Upward Pressure on Yields and Equities

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1:25This 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 Citigroup over the years and 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.

2:07I 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, kind of points to getting closer to things breaking, but not being at that point yet. In the near term, you've got bond yields backing up. And 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.

2:50And 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. Matt, how important is the rate of change here? I mean, it's been fast at 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 U.S. specific? Some people like to say it's the level, but 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.

3:22But there, too, it's not really consistent. What I would say, and even when you start looking at real yields rather 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. But we're not at that point yet. And that's a mixture of the earnings continuing to be strong, but also people who are having been educated to buy on dips over the last couple of decades.

3:58But 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.

4:35And 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 there. So we're looking a little more collateral heavy cash light again, the repo market 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.

5:04But how's that going to be affecting sort of rate volatility then? And is this really something that can come up out of 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 provide a 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 kind of liquidity shocks. And everything ends up correlated. This is really important, folks. What you heard was a jargon-laced Michael Ball. John Tucker, I think that Tito's and Tang is working in right now.

5:41I mean, he had like six jargon items in that question to Matt King. 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 on to 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 is the difference now, as you say, that we're talking about a ginormous mass of money, which is hinging together all this modern finance?

6:23What does that signal the sheer magnitude of it? it's prudely 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 dollars in terms of the repo understandings and while that's going on, it does lubricate markets. It does help with financing trades with both the basis trade and treasuries and also equity financing trades. But there's also a vulnerability that comes as part of that.

7:12I 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. Thank you. 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. Right. 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 starting to get a bit more in terms of bond volatility, but day-to-day volatility in things like equities remains really very low.

7:57Right. 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 Satori investment. Stay with us. More from Bloomberg Surveillance coming up after this. If you invest or lead a business, one-sided views aren't enough. Join me, Brad Rogoff, and my team at Barclays Research as we debate what's driving markets on the Flipside podcast. Find the Flipside wherever you get your podcasts.

8:39With ChachiBT, you can do more than get answers. You can get things done. When you're running a business and looking to expand, you need a clear view of the landscape before making any decisions. ChatGPT can help you prepare. Connect your Google Drive, point to relevant files and reports, and ask Chat to research competitors, industry forecasts, and market signals. It can turn the findings into a strategic deck in your team's template that you can review before presenting to your leadership team. Growing a business is ambitious, and ChatGPT can help you do it with confidence. Get started at ChatGPT.com.

9:20You're listening to the Bloomberg Surveillance Podcast. Catch us live weekday afternoons from 7 to 10 a.m. Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business App. Or watch us live on YouTube. So you jump right away to the expertise of Ken Leon on our first look at the banker. And he's, Ken Leon, 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 as it relates to risk and reward. The bank stocks have pulled back. The valuation seemed more reasonable than they did before they started to correct in the middle of August.

10:06We see opportunities clearly related to the capital markets and investment banking. Interest rates, Tom, we are at a level that we have not seen working together over two decades. And the opportunity, of course, is can the bank still generate strong earnings, to your question, for the third quarter? And importantly, directionally give for the fourth quarter confidence about their ability to continue to deliver strong performance. Off of what we just talked to Matt King about, and of course, Larry McDonald, the 9 o 'clock hour, VAR, folks, V-A-R, is a measurement of the risk taken by the banks.

10:49Do you expect to see expanded or contracting VAR? Is the banks look at the mess we're in? It'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 give durable, recurring fee income that generates stable earnings and drives higher earnings multiples. That is the book, whether you're Goldman Sachs, J.P. Morgan, or any of the large banks. I look at this, and Michael Ball, I want you to jump in here.

11:34I just look at the J.P. 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 kind of pullback as the rate sensitivity and the credit concerns picked up. But I don't think we're going to see that validate in the earnings. And actually, I'm just going to switch gears to some of the information that I always look for here. Oh, John Tucker, is Michael Ball allowed to switch gears? I believe he just did. Okay, thank you. Continue. Well, the insight into the consumer is always great. And I remember specifically Q2, the Bank of America's CFO saying there was no K economy.

12:06A 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 and 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 loan loss 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 banks do.

12:49So 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 quality in the third quarter. With us, 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. Ken, I think you make a good point there. That's interesting because everyone's talking about this muse, agentic AI adoption of finding cheaper pricing, but obviously will also affect how consumers see their saving rates and their money markets and all their options there.

13:30Are they going to have to acknowledge this sum of management? Are they going to have their own competition there? There is competition and we're seeing, 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. And all these give you just great opportunities for capturing higher CV rates or just moving money around. All right. Well, that's kind of where my eyes are as well, because that competition obviously going to affect the margins.

14:12And it's interesting that everyone has their 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 headcount 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.

14:57So, 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.

15:19you're listening to the bloomberg surveillance podcast catch us live weekday afternoons from 7 to 10 a.m eastern listen on apple carplay and android auto with the bloomberg business app or watch us live on youtube without question our conversation of the day for so many people who frame out caution given these odd and booming at 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.

16:02His 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 I was just saying to Michael a ball, I got$8 trillion in money market funds,$20 trillion in the repo market, and everything's fine. There's a lot of people besides you who go, really? The way you perceive$20 trillion, 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. which robin wickersworth nails right there's new book yeah 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 core weave uh the neoclouds right so if the high yield market is saying no mas it's an indication and every time this has happened where we've had a fast proliferation think of fourth quarter is Is it happening right now?

17:08It's happening right now. Okay, I'm going to cut you off because this is too important, folks. Jim Chanos on Bloomberg Money with me and Scarlett Fu said exactly the same thing. AI, Claude, AI, what's the other ones called? Chet, GPT, and the rest. Chanos and McDonald are looking at NeoCloud. Discuss that. Right, because the financing mechanism of these banks and bank lending, Think of the Metas and the Oracles and all that bank financing off balance sheet. The neocloud public bonds are kind of a good leading indicator on that because they're accessing not the bank lending, they're accessing public markets.

17:51So 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. And overall, though, like, is this just exacerbated by now, the size of this leverage still being unknown? We just 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.

18:25Right. So we're doing an event there tonight. He's speaking. And what does that translate? All that means is think of like the big short. You can buy credit default swaps on companies that are exposed to credit, like say MetLife or any one of these large insurance companies. And you burn carry, 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%. Okay, I get that. But to the Doom crew. That was Fred Sanford, by the way. Oh, thank you. Sorry. Surveillance culture reporter John Tucker with a correction.

19:07Larry, 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 the short list to take over management of the New York Yankees. The basic idea here is crying wolf in the night. When's the when of the caution that so many people fear? How do you know when it's coming? Okay, so let's say, by no means are we bear traps, but we're not perma bears. We actually think the relationship between the index and the Nikes and the Lulus and the Harley Davids, 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%.

19:53And 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 along a bass down 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 Larry, just to piggyback that too, there's also a thought that there's just a structural change with vol selling, whether it's to capture the premium or whether it's just zero DTE.

20:29Then the systemic community is still being relatively long, which is also stabilizing realized vol. 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-strand hedge funds, the amount of pods was 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 there. They're also long in their index. They're short in their line. And they're all in the same trade. And what happens is if something happens like we had in June, one or two gets carted out, and 40 or 50 of them get carted out.

21:04And so that creates this opportunity and volatility. In ample conversation, a real treat on Columbus Day, Lawrence McDonald, founder of Bear Traps Report, is with us here. Look for his books out. 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 Award movie called Inside Job about the financial crisis. I'm going to play off the Wigglesworth book, and I'll much more later this week on Robbins. Just tour de force, a required read. There's a point in there where Jeff Immelt of GE calls the Secretary of Treasury, Mr. Paulson, and says, Houston, we have a problem.

21:45Do 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 Fed's playing tough. Now, we have CPI Wednesday, and that's already a 0.6 month over month, which is a crazy number if you analyze it. But I hear behind the scenes, the Fed's a lot more concerned about credit and underlying weaknesses. So they're out there looking like they weren't in 2007. Oh, yeah. Well, remember, Warsh was actually, I think, on the 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 in 07-08.

22:26Are 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 and And then to your point, the Fed's in this weird position where they're punishing Main Street in the CapEx drive is really pushing up the notional nominal GDP number that we all are impressed with.

23:09So I guess, like, where do we see then how, like, is this going to be about, like, these 13-3 facilities? 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, would be 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 percent drawdowns. That gets to your point.

23:38So the consumer financial conditions is like really tight, whereas corporate slash data center, a lot of areas is wide open, except on the core weave. So that's what I mean. I'm seeing guys like if you had a bet right now, Tom, which comes first, 75 bips of hikes or 75 bips of cuts. I'm seeing lots of more and more guys in our Bloomberg chat betting on the cuts. In other words, cumulative. What would what would come first? 75 bips of hikes or 75 bips? So I'm on the cut side. I want to shift gears here. J.P. Morgan out with a fabulous 50 pages on this AI moment. We're living in the back of five appendices on the railroads, the interstate highways, standard oil of breaking up.

24:27And I believe it was 1911 off the top of my head. The fiber optics that we all lived as 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 and 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 burn, say, meta, was so significant a year ago, the projection, that they started, they've taken the off-balance sheet financing from$35 billion to $600 billion. Because you know what that does? It protects their free cash flow.

25:09And it's AA rated, right? full recourse lending so they can go to the banks against their free their cash flow from from instagram facebook which is juicy and they can finance this these projects but at the end of the day they're doing an 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 so larry is getting like more of a coo turn to this whole saga where are you thinking about the depreciation of these assets i still never get a clear answer how these chips are going to hold value on more than a couple year time frame because it's moving so fast right that's where i listen to chanos i mean and if you listen to chanos and 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 probably five or six quarters seven quarters but then each quarter that goes on it's like this where's the beef right more and more competition from overseas china's obviously making great inroads there with the production of chips and now we have to think about the memory side of this as well, which is picking up.

26:09So again, it doesn't seem like these are going to be as pristine as collateral, maybe a couple of years out. And we have to start pricing that. And think of this. A billionaire investor said this to us in the chat. Meta was a world-class oligopoly, right? They've taken, they're burning the cash, and they're creating products like Muse. Guess what? Amazon's going to have a Muse. Apple's got, there's going to be seven Muses. And so they're burning cash, and they're actually creating products that have no barriers to entry. This is brilliant. In the J.P. Morgan essay, Gerard Gross, thank you so much for being with us the other day.

26:41There's a headline out. John Tucker, I need you to discuss this since you're surveillance fast food correspondent. Starbucks says it's not buying Chipotle Mexican grill. Yeah. It's a sigh of 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 of last week, the Financial Times did report that Starbucks had been working with advisors on a takeover proposal. Yeah, I was looking for, like, I don't know, a burrito-flavored coffee. That is disgusting. But no. Do you know that Mrs. Keene got me pumpkin spice coffee for home?

27:23Oh, yeah. I just refused to protest. I'm not doing it, Mrs. Keene. 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, and the crew at J.P. Morgan Asset Management, they make clear they don't know who's going to fail or who's going to win. To me, it's not an analog to 07, 08, where we had these immovable forces that we all knew, like Bear Stearns 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?

28:10So think about this. Three years ago, SpaceX, Anthropic, and OpenAI were worth$360 billion. Now it's$5.1 trillion. Now, oh, by the way, those markup and assets are in the S &P 500 earnings from the Vibrascalers, Meta, and all these companies, and Oracle, and more so Microsoft. So they're marking up all these positions. So you really have like a one-time event, potentially, that's really distorting the true earnings 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?

29:00It'll be Meta. I'm sorry, it'll be NVIDIA and Apple,$130 ,000. And after OpenAI gets in and 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 Bear Traps Report here. Just a lot to digest there as well. Well, Larry, thank you so much. Stay with us. More from Bloomberg Surveillance coming up after this. With ChatGPT, you can do more than get answers. You can get things done. When you're running a business and looking to expand, you need a clear view of the landscape before making any decisions. ChatGPT can help you prepare.

29:47Connect your Google Drive, point to relevant files and reports, and ask chat to research competitors, industry forecasts, and market signals. It can turn the findings into a strategic deck in your team's template that you can review before presenting to your leadership team. Growing a business is ambitious, and ChatGPT can help you do it with confidence. Get started at chatgpt.com. Running a small business takes everything you've got. But with Chase for Business, you're not alone. They bring together local support and a broad range of resources to more than 7 million customers. With a deep understanding of your day-to-day needs, they provide products and guidance built to help you thrive.

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31:14You're listening to the Bloomberg Surveillance Podcast. Catch us live weekday afternoons from 7 to 10 a.m. Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business App. Or watch us live on YouTube. We love, love, love to talk to housing economists in the trenches of the housing market. Selma Hepp is wonderful at Quotality 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 home homes for one you know really the high borrowing rates and overall uh lack of affordability out there in the housing market is really stalling housing market activity.

32:10When 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. So we're in a really low turnover environment for the housing market. And there's really no signals that things are going to improve. Now, a lot of the forecasts 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 for longer. But if I have to sell, what percentage price am I reducing the home? Does totality have that number?

32:53Yeah, no, we do. So the average price reduction out there is about 3 % to 5%. And honestly, that's not that much further away from where we are historically. This is typically, you know, 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 % 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 is no inventory, homes still sell over the asking price.

33:39So someone to that point, you know, 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 that will start to get this sort of price discovery back on as we like unleash pent up mobility? Or are you generally thinking it's always just going to be more regional because of what we had post COVID? it? Well, honestly, you know, when we had rates coming at two 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.

34:18I 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%. So some of the prior guests were talking about how people, maybe the baby boomer generation, starting to sell some of their equity holders. Are we seeing any increasing turning to the HELOCs and sort of trying to cash out on that? Or is the trend basically being more stable? Well, we have seen increases in HELOCs and home equity credits.

34:54We are at some of the highest levels where we are at highest levels of equity that 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 ,000 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 homes. So we're seeing increases in tapping into the equity. On average, unfortunately, only about 2 % of that equity has actually been tapped into because people are still worried about very high borrowing costs.

35:41Where in your head, we got to go, but where in your head, Selma, is the mortgage rate where it becomes painful or price moves, etc. Is it 7.75? Is it 8 % or is it some silly number higher? Well, you know, when we reached 8%, 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. Salma, with Catality. This is the Bloomberg Surveillance Podcast, available on Apple, Spotify, and anywhere else you get your podcasts.

36:27Listen live each weekday, 7 to 10 a.m. Eastern, on Bloomberg.com, the iHeartRadio app, TuneIn, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg Terminal.

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