Morning Brew Daily - Powell’s Job in Limbo? & Your 401K May Be Open to Private Markets

Episode Date: July 17, 2025

Episode 628: Neal and Toby discuss the reports of Trump getting ready to tell Fed Chair Jerome Powell to pack his desk and skedaddle. Then, an executive order from the President may open up 401(k)s to private markets. Also, Ford is issuing another recall…seems to be a recurring issue. Plus, it’s Neal’s Numbers on the Labubu craze, air conditioning in Europe vs. the US, and obesity.  Meet your local home loan expert at ⁠⁠https://mortgagematchup.com/?utm_source=morning_brew&utm_medium=podcast  Subscribe to Morning Brew Daily for more of the news you need to start your day. Share the show with a friend, and leave us a review on your favorite podcast app. Listen to Morning Brew Daily Here:⁠ ⁠⁠https://www.swap.fm/l/mbd-note⁠⁠⁠  Watch Morning Brew Daily Here:⁠ ⁠⁠https://www.youtube.com/@MorningBrewDailyShow⁠ 00:00 - Dog adoption surges thanks to ‘Superman’ 3:10 - Powell’s on the hot seat 9:15 - 401Ks could go private 12:10 - Ford Recalls 18:00 - Labubu's rise 20:20 - Euro AC vs US AC 22:20 - Obesity Study 25:30 - Coke real cane sugar Learn more about your ad choices. Visit megaphone.fm/adchoices

Consider this comparison. PWC data found the percentage of CEOs who report revenue gains or cost reductions from AI is almost equal to the percentage who say they're still stuck. What separates these two groups? PWC points to a clarity issue. Even for CEOs, it's hard to tell what's AI hype, what's reality, and where this tech can make a tangible difference. Learn where AI can actually make an impact and what successful adoption looks like at

pwc.com slash U.S. slash brew AI. That's pwc.com slash us slash brew AI. Good morning brew daily show. I'm Neil Fryman. And I'm Toby Howell. Today, the drama over Jerome Powell's job security

keeps on escalating. Will Trump really give him the pink slip? Then Ford just broke an automotive record for the most recalls ever issued in a calendar year. It's Thursday, July 17th. Let's ride. So people may have mixed feelings

about the new Superman movie, but they are totally in love with a new character the film introduces to the DC universe, the Super Dog Crypto. Superman's scene-stealing foster dog has led to a spike in interest for dog adoption in the real world, with Google searches for Adopt-a-dog near me, jumping 513% in the days following the release of the movie. The dog training app Woofs with Z, which compiled the data, sent a note of caution to all the hopeful dog parents saying adoption is a real commitment. The hype will fade, but your dog will stay.

So make sure you're ready to give them the time, care, and training they need and deserve. Toby, this dog is pretty cute. He's very cute. According to Woof's findings, users even search for crypto. That's the dog's name. Breed specifically. And that breed is CGI. No, I'm kidding.

The dog was entirely made of CGI, but he is modeled after James Gunn, the film's director's own rescue dog, Ozu, who looks like a mix of a schnauzer and a terrier mutt. apparently this is the backstory. While the director was writing the film and creating the film, he was having trouble training this dog, Ozu, and wondered how much worse it would get if Ozu actually had superpowers. Hence, crypto, the super dog making it into the film. Very cute.

I've only seen the trailers, but he does fly around really quickly. So if you're in the market for a dog, maybe look at the terrier mutt and schnauzer mix. Now a word from our sponsor, Mortgage Matchup. Hey, Neil, what's something you can do really fast? You ever see me eat a whole rotisserie chicken? No. That's because it happens like that. That is terrifying.

For speed, I think of a mortgage matchup powered by United Wholesale Mortgage. They can connect you with a mortgage broker like that. Brokers can offer a loan process that's optimized for a faster clear to close. Their licensed professionals can shop on your behalf and give you access to more home loan options like conventional. 1% down purchase, VA loans, jumbo, and more. They've saved borrowers thousands of dollars. So check out MortgageMatchup.com to speak to a real home loan expert from the comfort of your own home. That's MortgageMatchup.com. And in the meantime, I'm going to watch Neal Shotgun an entire chicken. Quick disclaimer, United Wholesale Mortgage LLC, Equal Housing LLC,

equal housing lender, NMLS, number 3038, licensed in all 50 states in the District of Columbia. Jerome Powell's role as Fed Chair is more precarious than ever, following a day of conflicting messages over whether President Trump would fire him imminently. Around noon, multiple outlets reported that Trump told a group of House Republicans that he would try to fire Powell soon, according to an unnamed White House official. He even allegedly drafted a letter relieving Powell of his duties and waved it around as he pulled the room if he should do it. The response from lawmakers was enthusiastic. Less than an hour later, Trump denied he would try to fire Powell telling reporters, we're not planning on doing it, but I think it's highly unlikely

unless he has to leave for fraud. Still, Trump continued to bash Powell for not cutting interest rates, saying, I was surprised he was appointed, apparently forgetting that he was the person who appointed Powell in 2017 for a term that runs through next May. While many presidents have criticized the Fed Chair for keeping rates high, none has attempted to fire them before. Central Bank Independence is considered an essential ingredient of America's world-leading financial markets because it allows the Fed to make decisions based on what they believe will

be good for the economy long term and not joshed up for elected leaders while they're in office in the short term. Even as Trump denies he's going to fire Powell, and he legally can't do that without cause, his team has been laying the legal pretext for doing so. In the past two weeks, they began to criticize Powell for an HQ renovation project that went over budget, accusing Powell of mismanagement and lying to Congress. Toby, the drama has reached a fever pitch with potentially global markets at stake. Yeah, let's talk a little bit about the market. because in this chaotic half hour when that Bloomberg report first surface, markets dipped a little extremely and then actually finished up yesterday after their brief downward tour. Speaking of other markets, I went to the prediction markets, polymarket and Kalsi to see how they were processing the news.

And odd shot up to 40% that Powell would not finish his turn before, again, settling back down in that 20% range. The prediction markets actually also moved in lockstep with the 30-year Treasury. yield. If you overlaid them on each other, they basically followed the same spike and then settling down as investors kind of sold off these long-term bonds. Right now, looking at both of the prediction markets, it looks like they are sitting at about 80 percent that Powell does finish its term. So take it all in the whole, a lot of uncertainty for about a half an hour, and then everything kind of settled right back where it was before these reports came out. Well, it's kind of a natural experiment about what would happen if Trump does move to fire Powell,

and that is looks like the stock market would sell off. I mean, S&P 500 did move down three quarters of a percentage point, which is a significant downturn. And then as soon as Trump denied it, it went right back up to where it was. Bonds also sold off during that interim period. And that's why economists and even banking CEOs have come out and said,

we do not want this to happen. Central Bank Independence is a core, it's core to the entire American financial system because when you make economic decisions or monetary policy decisions for the short term, like lowering interest rates in a somewhat inflationary environment, as we talked about yesterday, then you risk sending inflation higher over the next few years. It's exactly what you don't want to do and why there's this church and state separation that's been creative over decades and centuries between the central bank and the executive branch. Let's talk about the renovation. What

is going on with the Fed's renovation project. It was actually approved back in 2017. It was originally supposed to cost $1.9 billion. Those costs have swelled to $2.5 billion because of unforeseen construction conditions like more of asbestos than anticipated toxic contamination in the soil, stuff like that. This was a nothing burger for a long time. I mean, only people who were paying very close to intention to Fed disclosures even pick up on it. But a Trump aide found it, and they're now using it as this attack vector. Most people say that they don't have a great legal case here. It's not like it's going to go through the courts and Fed will be ousted that way.

But a lot of analysts are saying this is a war in the court of public opinion right now. If you can put enough social pressure that the Fed is being irresponsible, physically irresponsible right now in a time of a dicey economic time, that might make Powell eventually step down. So it's almost like socially pressuring them rather than legally pressuring them with this renovation angle. And in the court of public opinion, Powell did have a major defender earlier this week, JP Morgan CEO, Jamie Diamond, during his company's earnings call, kind of went on a non-sequitur

towards defending Powell, saying playing around with the Fed can have adverse consequences, the absolute opposite of what you might be hoping for. So that's Diamond coming to the defense of Powell and saying, Trump, this is something you don't want to touch because the financial markets will sell off in a big, way. You want yields to go down because you want borrowing costs to go down. But if, as we saw yesterday in that natural experiment, yields spiked, and that leads to higher borrowing costs. So that's what Diamond is talking about, the absolute opposite of what you might be hoping for. Other reports suggest that Trump is not planning to fire Powell. He's just trying to bully him and troll him

because he just wants to make life miserable. But if you think Powell will be, uh, will acquiesce to that and resign as Fed Chair under this bullying, then don't think that at all. Because as Powell told reporters during his first term, I will never, ever, ever leave this job voluntarily until my term ends under any circumstances. None whatsoever. You will not see me getting in the lifeboat. It doesn't occur to me in the slightest

that there would be any situation in which I would complete my term other than dying. So I'm going to use that quote if my boss ever tries to fire me. Pretty clear. Let's move on. Most private things should not be accessible to the public. DEMs, affairs, the score of Neil and I's, last pre-show game of ping pong, but private equity is scrambling for access to public markets,

and according to a report from the Wall Street Journal, the government is working to make it happen. President Trump is reportedly closest signing an executive order that would give 401k's access to private market investments. What does that mean exactly? Normal everyday investors like you and me would get to participate in deals usually only enjoyed by Patagonia vest wearing types, but for the vest wares, they might be getting a better deal. Big man of of private assets like Apollo and Blackstone want access to the money scrolled away in your 401k's. It's crazy to say, but typical institutional investors like big pension funds with trillions of dollars have already invested all they can in private markets and are all but

tapped out. Meanwhile, US defined contribution plans, aka retirement accounts, held $12.4 trillion in assets at the end of 2024, and that is a tasty pot of gold at the end of the mom and pop investors rainbow for PE. Neal, there are plenty of pros. and cons to this plan. But the gist is that everyday investors should have the same access as institutions to the large portions of the economy that remain privately held. Yeah, right now, if you look at the composition of your 401k, it's going to be pretty much exclusively stocks and bonds. Right now, fewer than one in ten plans offer any kind of alternative investment. And when we're talking alternative investments, it's anything other than stocks and bonds, real estate, private companies,

companies that haven't gone public yet, infrastructure, things like that, that is where you don't have exposure to. And if you listen to the private equity giants, they're saying, hey, you should be diversified beyond stocks and bonds in your retirement account. You're missing out on some serious returns here. That's the pitch they're making to 401k overseers. Meanwhile, there is some pushback to this saying, well, there's a reason that they're in stocks and bonds. Those are the safest investments. You don't want to mess with your retirement account. Private equity has, higher fees, it is more risky, it is less liquid than stocks and bonds. There's a reason that private equity hasn't been in your 401k, and we should keep it that way. The other risk, as Dan Primack

from Axios wrote, is that there's a big information gap between, you know, the private LPs and the public everyday investor, while portfolio companies will get stuff like the financial, strategy shifts, key information, that will all be kept from retail investors. So if something went south, which oftentimes it does. I mean, these are still risky investments. What if fraud happens or what if something else happens? Mom and pop investors would likely be the last ones to figure out about that. And they might start panicking a little bit.

Private equity might not know what it's getting into there. If there is a meltdown in retail investors come clamoring, that can just be a big headache, a big scandal for the industry as well. So even though it seems like a really good idea on the surface, dig down a little bit and there are some cons. But this horse must. might have already left the barn because the 401k giant Empower is already starting to allow private credit equity and real estate in some of the accounts. It administers later this year. They made that announcement

in May. And then if President Trump signs this executive order as he's reported to, it would just kind to open the floodgates for all these 401k companies to offer private equity. That might be exciting for some people if you're looking at what you're investing for your retirement account. Or it might be a little spooky and you'd just say, I'll stick with the safe stuff. In a tough car market plagued by tariff-induced headaches, Ford has set a record to forget. It has issued more safety recalls in the first six months of the year than any car company ever has in a full year. Yes, with just half the year elapsed. Ford is already number one with 89 recalls issued so far.

A recall occurs when either the manufacturer or the National Highway Traffic Safety Administration identifies a safety issue or defect that doesn't meet federal standards. when that happens to manufacturer is required to inform affected owners and provide a free repair to fix the problem. And Ford has been ripping recalls recently. In fact, its recall count is more than the next five automakers combined. Ford has said that this count looks a little worse than it actually is because 33 of those have been tied to safety issues that extend back to last year as part of a continuing safety audit. Still, the issues have been wide-ranging and pervasive. It's most recent recall dealt with a faulty fuel pump affecting 850,000 models. Another recall involving rearview mirrors affected 1.1 million vehicles. And a lot of them are simple benign things that can be solved with a software update.

But all the recalls have involved either a rearview camera, steering controls, braking system, seats, and door trims, among other things. The strategy seems to be iron out these issues now, Neil. Maybe take a reputational hit in the process, but raise quality levels so you can reap the long-term rewards. In the meantime, though, that is a lot of recalls. It is a lot. I mean, the most recent one happened yesterday, so that 89 count is already dated. They are recalling almost 700,000 vehicles over an issue in over cracking in a particular part that could potentially leak fuel into the engine and cause fires.

Now, listen to this corporate spin. So if you're in the PR industry, take notes. Ford said that the increase in recalls reflects our intensive strategy to quickly find and fix any hardware and software issues. and go the extra mile to protect customers. They're saying we are beefing up our inspections now to prevent more problems down the road. And that may be true. Jim Farley, the CEO, said improving quality and rehabbing this reputation as a recall monster

because they have been one or two since 2020. They are known to have some safety issues. They are beefing up these teams and trying to root out any problems so that over the long run, they will have fewer recalls and hopefully never break. their owned record. 70% of executive annual bonuses are now directly or tied, tied directly or indirectly to quality. They hired a qualities are back in 2022. So this is a big push for them to, to, you know, have this be the last time we talk about a Ford recall. I know. And we're talking a lot about Ford, but in general, recalls across the auto industry have been arising. There was more

than a thousand recorded last year compared to about 800, a decade earlier. So it's been creeping up slowly over time. And again, a lot of these are relatively minor issues where like a light isn't working inside or a sun visor isn't coming down how you want them to. Some are major, though, like exploding airbags, break failure. So when you hear recall, it does encompass a lot of different safety issues. And Ford is trying to say that most of these were just fixing via software update. We've been looking at them for a long time. And dealers have kind of echoed that saying like, hey, I'm glad that they're doing that. Now I'm comfortable with what they're doing. I think they're handling this the correct way.

So tough to make these headlines, though, because they're running up the numbers. We're six months into the year, and they're already set in records. Up next, deal has three numbers that are going to blow your mind. Welcome to Neal's numbers, the segment where I share three stats from the week's news that will turn you into a walking chat GPT. My first number puts some hard stats to the Laboooooooo toy craze. And let me tell you, folks, we haven't seen a gross spurt like this since Toby in seventh grade. Pop Mart, the Chinese company that makes a lot of the Chinese company that makes a little bit.

Libubu's is projecting that over the first six months of this year, revenue grew at least 200%, that means triple, and profit jumped at least 350%. Potmar attributed the astonishing gains to increase global awareness of its brands and IP. That's the understatement of the century. Labibu Mania has taken over the world as Gen Z and Millennials Scramble for the plush toy, which resembles an elf-type creature with spiky teeth. The collectible craze has been fueled by celebrities such as Rihanna and Kim Kardashian, showing off their Labubus, as well as a creative distribution tactic in which Labubus are sold

in blind boxes, so there's a surprise waiting for you in every package you open. And while Labibu's launched in China in 2019, 2025 was the year they took over the world. In June, Labubu sales in the U.S. were up by 5,000 percent compared to a year earlier, according to estimates from M Science, whose analysts said, I have not seen anything like this from other toy companies. Pop Mart stock has skyrocketed in tandem with sales. Shares are up on about 600% over the last 12 months, and its market cap of over $40 billion is greater than the combined value of Sanrio, Hasbro, and Mattel combined the company is making Hello Kitty Transformers and Barbie. Toby, have you caught Labibu fever? No, I still don't like these freaky little things.

I don't get it. I look at them on celebrities' handbags. I go, why are we wearing this? But maybe I just don't understand. I think the real question that investors are asking right now is, is this a flash in the pan or does it become Barbie? I mean, Barbie has endured over generations and it drives consistent revenue year over year. Is Labibu going to become one of those iconic figures like a Hello Kitty like a Barbie? And who knows? It does face some headwinds in China as well. Chinese state media issued this kind of proclamation saying that they want to crack down on businesses that are enticing young children to spend excessively on, quote, blind cards and mixer e-boxes. If you read between the lines here, what is driving a lot of Lubbubu sales?

It is these mystery boxes. They didn't specifically mention Pop Mart. And Pop Mart shares did briefly dip, but then have kind of returned to their same record highs. That is something else to look forward. This regulatory environment may be cracking down on their growth. My second number is the staggering health divergence between an air condition society and one that mostly shuns AC. According to the Financial Times, between 2000 and 2019, an average of 8,000. 83,000 Western Europeans lost their lives each year from extreme heat compared to 20,000 North

Americans. The writer John Byrne Murdoch chalks this up to North America embracing AC as a miraculous invention needed for a productive and healthy society, while Western Europe's regulations disincentivize the adoption of air conditioning over climate change concerns. The lack of air conditioning in Western Europe has become headline news this summer as a record-setting heatwave stocked Western in Southern Europe. And data from a 2024 study show that low adoption of air conditioning has meant Europe's death rates climb far more steeply than the U.S. during periods of intense heat. Just look at two cities, London and Portland, Oregon. The two experienced the same amount of heat, but 79% of households in Portland have air conditioning compared to less than 5% of people living

in Britain. Paris is a little bit better, but not much. About 25% of French homes had air conditioning in 2020, but that's compared to 90% of American homes. Toby, the data show that once indoor temperatures rise above about 75 degrees Fahrenheit, humans start to suffer in terms of cognitive performance and worker productivity, and it becomes a life or death issue during hot nights, which are becoming even more frequent. A growing number of critics are telling Europe to get its act together. I had no idea that it was such a cognitive performance decrecer. If you look at US high school scores on tests, they dip dramatically during hot days. And then if you extrapolate that, if you live in a hot climate that doesn't have air conditioning and your test scores have an

impact on your future, it does start to ripple through your entire country, through your entire generation, really. And I go back to Singapore. They've had this kind of remarkable turnaround in the 20th century. And their premier said that one of the big reasons for it was air conditioning. They installed air conditioners in government offices. And they said that's been a key to increasing Singapore's efficient civil service. So it sounds like you complain, like, ah, the air conditioning's out, but it really does have very dramatic impacts, not just on health outcomes, but also educational outcomes, government outcomes. It is a big issue. For my final number, here is a question. Who do you think burns more calories per day? A desk worker in New York or a Haza hunter gatherer in Tanzania?

The surprising answer is, there is no difference at all. In a major new study published this week, a team of scientists found that total daily energy expenditures were roughly the same across 34 countries or cultural groups at varying levels of economic development, from South American tribes to European suits. The goal was to resolve one of the great debates of obesity. Why do wealthy, highly industrialized countries have higher obesity rates than hunter-gatherers, herder farmers, and others in less developed countries? Is it the gap in physical activity, or is diet more to blame? Or is it a combination of both? This study aims to put the argument to bed, showing that people burn the same amount of calories

no matter where they live and in what type of society. So the divergence, then, must be explained by a difference in what we eat. The researchers looked into the diets of some subgroups in the study and found a strong correlation between the percentage of daily diets consisting of ultra-processed foods, or quote, industrial formulations of five or more ingredients and higher body fat percentages. Toby, what do you make this? Are you surprised? I was very surprised like this because just long.

Logically, you would think the desk worker would burn fewer calories than someone, you know, walking around and being on their feet all day. But to be clear, this study doesn't mean that exercise is unimportant. Exercise is still, you know, correlated with good outcomes. It's essential for health. Strong link between muscle density and longevity. Same with cardiovascular health. So it's not saying do not exercise.

It is just saying that our bodies do a very interesting thing and monitor our energy expenditure throughout the day and keeps it in a pretty narrow range. So even if you are training for a marathon or just sitting at your desk, if you are doing that marathon training, what your body will do is shut off or slow down some of these less important, some tangential biological processes. One that the article mentioned was growth. It will just start devoting less of your energy resources to, you know, growing. And that is just a fascinating thing that your body does. It just self-regulates and doesn't go too far one way or another. And so, yeah, the implication to it is that diet is the main reason for. higher obesity levels. Yeah, their bottom line was that increased energy intake has been roughly 10 times more important than declining total energy expenditure in driving the modern obesity crisis. So a very interesting study there. Now let's sprint to the finish with some final headlines. Just one headline today. President Trump is a Diet Coke fanatic to the point where he

has a button installed in the Oval Office that he can press to have one brought to him. And he is pushing Coca-Cola to change one of his favorite beverages to taste better. Yesterday, Trump, said that Coke had agreed to use real cane sugar going forward in its drinks sold in the U.S. U.S. Coke is typically Sweden with high fructose corn syrup, but in other countries like Mexico, the UK and Australia, already use cane sugar. While American cane sugar producers are no doubt celebrating, corn farmers are less than enthused to be replaced with the Corn Refiners Association President John Bodie issuing a statement saying it will cost thousands of American food manufacturing jobs. Neil, he does have a point. This might lead to a boost in U.S. sugar imports.

It might because right now U.S. cane sugar production is expected to account for about 30% of our sugar supply. The remainder comes from sugar beats and imports from Mexico and other countries. I'm not surprised that the corn syrup guy is ticked off about this. I think a lot of people would be very excited about this. There is a halo around Mexican Coke because he uses real cane sugar. People think it tastes a lot better. I happen to agree with them. There's still a remaining question about whether this is actually going to happen. A spokeswoman for Coca-Cola came out after Trump sent this out online. She said, we appreciate President Trump's enthusiasm for iconic Coca-Cola brand. More details on new innovative offerings within our

Coca-Cola product range will be shared soon, though. So that was far different than confirming that real sugar is coming to Coca-Cola. if they're reporting earnings on July 22nd, five days from now, early next week, and we'll maybe hear more details about this. But right now, it's a huge mystery. It doesn't stop people from getting excited because this would be a great development. And we were talking before the show, Neil, you had some pretty strong opinions on what makes a great Coke. You said there's one Coke that rises above them all.

What was that? The one Coke that rises above them all for me is a movie theater Coke. And perhaps it's because you're eating popcorn at the same time. So you're extra thirsty and it just tastes so much better. But I don't know, whatever they're putting in the formula at AMC's or regals just taste so much better to me. And I honestly don't have Coke any other setting than that. Yeah, I think it might just be the fact that that's the only place you drink it. I will go to bat for any Coke in a glass bottle, though.

I have had Mexican Coke. And then I don't know, maybe it is just this halo effect around it. But it does taste, it just hits different, especially in the glass bottle. So you have your movie theater Coke. I'm just going any coconut glass bottle. Any over ice, I think, tastes delicious. All right, that is all the time we have. Thanks so much for starting your morning with us

and have a wonderful Thursday. If you have any thoughts on today's episode, send an email with questions, comments, or feedback to Morning Brew Daily at Morningbrew.com. Let's roll the credits. Emily Milliron is our executive producer. Raymond Liu is our producer. Our associate producers are Olivia Graham and Olivia Lake.

Yuchinawa Ogu is our technical director. Always love a Euchenna sighting. Scoop Starteris is back on audio for today. We've got a packed control room back there. Hair and makeup is beginning the countdown to football season, 50 days 5-0. Devin Emery is our president and our show is a production of Morning Brew. Great show today, Neil. Let's run it back tomorrow.