Jim Bianco

Rational Dissent Episode 010. Will the Bond Market End Humanity? With the 10-year Treasury yield hitting a 16-year high of 5.20%, is this a return to historical normal—or the start of a market break? Available on YT, Apple, Spotify, Overcast, etc. --- Chapters 00:00 - Introduction & Market Overview 03:01 - Analyzing the Week's Bond Market Frenzy 07:09 - Shifts in FOMC Rate Expectations 08:27 - Economic Growth and Potential GDP 13:30 - Historical Context: 5,000 Years of Interest Rates 17:04 - Economic Resilience vs. Market Fears 18:38 - Drivers of Yields: Growth, Energy, Policy, and Deficits 23:03 - The Fed's Dilemma Heading into October 26:…

Two weeks ago, AI was going to wipe out humanity. Now, 88% of the species will survive. Amazing improvement!

My question: "Will the bond market end humanity before AI?" This is the post of the week, if not the month.

August 15, 1971. President Nixon closed the gold window, effectively turning the US dollar into a fiat currency. Since that date, the 10-year yield has averaged 5.91%. It closed today at 5.18%, --- Maybe the bond market won't end humanity. https://t.co/uQci0si2oL

This is still shaping up to be the biggest story of the second half of October. If these probabilities hold, the market is DEMANDING a rate hike on October 28th, a week before the midterms. Trump will lose it, and Warsh will become the new Jay Powell. If these probabilities hold, it means the market has lost patience with the Fed's easy policy over the last two years, which is why long-term yields rose during a 2024 to 2026 easing cycle for the first time in 50+ years (see the repost below). If the Fed sits idle while the market prices in a rate hike, long-term yields could spike off the top of the page. Of course, payrolls, CPI, retail s…

Now 73% probability the Fed hikes on October 28, the week before the midterms. Can the Fed disappoint the market? (See below) https://t.co/k6lvmeAwM8

2/2 Remember when the Fed was cutting rates between 2024 and 2026 (orange), the 10-year yield rose (blue). This was the first time in 50+ years that a sustained cutting cycle saw long-term yields rise. I've argued this was a market message (maybe screaming) that the Fed was too easy. So, if the market continues to price in a hike for October 28, meaning it is still >50% after payrolls and CPI next month, and the Fed does not deliver a hike, does this pattern of reacting to a "too easy" by sending yields upward continue?

In December 1988, federal agents arrested 25-year-old Kevin Mitnick for stealing software from Digital Equipment. According to Mitnick's memoir, the prosecutor told the magistrate, "He can whistle into a telephone modem and launch a nuclear missile from NORAD." Three judges denied him bail and ordered him held in solitary confinement, where he stayed for eight months, according to Forbes. No human can produce a modem handshake with his mouth. And NORAD does not launch anything. It watches launch orders travel as authenticated messages. Firing requires two officers turning keys at the same moment, set too far apart for one person to reach b…

My data agrees https://t.co/wZMAsixJQK

Trump said this on the tarmac in North Carolina Wednesday night after the Fed hiked rates. Trump is telling Warsh how to vote???? And I told — I talked to Kevin and I said, “You might as well vote with the board because it’s not going to matter.” --- Verbatim transcript Trump: I’m relying on Kevin, but he’s got, you know, a very tough board. He’s got a board that was put there by a lot of other people, and the interest rates are too high. They’re not appropriate. And I told — I talked to Kevin and I said, “You might as well vote with the board because it’s not going to matter.” The board is very hostile. They’re very political. They’re d…

Rational Dissent Episode 009. Did the Fed Get it Right? Kevin Warsh delivered the first hike in a few years as persistent inflation bites; was it the right move? Available on YT, Apple, Spotify, Overcast, etc. --- Chapters 00:00 – Introduction & FOMC Rate Hike Overview 02:38 – Rising Bond Yields & Financial Conditions 08:02 – Structural Inflation & the Post-Pandemic Economy 24:10 – The 12–0 Vote & Threats to Fed Independence 29:10 – Eliminating Forward Guidance & Outro

Crossing this afternoon *FRANCE'S CREDIT RATING DOWNGRADED TO A+ FROM AA- AT SCOPE The U.S. credit rating is AA+ -- Trump will be upset because he thinks Sovereign (Government) yields are set by credit rating. The best credit rating gets the lowest yield. As the chart shows, France has had lower yields than the U.S. since 2013 (13+ years now) despite being a lower-rated credit, and now even lower. Better credit ratings getting lower yields works really well for junk-rated Atlantic City casinos (which he is an expert on), but not for government yields. Government yields are set on inflation expectations, growth outlooks, and borrowing amoun…

Anthropic is building a "wet lab" in the San Francisco Bay Area. -- Now it makes sense! The reason they are worried that AI will end humanity is that they are the ones who are going to end it with AI!!

1/3 There's a narrative that the Fed can't hike on October 28 because it's the week before the midterms. Somebody should tell the market because it's pricing the probability of an October 28 hike at 60%, and it is rising. https://t.co/2WGxwra5hK 2/3 If the market is pricing in a hike in late October and the Fed defies it by NOT hiking, remember this chart. For two years, the Fed (orange) was easy, and the market (blue) kept rejecting it by pushing long-term yields higher. This could repeat in late October. https://t.co/Df8G4UtIHG 3/3 I explained this on @BloombergTV this morning @FerroTV @lisaabramowicz1 @mckonomy https://t.co/ZcM4xS…

In 2018, when Powell was new and hiking rates, Trump said he was "a very good man" and, "I am not happy about it. But at the same time, I’m letting them do what they feel is best.” We know how that movie ended. Are we sure "this time will be different?" https://t.co/3D0OuPKq8B

I give JP Morgan credit for acknowledging this. Much better than making things up, like I'm sure a lot of others are doing.

Paging @donnelly_brent Both of these covers came out TODAY. Time to back up the truck and buy? https://t.co/mj2nC9M4aD

@HenrikZeberg I'll see your one-dimensional rebuttal and raise you with this one-dimensional counterargument! https://t.co/R0i7UTwiR3

@valentin_macro @HenrikZeberg Try this https://t.co/Hhg46u037Y

The Fed did not make a policy error yesterday by hiking rates. They ended a two-year policy mistake yesterday. Explained below.

1/3 The repost is correct. But the Fed adopted the PCE (orange) as its measure in 2000, not CPI (blue). Core PCE was 2.8% in Sept. 24 and was falling when the rate cuts began. It is now 3.3% and rising, as they started hiking. Viewed this way, hikes look more appropriate. https://t.co/YEj8s2pdFD 2/3 The gap between core CPI/PCE is the largest since 1985, when the BLS switched to measuring housing inflation using Owner's Equivalent Rent (OER) and Rents of Primary Residence (RPR) OER plus RPR ~40% of core CPI ~17% of core PCE This is all about housing weightings. https://t.co/95455ciIVj 3/3 Which one should the Fed use? The one the F…

Remember, the Fed voted 12-0 today (See repost below). So, when Trump wants to stop TALKING about cutting rates to less than 1% and start ACTING on it, the Fed set it up so Trump only has to threaten, pressure, or intimidate one person to make it happen. https://t.co/FOhEve7NUl

Stop saying "the Fed can't print oil." It's a lazy comment. Maybe, without a supply shock muddying the water, the Fed would have seen more easily that deglobalization ended goods deflation, which masked problematic services infaltion and hiked sooner. If so, long-term yields might be lower today, since bond traders could have stopped panicking sooner because the Fed started panicking earlier.

What did the Fed accomplish by raising rates today? For the first time in over half a century, a completed prolonged rate-cutting cycle produced HIGHER long-term interest rates. The market has been telling the Fed for 2 years that it had the wrong policy. They finally listened today.

Warsh did not submit a dot for the 2nd time in a row. The chart shows 18 dots (not 19). So I still believe he doesn't want to commit to any kind of forward guidance. Any headlines or discussions suggesting he gave forward guidance will probably be misunderstandings. https://t.co/LFiBQoXyKH

Today's strong August retail sales report pushed the Atlanta Fed's GDPNow to 5.1% for Q3 2026. Restated, the economy is booming. -- GDPNow is a running tracker of GDP data. It's like checking your marathon split at mile 22 and assuming you hold that pace to the finish. https://t.co/IyDJUT0nqi

Below I make the case that the more dissents the better. Also, Greenspan was famous for saying "If you understand what I said, I obviously misspoke." Regarding Warsh ... If you think you heard him give forward guidance at the presser, you misunderstood him.

3/6 After China joined the WTO in 2001 (red), core GOODS inflation went DEFLATIONARY, at -0.50% for 18 years. Since the end of COVID (blue), core goods inflation averaged 1.82% over the last 6 years. An increase of 2.3%. The deflation pull lower from goods is now over. https://t.co/JFo57fzaZN 4/6 We live in a post-COVID era of deglobalization, strong borders, wars (disrupting supply chains), tariffs, and populism. Result, importing goods deflation has reversed. Ending Russia-Ukraine or the Iran-US wars does not change this chart. https://t.co/rmar71C226 5/6 At the same time, SERVICES inflation has ALWAYS been a problem. Even during …

2/5 Green is every cutting cycle since 1971, eight cycles in total. https://t.co/hd5FPMMmbo 3/5 Here is the change in the 10yr yield during all of these cutting cycles. Black is the current cycle. This cycle stands apart from all previous cycles because it will be the only one in 50+ years that the Fed cut rates for an extended period and 10yr yields are HIGHER. https://t.co/bRAdoXwSjZ 4/5 Even the 2-year yield is up more than 1% since the Fed cut rates two years ago. Remember, the funds rate was 5.5% two years ago, and now even the 2-year yield is 1% higher than it was then! https://t.co/ENi5O827I2 5/5 Many argue that the Fed is ab…

Anyone else see a theme? US10Y >5%, HIGHEST SINCE 2007 US30Y >5.4%, HIGHEST SINCE 2004 JAPAN 10Y =3%, HIGHEST SINCE 1996 UK10Y >5.4%, HIGHEST SINCE 2007 FRANCE 10Y >4.5%, HIGHEST SINCE 2008 GERMANY 10Y =3.5%, HIGHEST SINCE 2009