the possibility that the task forces could recommend other measures. They could go to an average instead of picking one index. They could look at CPI PPI. There are a lot of things they could do. But I think Anna as usual raises an important point is that an inflation targeting central bank needs to be clear about what it is it's targeting. It can and may evolve. And so I think that will be important. [00:41:52] Speaker 3: Anna published this morning as well. Look for that at Bloomberg economics across the weekend and we'll get our videos. They'll be out as well. All right. Well it's great to have Richard Clarke here with us. But it is Friday. So we need to look ahead to the weekend and next week as well. This Saturday and Sunday. BTS will be holding their first headline performance concert in New York since they've got to be sold out like mental. Mental sold out. I was checking on StubHub. You can still get stage right tickets for $1,800 for a pair each. And then the nosebleed is at 176. So that's That's a huge spread. But I thought maybe you would be more interested in Rush. Got that right. Yeah. They have a reunion tour. They're now halfway through their four night residency at MSG. The OG band members Geddy Lee and Alex Lifeson will be there minus drummer Neil Peart who passed away sadly in 2020. [00:42:38] Tom Keene: They did a bang up job on this. They went out and they just really looked for a new drummer which is incredibly hard for any bands. They will all say that. Annika Niles is from Germany. And she's like legit classical rock train. Jeff Piccaro was a huge hero from Toto. And the answer is she's the real deal and literally ran an academic department at a university. I don't know that. It's a woman of many talents. I would suggest is a non-Rush fanatic. It's been hugely successful. All right. Well they are playing at MSG again. [00:43:10] Speaker 3: This four night concert residency that they're calling it. Also of course next week we've got the jobs report for the month of July. And the consensus estimate right now is for 88,000 jobs added in the month of July versus 57,000 in June. I'm still not used to the new jobs number with immigration being under 100,000. [00:43:29] Tom Keene: To me 88,000 is terrible. And yet Anna Wong would tell you that's actually pretty good. Well you look at the unemployment rate. [00:43:34] Speaker 3: It's going to stay unchanged at 4.2 percent. And average hourly earnings pretty much staying in line. And that's brilliant that you do that through August through September for Bloomberg money. The inflation adjusted wage. Got to be front and center as well. And don't forget earnings. SpaceX reports its first set of results as a listed company. [00:43:52] Tom Keene: That's worked out so far. I hope this has worked out for you. It's Bloomberg money in New York. We're making it up every week as we go. Thank you so much for the response we received again. We're trying to give you a video presence out Friday out Saturday and on into next week. Skylar Fu and Tom Keen. Thank you for joining us. [00:44:14] Speaker 3: All right. That does it for another week.