Upward Pressure on Yields and Equities

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This is Robert Smith from Business History. If you're listening to this, there's a good chance you're a small business owner. And like every small business owner, you started with a dream to do what you love and watch it grow. What you probably didn't dream about? Keeping up with cyber threats. That's where MasterCard can help, with access to tools that help identify cyber threats to better protect your business. Building a dream business? Priceless. For cyber security in a changing world, there's MasterCard. [MUSIC PLAYING] Learn more at mastercard.com/smallbusiness. [MUSIC PLAYING] Bloomberg Audio Studios. Podcasts, radio, news. [MUSIC PLAYING] This is the Bloomberg Surveillance Podcast. Catch us live weekdays at 7 a.m. Eastern, on Apple CarPlay or Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. This is wonderful. From England, Matthew King joins us. Matt King is founder of Satori Insights. Truly iconic at City Group over the years in thinking about the big picture. I love the single sentence, Matt King, in your note, which is what so many people are thinking. Why hasn't anything broken? Why does this just continue on if so many are a fear of the future? Thanks very much for having me. I think there's lots of ways we could tackle that. And one of them is earnings. But I think there's something important about how deficits have been financed and about how that is changing, which is also part of the explanation. And it too points to getting closer to things breaking, but not being at that point yet. In the near term, you've got bond deals backing up. And the lots of people like to say, oh, it's growth that's driving it, because it's the real yield moving, and not inflation break evens, and not oil prices. And I don't really think that's the whole story. It is the real yield. But it's actually more about who's doing the borrowing and their desire to borrow that keeps pushing these yields up. And we're getting closer to the point where that causes money to rotate out of equities and back into cash. But we haven't got there yet. How important is the rate of change here? I mean, it's been faster times. And then it's been more of a grind and acceptance of either higher growth or a tighter policy path. What do we think there for the US specific? Some people like to say it's the level that you look back through history. And there hasn't been a consistent level where markets break. Some people like to say it's the rate of change. And that's been more important since about 1997 or so. But there too, it's not really consistent. What I would say, and even when you start looking at real yields or other than nominal yields, again, it's not as simple as that. For me, it's this combination of the higher real yield sucking money back out of equities and risk and into cash and money market funds. And we're getting closer to that point. And even recently, you can see it's kind of just tech equities that are driving things. Well, we're not at that point yet. And that's a mixture of the earnings continuing to be strong. But also people are having been educated to buy on dips over the last couple of decades. But it's also about how the deficits have been financed, especially in the US up until recently. And there's even an argument that my presentation goes into about how the US in particular has kind of been self financed almost. So whereas countries like France are having to rely much more on foreigners to fund their deficits. And that's a lot of the reason why markets have become more yield sensitive and the buyers have become more yield sensitive and therefore the yields have been backing up. In the US, there's been this much more subtle mechanism that combines money market funds on the one hand and then hedge funds and repo on the other. And that's coming under a little bit of pressure. But it's been very effective up until now. And that in turn is one of the reasons why I like to joke that I used to think that hundreds of billions was a lot of money. And these days, suddenly everything is in trillions. And we're getting closer to the point where that comes under pressure and things like basis trades are reduced. But till now, we still haven't got that. So we're looking at a little more collateral heavy cash light again, the repo marked to your point there. How does that kind of liquidity backdrop? And if it's just more on the hedge fund side, so be it. But how's that going to be affecting sort of rate volatility then? And is this really something that can come up out and nowhere like we sort of saw at the end of '25, a little bit in October November period? Basically, I would say yes, it is. And mechanisms like the SRF provided degree of protection. But what we see is all of the repo numbers getting larger and larger. And that does point, as you say, to exactly this risk of liquidity shocks. And everything ends up correlated. This is really important, folks. What you heard was a jargon-laced Michael Ball. Jen Tucker, I think the Tito's in tang is working in right now. I mean, he had like six jargon items in that question. To Matt King. I'm finishing up the Wigglesworth, which is my book of the fall. I can't say enough about the arc from Venice over to Milken and onto the modern day that Robin Wigglesworth does in his book. I'll have much more on that in the coming days. But Matt King, when we talk about the repo market, we're talking about trillions of dollars. And I'm going to combine your repo and money market fund like a lead weight there. What does the difference now, as you say, that we're talking about a ginormous mass of money, which is hinging together all this modern finance? What does that signal, the sheer magnitude of it? It's crudely. It signals bubble-driven processes, or it's kind of reminiscent of 2008, not in the immediate-- or the magnitude of those risks. But let's say risks being pushed into the tails. So you're right that all of these volumes have doubled just since 2020 or so. We're up to $7 trillion in terms of the repo and the standings. And while that's going on, it does lubricate markets. It does help with financing trades, with both the basis trades and the also equity financing trades. But there's also a vulnerability that comes as part of that. I think the public instinctively understands that vulnerability. How is that usually expressed? How do we see it coming? I think the usual rule with both bubbles and with these sorts of vulnerabilities is you tend not to see them coming precisely because everything looks great while the valuations are going up, and then as the numbers come down, you realize just how important money creation, even if it's through repo, was in driving that process. So in that sense, we monitor it, but the risk has been pushed into the tails. A lot of what bothers me is you're getting-- starting to get a bit more in terms of bond volatility. But day-to-day volatility and things like equities remains really very low. And yet, the tail risks are rising, and you begin to see signs of stress spreading out from bonds into credit and through into other markets. What a terrific window into the dynamics here right now that the pros are looking at. We'll have much more on that hour. Matt King, thank you so much. Just wonderful, wonderful story, investors. Stay with us more from Bloomberg's Surveillance coming up after this. A t-shirt and jeans, Mac and cheese, oceans and sunsets. Some things in life aren't obvious match, like RIAs and Schwab advisor services. The number one choice for independent advisors looking for a custodian who can help them go further, with all the wealth services, technology, and support an RIA firm needs. The difference is so obvious. It's Schwabvious. Find your match and learn why custody is just the beginning at Schwabvious.com. This is the Bloomberg Tech Minute brought to you by ChatGPT. I'm Carol Masser. There's probably nothing so closely associated with an MBA as the case study. As Bloomberg's Rob Mandelbaum reports, developed at Harvard Business School over a century ago. The case study invites students to wrestle with a complex problem faced by a real company and its people. That is, until AI, which has kicked off a movement that's now spread to business schools worldwide. 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We've seen jump right away to the expertise of Ken Lee on our first look at the banker and he's Ken Lee on how important are the conference calls the view forward for the major banks? Well, it's great to be with you, Tom, and they're very important because we're at a very high level. It doesn't as it relates to risk and reward. The backstocks have pulled back. The valuation seemed more reasonable than they did before they started to correct in the middle of August. We see opportunities clearly related to the capital markets and investment banking. Interstrates, Tom, we are at a level that we have not seen working together over two decades and the opportunity, of course, is, can the banks still generate strong earnings to your question for the third quarter and importantly, directly give for the fourth quarter confidence about their ability to continue to deliver strong performance. Although, what we just talked about, King about, and of course, Larry McDonald, the 9 o'clock hour, VAR, folks, VAR is a measurement of the risk taken by the banks. Do you expect to see expanded or contracting the VAR is the banks look at the mess we're in? That's a great question for people. We're talking about where you're putting more capital to risk, particularly across the trading desk or principal trading as you were speaking about derivatives. Banks generally are very conservative in terms of this area. What they are striving to do is get durable, recurring fee income that generates stable earnings and drives higher earnings multiples. That is the book, whether you're Goldman Sachs, JP Morgan, or any of the large bags. I look at this at Michael Ball, I want you to jump in here, I just look at the JP Morgan chart and on a weekly basis, it's really elegant. It's just moved back to the long-term moving average, it hasn't given way. No, it's been an orderly pullback as the rate sensitivity and the credit concerns picked up. I don't think we're going to see that value in the earnings and actually just going to switch gears, some of the information that I always look for here is Michael Ball allowed to switch gears. I believe he just did. Okay, thank you. Continue. We're going into the consumers always great, and I remember specifically Q2, the Bank of America, CFO, saying there was no K economy, a lot of traders and PMs picking up on that and that being sort of the turning point of earnings breadth for that whole quarter. I mean, do we need to actually hear something like this again because the credit card data, the higher frequency touchpoint still looks strong although we have consumer confidence in some worries there. So I think, you know, we're in the kind of the neutral zone for credit quality, we're seeing clearly no significant increases of low and lowest provisions, but the other issue really relates to what rates deposit risk. The question whether banks can or will provide competitive rates because by just using your phone, you could be moving money even overnight as some of the large backs too. So I think we're in an environment where consumers are much smarter of how they try to get higher interest earnings. And I don't see a risk, you know, for the large banks on credit while in the third quarter. With this Ken Leon of CFRA providing all their global research leadership as well, Ken Leon definitive for over three decades of looking at the securities analysis of banks. Our Michael Ball with Ken Leon. Can I give you a good point there? That's interesting because everyone's talking about this Mews, a Gen TKI adoption of finding cheaper pricing, but obviously we'll also affect how consumers see their saving rates and their money markets and all their options there. Are they going to have to the acknowledges some of management or they're going to have their own competition there? There is competition and we're saying, you know, we talk about the shadow bank market, you know, just opportunities where you have other choices. And with AI capabilities, the agility of some of the new startups, hopefully these become great companies that go public after anthropic, like Stripe, Ramp, Plan, all these give you just great opportunities for capturing higher CD rates or just moving money around. All right, well, that's kind of where my eyes are as well because that competition obviously can affect the margins. And it's interesting that everyone has their sort of eyes on, you know, maybe IPOs coming off and M&A falling, but it seems like that's going to be the core on top of obviously a flatter curve, which hits the banks as you know. They are, you know, margins, you know, with efficiencies, the banks have clearly have a chance possibly for account reductions as they get more efficient, you know, you break up the picture of a bank in terms of the front, the middle office and back office. A lot of this is happening more in the back office, but we're even seeing this for many out there with your financial advisor that they are using AI agents to help and better understanding your financial objectives and your portfolios. So, you know, we're in a new world today. Ken Leon, thank you so much. We're in a new world with you. Thank you so much for this first look at the bank earnings to be seen. Stay with us more from Bloomberg surveillance coming up after this. Catch us live weekday afternoons from seven to 10 a.m. Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg business app or watch us live on YouTube. With that question or conversation of the day for so many people who frame out caution given these odd in booming times, Lawrence McDonald years ago held court at various and sundry firms, he enjoyed the collapse of Lehman. He's written any number of books and writes a religiously read bear traps report. What's great about him is he filters in the short-term paper market into great caution about this odd bull market we're living in. His essay of I'm going to think three or four years ago on the mass of money out there was absolutely definitive. He joins us in studio this morning. So it's just saying a Michael ball, I got eight trillion in money market funds, 20 trillion in a repo market, and everything's fine. There's a lot of people besides you go, really? The way you perceive 20 trillion dollars is everything fine? Well, we talk about this in both of our books and one of my favorite indicators is the last saloon the convertible bond market, and when I put you robin, we're just worth nails right? It's a new book. And so whenever you see a proliferation of serial convertible issuers, that's a sign that the high yield market has shut these guys off, or we've, the neoclouds, right? So if the high yield market is saying no mass, it's an indication. And every time this has happened where we've had a fast proliferation, think of fourth quarter. Is it happening right now? It's happening right now. Okay. I'm going to cut you off, because this is two important folks, Jim Chanoes, I'm Bloomberg Money with me and Scarlett Foo, said exactly the same thing, AI, Claude, AI, what's the other one's called? Jet GPD, and the rest, Chanoes in McDonald are looking at neoclouds, discuss that, right? Because the financing mechanism of these banks and bank lending, think of the metas and the oracles, all that bank financing off-energy, the neocloud public bonds are kind of a good leading indicator on that, because that's their accessing. not the bank lending, they're accessing public markets. So if that's tightening, then it's a sign that we may move upstream with a credit problem. So Larry, it smells a little bit like just an asset liability duration mismatch again. We're all waiting for the profitability. It's highly uncertain. Overall, though, is this just exacerbated by now the size of this leverage still being unknown? Every week I come in, there's just a bigger number. Well, tonight we're doing a dinner at the Harvard Club. Lee Robinson's in town, you would love Lee. He's been really bullish in recent years. And what he's seen, what I'm seeing is big family offices are starting to buy tail-risk funds. Right? So we're doing an event there tonight he's speaking. And that would be-- What is that translate for buying a tail-risk fund? Think of like the big short, you can buy credit-to-fall swabs on companies that are exposed to credit, like, say, MetLife, or any one of these large insurance companies. And you burn carry, so you lose-- so you might lose 10% a year, 20% a year, depending on how much leverage. But if we blow, as George Jefferson used to say, this is the big one, Elizabeth, you'll make 800%. OK, I get that. But to the doom crew. That was Fred Sanford. Oh, thank you. Sorry. Oh, correction. Surveillance culture reporter Johnny Tucker with the correction. Larry, but the point is, and I am going to say this for the bulls. I got a lovely note from Doug Cassier, who's on a short list to take over management of the New York Yankees. The basic idea here is crying wolf in the night. When's the win of the caution that so many people fear? How do you know when it's coming? OK, so let's say-- by no means are we-- the bear traps are poor. We're not permanent bears. We actually think the relationship between the index and the night keys and the Lulu's and the Harley Davidson-- the market's already crashed internally. This is a 1987 crash. There's 40 names in the S&P 50 world-class brands. World-class brands that are all down 30% to 70%. And so to me, this setup is they're pinning the index-- and Tom, this is the most important part-- when you have a year where the index is up a lot. And the internals in the market are poor. If you go long a bass, gown names, in the fourth quarter, between now and say June, you'll get much better performance from that group. And I think this is part of the whole passive indexing, and they're creating more dysfunctions year in and year out. So there's just a feedback there, too. There's also a thought that there's just a structural change with ball selling, whether it's to capture the premium or whether it's just zero DTE, then the systemic community is still being relatively long, which is also stabilizing realize ball. How much of that market structure now is making this index grind higher? Well, to your point, it's just carnage underneath. So think about it 10 years ago, multi-strike hedge funds. The amount of pods is probably 30% of where they are now. And the thing about these pods is they have very, very strict risk controls. So they have those types of trades on, they're dorsal, they're long, they're indexed, they're short, they're underlying. And they're all in the same trade. And what happens is if something happens, like we had in June, the one or two gets carted out and the 40 or 50 get carted out. And so that creates this opportunity in volatility. An ample conversation, a real treat on Columbus Day, Lawrence McDonald found her bear traps report is with us here. Look for his books out. You know, is a movie coming out Memorial Day next year? How to listen when markets speak? The only movie I had, I was in the Academy Ward movie called Inside Job, about financial crisis. Well, let's go. I'm going to play off the Wigglesworth book and I'll much more later this week on Robbins just tour to force a required read. There's a point in there, what Jeff Melt of GE calls a Secretary of Treasury, Mr. Paulson and says Houston, we have a problem. Do you worry about that now, or are we just so fat and happy, we're not to a GE capital challenge yet? Well, I'm hearing that behind the scenes, the feds playing tough, now we have CPI Wednesday and that's already a 0.6 month over months, which is a crazy number if you analyze it. But I hear behind the scenes, the feds are a lot more concerned about credit and underlying weakness. So they were out there looking, like they weren't in 2007. Oh, yeah. Well, remember, it was actually, I think, on the full fed board in the spring of 2008. So he was sitting on the deck of the Titanic at the time. Okay, but the bottom line is we had lessons learned, you know, 708. Are you saying as business as usual, greed wins, I got to make a little bit extra yield. So I'm going to do this silliness, is that still where we are, where greed pervades? Yeah, the JP Morgan, 1907, he said there's nothing in this world, which will so violently distort a man's judgment more than the sight of his neighbor getting rich. Right. One of the challenges here is that the actual driver of final domestic demand is really inelastic to where rates are and to hence where policy can move. Right. And then to your point, the feds in this weird position where the punishing main street in the CapEx drive is really pushing up the notional nominal GDP number that we all are impressed with. So I guess, like, where do we see then how, like, is this going to be about, like, these 13 three facility? Like, you know, let's take this, play this out. We get a 10, 50% correction in the SBX. We got credit markets really starting to bleed. There's a lot more pressure. I mean, there's nothing really about cutting rates here. I guess the primary thing, but we're going to have to roll out some stuff. The stat of the week, I think, is the Fed has never hiked rates or started a hiking cycle, I should say, with McDonald's and Home Depot in 30 to 35% draw downs that gets to that your point. So the consumer financial conditions is, like, really tight, whereas corporate slash data center, it's a lot of areas is wide open, except on the core weave. So that's what I mean. I've seen guys, like, if you had a bet right now, Tom, which comes first. 75 Bips of Hikes or 75 Bips of Cuts. I've seen lots of more guys in our Bloomberg chat betting on the cuts. In other words, cumulative. What would come first? OK, so I'm on the cut side. I'm going to shift gears here. A GP Morgan out with a fabulous 50 pages. This AI moment we're living in the back are five appendices on the rear roads, the interstate highways, standard oil of, you know, breaking up, and I believe it was 1911 off the top of my head, the fiber optics that we all lived is, well, Larry, your thoughts on the great bond financing on balance sheet and off balance sheet of AI, I'm sorry, there's ghosts there of another time in place, isn't there? Tom, it's such a game. What happened was, and I was at a Silicon Valley dinner. And what happens is the free cash flow burden, say meta, was so significant a year ago, the projection that they started, they've taken off balance sheet financing from 35 billion to 600, because you know what that does? It protects their free cash flow, and it's double a rated, right, full recourse lending. So they go to the banks against their free, their cash flow from, from Instagram, Facebook, which is juicy. And they can finance these projects, but at the end of the day, they're doing off balance sheet, and they're doing it because they don't want to just, they, they're trying to protect the free cash flow destruction, or what I call incineration. Larry, does it get like more of a COO turn to this whole saga? Right. Where are you thinking about the depreciation these assets? I still never get a clear answer on how these chips are going to hold value on more than a couple of year time-term, because it's moving so fast. Right. That's where I listen to channels. I mean, if you listen to channels from Burry, they're both saying the same thing that this is a depreciation game that they can get away with for, right now, they've been getting away with it for probably five or six quarters, seven quarters. But then each quarter that goes on, it's like, there's, where's the beef, right? And more and more competition from C's, China's obviously making gradient roads there with the production of chips. And now we have to think about the memory side of this as well, which is picking up. So again, it doesn't seem like these are going to be as pristine as collateral, meaning a couple of years out and we have to start pricing that. And think of, think of this, a billionaire investor said this to us in the chat, met out was a world-class oligopoly, right? They've taken, they're burning the, and they're creating products like Muse. Guess what? Amazon's going to have a Muse apple, it's going to be seven Musees. And so they're, they're burning cash and they're actually creating products that are, that have no barriers to it. And this is brilliant. The JP Morgan essay jar goes, thank you so much for being with us the other day. Where's that headline out? John Tucker, I need you to discuss this in your surveillance fast food correspondent. Starbucks says it's not buying Chipotle, Mexican girl. Yeah. It's a sigh relief. CNBC first reported it, but we just got in touch with one of the spokespeople there. Yeah, they say Starbucks is not buying Chipotle. You'll recall Thursday, last week, the financial times, did report that Starbucks had been working with the scientists. I saw cheers in your eyes. On a takeover proposal. Yeah, I was looking for like, I don't know, a breed. I know flavored coffee. That is. That is. That is. But now you know that Mrs. Kennedy got me that pumpkin spice coffee for home. Oh, yeah. We just protest. I'm not, I'm not doing it, Mrs. Keane. No way. John Tucker, thank you for that update on Starbucks and Chipotle. We're with Larry McDonald here on the moment. And the Jared Gross piece, George Gatch in the crew at JP Morgan asset management. They make clear, they don't know who's going to fail or who's going to fail. to win. To me, it's not an analog to 07 away where we had these removable forces that we all knew like Bear Steins and Lehman and that it's hugely dynamic now. If you're in a retirement plan, if Larry, you have to participate in this equity market, how do you do it if you have somewhat of the fear that you articulate? So think about this three years ago, SpaceX and Thropic and OpenAI. We're worth 360 billion. Now it's 5.1 trillion. Now, all by the way, those mark-up and assets are in the S&P 500 earnings from the viperscalers and meta and all these companies and Oracle and and one more so Microsoft. So they're marking up all these positions. So you really have like a one-time event potentially that's that's really distorting the true earning power of the S&P. And guess what? Tom, I think it should be a fiduciary liability slash violation. If you put a 75 or 70-year-old person's money in the S&P, $120,000 of that is in two stocks now, right? It'll be meta. I'm sorry, it'll be Nvidia and Apple, 130,000. And after after after after after after OpenAI gets in and then the these IPOs come in, then 50% of the NASDAQ, 55% is going to be AI. Larry, thank you so much. Larry McDonald with us today, the beer trips at report. You're just a lot to digest there. That is well Larry, thank you so much. I'm Carol Masser. There's probably nothing so closely associated with an MBA as the case study, as Bloomberg's Rob Mandelbaum reports developed at Harvard Business School over a century ago. According to a Bloomberg Business Week survey of global business schools, half of the 56 that responded have either implemented more interactive AI simulated cases or are developing or piloting them. The founder of the AI integration consulting firm Inspire Higher Ed and the author of a report tracking AI at B-Schools says the argument for interactive cases is largely about extending opportunities for students to practice and hone their skills at negotiation, directing teams, crisis management, and more. That's the Bloomberg Tech Minute brought to you by ChatchyPT. Get started at chatchypt.com/work, available with all paid ChatchyPT plans. Comcast business keeps you totally in step, with secure AI back, networking built to power the way modern business gets things done today in more than 100 countries around the world. That's some serious muscle. And get this. Comcast business powers over 90% of the Fortune 500 and millions of small businesses. Behind it all, network engineers, cyber security specialists, support teams, thousands of experts answering your call at 2am, like its 2pm, always on, always ready. For big business, AI opened up a world of promise, but that world of promise turned into a world of pain, to cost spiraling data scattered across disconnected systems, security and governance increasingly complex. AI initiatives struggling to scale, and ROI that remains frustratingly out of reach. The challenge is in AI itself, it's having the infrastructure AI needs to succeed, which is right where Boomi says we got you. Tens of thousands of enterprises trust Boomi to connect data, applications, processes and AI. With Boomi, businesses can eliminate silos, automate workflows, strengthen governance, and create the foundation AI needs to perform at scale. The result, faster innovation, more efficiency, better business outcomes. Boomi turns a world of AI pain into a world of AI gain. As Boomi says, we got you. Head to Boomi.com to learn more. That's B-O-O-M-I dot com. Eastern. We love, love, love to talk to housing economists in the trenches of the housing market. Selma happens wonderful to cutality on that the chief economist. Selma, what do we actually do? What is our behavior in a new bank rate 30 years 7.51 percent? Not like Fed talk or yield talk. What do people actually do? Well, they stop buying homes for one. High boring rates and overall lack of affordability out there in the housing market is really stalling housing market activity. When you look at where home sales are today, they continue to be at some of the lowest levels we've seen, especially adjusted for population growth over the last decades. We are in a really low turn over environment for the housing market and there's really no signals that things are going to improve. Now, a lot of the forecast for 2027, for example, had home sales gradually improving and improvement through the rest of the decade. But we're looking at a different environment now with higher. But if I have to sell, what percentage price am I reducing the home? Does cotality have that number? Yeah, no, we do. So the average price reduction out there is about 3 to 5 percent. That's not that much further away from where we are historically. This is typically, typically, when you look at where a list price is versus sale price, it does come a little bit below that list price on average. So even before we went through this surge in the housing market during the pandemic, in that 2012 to 2019 period, home prices were selling at that 3 to 5 percent discount. So we are still in that range and really it depends where inventory is. So it's about individual markets. So some markets where there's no inventory, home still sell over the asking price. So someone at that point, it seems like then we don't really have a national sort of situation. It's still very regional. Is there like a clearing price you have in mind? For the mortgage rate, they'll start to get this sort of price discovery back on as we like unleashed pent up mobility? Or are you generally thinking it's always just going to be more regional because of what we had post-COVID? Well, honestly, you know, when we had rates coming to low sixes or even when it dropped below six right before the middle east situation, we did have unleashing in many markets. We had stronger demand, even in the markets that were really weak over the last couple of years, they were coming back. I mean, think about over the last couple of years, we've been talking a lot about weakness in Florida and Texas. Those markets were actually coming back when mortgage rates came at six and below. So I think that is that psychological barrier for people. It's definitely not 7 percent. So someone with a prior guess we're talking about how people may be the baby boomer generation starting to sell some of their equity holders. Are we seeing any increasing turning to the HELOX and sort of trying to cash out on that or is it trying to basically be more stable? Well, we have seen increases in HELOX and home equity credits. You know, we are at some of the highest levels where we are at highest levels of equity people ever had. I mean, we were a little bit higher a couple of years ago before some of these price resets, but you know, people on average have about $310,000 in equity markets like New York, you know, California, Washington state is as much as $600 to $800,000. So people have a lot of equity. And because of that lack of ability or mobility to go somewhere else, they are investing in their home. So we're seeing increases in tapping into the equity on average. Unfortunately, only about 2 percent of that equity has actually been tapped into because people are still worried about very high borrowing costs. We're wearing your head. We got to go, but wearing your head, Selma, is the mortgage rate where it becomes painful or price moves, etc. Is it 7.75? Is it 8 percent or is it some silly number higher? Well, you know, when we reached 8 percent, I want to say that was in 2024. We did see more significant slowdown in home prices. We are seeing some slowing right now, but at the national level we're still positive, right? But I think 8% is the point at which more markets start to deteriorate. Okay, Salma, thank you so much. Something up with cutality. This is the Bloomberg Surveillance Podcast available on Apple, Spotify, and anywhere else you get your podcasts. Listen live each weekday 7 to 10 a.m. Eastern on Bloomberg.com, the iHeartRadio app, tune in and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg terminal. What you probably didn't dream about, keeping up with cyber threats. That's where master card can help. With access to tools that help identify cyber threats to better protect your business. Building a dream business priceless. For cyber security in a changing world, there's master card. 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