Jim Bianco

1/2 The probability of a hike on Wednesday is 95% https://t.co/aoY1aW3wnm

Oh wow. Is she trying to argue that we're having a worse "Liz Truss moment" and it's not her fault?

1/7 In the thread below, we note that diesel prices are soaring. Another short 🧵on why tl:dr, it's the war. But the "other war" ... Russia-Ukraine. (The fact that we have an "other war" speaks volumes about the state of the world.) 2/7 Ukraine is bringing the war to Russia's energy infrastructure. https://t.co/hiZ2oyXY87 3/7 Good open-source data shows what’s happening to Russia’s energy infrastructure. Refinery Ledger shows that 60% of Russia’s oil refinery infrastructure has been damaged by Ukrainian drones. (Note: Russia does not disclose how much has been repaired and is back online.) https://t.co/sE8xsvTsEs 4/7 In the last …

2/3 The national average for diesel is now $6.20, up 60 cents (11%) over the past 2 weeks. A typical 18-wheeler carries about 200 gallons. Filling it now costs $1,240, $120 more than 2 weeks ago. They average about 7 miles per gallon (efficient for a vehicle that can weigh up to 80,000 pounds, including freight). So a 2,000-mile trip from Chicago to LA now consumes about 300 gallons (including climbing the Rockies), costing ~$1,900 in fuel alone. 3/3 @CommodMkt calls commodities "dirt and diesel." All commodities come out of the ground, either grown, dug up, or pumped out. The machines used to harvest, dig, or drill all run on diesel.…

Red headline crossing Bloomberg now *SAUDI EAST-WEST PIPELINE SHUT DOWN AS PRECAUTION AFTER ATTACK I should have explained. This headline confirms yesterday’s massive move higher in crude oil.

If Warsh is true to his word, DO NOT expect a leak to the financial press today or Monday about what the Fed will do next Wednesday. The days of a Fed reporter getting a call from "unknown" and a gravelly voice saying "blue horseshoe likes 25 (or hold)" are supposed to be over.

The old market adage that markets will "move to the level of most confusion" could apply to a WEAK CPI report tomorrow. The probability of a Fed hike ended at 73% today. The meeting is next Wednesday. A weak CPI report tomorrow could throw this assumption into chaos, leaving everyone confused and unsure what is next. As I often say: "Bond Traders will stop panicking when the Fed starts panicking." If the market thinks the Fed STILL hasn't found a reason to hike, slicing through 5% on 10-year yields might only be the beginning.

An excerpt from Rational Dissent Episode 007 (full episode below): Alex Malitas examines why investors might hesitate to accept fixed Treasury yields around 4.75% to 4.80% by evaluating three competing asset classes. Stocks offer comparable starting yields but include the potential for future earnings growth, while cash allocations provide solid returns while preserving liquidity. Additionally, direct lending offers a significantly higher 9.50% yield for those willing to accept more risk, raising the question of what will eventually drive genuine buyer demand for Treasuries again.

@cullenroche https://t.co/N2yQm4cvUJ

1/3 Here's the chart back to 1793, courtesy of Ed McQuarrie at Santa Clara. (BofA's starts in 1936.) The past 10 years through this summer have been the worst since 1803. Read that carefully. Bonds WERE the worst investment in American history. It says nothing about what they do next. 2/3 Why so bad? You buy a bond for its yield. Ten years ago, the long Treasury paid 2%. That was the ceiling, and then rates rose (price losses), taking even that away. Some perspective: in 223 years, a negative 10-year return has happened in 25 months. 24 of them are right now. The only other was Dec 1959, at -0.08%. This wasn't a normal bad decade. It …

too low an interest rate is just as bad as too high an interest rate. Full podcast in the repost below. https://t.co/PutcVQYsNG

Rational Dissent Episode 007. Are Yields Good Enough To Compete? A yield is only as good as what you compare it to, right now, rates aren't promising enough for investors to want in. Available on YT, Apple, Spotify, Overcast, etc. https://t.co/oLNxVIdG8l

The Fed has no Navy and desperately wants a deal.

If he does this, all their yields will plunge even further, and we'll have the highest rates in the world.

Trump concludes with ... The Fed Board, with its great new leader, must get smart - BE PATRIOTS for a change. High interest rates put the U.S.A. at a very unfair disadvantage, and I won’t allow that to happen! --- Does this mean he will indeed bomb the bond market? https://t.co/Gti5n3VGEN

Good post Diane. This is core PCE, the Fed’s favorite inflation metric (until then inflation task says otherwise). It is color-coded to reflect the different expansions. Green=post 9/11 recovery Red=post Financial Crisis recovery Blue=post COVID recovery Also shown is the average and +\- 1 Standard Deviation range (shaded) for each period. —- From 2009 to 2021 (red) Core PCE exceeded 2% only 5 times, 3 in 2012 and 2 in 2018. The average inflation rate for this nearly 12 year period was 1.56%. Post COVID (blue) just completed it 65 consecutive month above 2%, something Warsh specificially highlighted in his Jackson Hole speech. And its lat…

1/3 I've been arguing that Fed watching is now vote-tallying (as explained in the repost). With Waller suggesting he will hold, this means the September vote is 6 (hold) - 5 (hike) - 1 (unknown). The unknown is Jay Powell. He could be the decider. Here is my vote-tallying cheat sheet. 2/3 Powell has not spoken publicly since his May press conference, hoping to fade into the background. But now, if everyone votes consistently with their public statements, Powell’s vote carries some weight. This is why the probability of a hike is effectively 50/50 less than two weeks before the meeting. 3/3 Since 1936, there has never been a 6 – 6 vo…

Brent is up more than 5% today The US is attacking the IRGC The last time Brent was up more than 5% was July 29. Story - The US was attacking the IRGC. https://t.co/xRX3vkqrBj

Now equal to a three year high https://t.co/hcFWLF1bZA

*US FORCES BEGAN STRIKING IRGC TARGETS IN IRAN AT 12PM ET TODAY November Brent is the front month. Up ~4.5% on the headline above, at the highest level sine May. Chart shows it is ~$1 from a post war high. https://t.co/FAfpHNK5nB

The probability of a hike closed Friday at 58%, not 95%. So, yes,the next Fed meeting is “lean hike,” not a done deal. Or, as I I detailed in a post yesterday, it's looking like it's going to be a 7 to 5 vote. I just don't know if seven is for hold or Hike.

1/4 tl:dr: Little evidence this is happening --- The argument below is that massive AI-related borrowing is "crowding out" other non-AI borrowers and driving up costs (interest rates) for everyone, putting non-AI companies at a disadvantage. @elonmusk and @chamath agreed 2/4 Overall High Yield Index's Yield to Worst (The lowest return, assuming the issuer calls it back early at the worst possible time for the holder). Since 6/30/09 (GFC), the average yield has been 6.88%. The current yield of 7.27% is nothing unusual. https://t.co/kU67nFOxNS 3/4 High-yield option-adjusted (for call features) spreads (OAS) are NOT showing elevated credi…

https://t.co/sdVt1qOh2w Rational Dissent Episode 006. Can the Treasury Bully the Bond Market? In a regime where financial conditions never tightened and liquidity never left, the Treasury could open its wallet the same week the Fed decides whether to hike. Is it a fool’s errand? 00:00 - Introduction and Topic Overview 02:23 - Defining Financial Conditions vs. Liquidity 05:54 - Liquidity and the Fed's Balance Sheet 08:26 - The Role of the Treasury General Account (TGA) 12:48 - Market Liquidity and Inflation Fears 21:51 - Term Premium and Market Risk 24:41 - The "Liz Truss Moment" and Bond Vigilantes 32:26 - Outro

Warsh: "I would be hard pressed to describe broad financial conditions as restrictive." — This was our topic this week.

2/2 This is my worksheet for the vote tally. I currently have the voting for a possible September 16th hike at 5 (hike) - 5 (hold) - 2 (unknown) The two unknowns are Chris Waller, who speaks on September 3rd, and Jay Powell, who will not speak A 58% probability of a hike aligns with a vote tally of 5 - 5 - 2 because Waller is expected to say he is also in favor of a hike (on September 3rd). Restated, Waller's public appearance this coming week is as important as Warsh's at Jackson Hole in determining if the Fed will hike on September 16. Two follow-up thoughts Too many are OVER-analyzing Warsh's words and not appreciating that he is no…

1/2 "The Bond Market Can Stop Panicking When The Fed Starts Panicking" --- 3-day tick chart of the 30-year yield "Bond Traders are panicking a little less" https://t.co/XV1flvtQst 2/2 Probability of a September hike now 49%, up from 36% right before the speech dropped The Fed is panicking a little more. -- Restated, if the Fed does something about inflation (hike), bond yields can stop rising. https://t.co/xYgn29xp5f

1/3 In the thread linked below, I argue that the bond market is worried about inflation. I can hear the response that inflation swaps and/or TIPS Inflation Breakevens are not reflecting this. Maybe they are! 🧵 2/3 The 5-year TIPS inflation breakeven rate is the market’s pricing of the average annual inflation rate over the next 5 years. It has averaged 73 basis points higher post-COVID (blue) than pre-GFC (red). Also note that the standard deviation range (shaded) post-COVID is completely above the standard deviation range pre-COVID. Inflation expectations have stepped higher. Inflation expectations are saying the post-COVID environme…

2/3 Bond buybacks, yield curve control, and/or QE (or "QE-lite") all expand the Fed's balance ("money printing"). When inflation is the worry, money printing means bonds sell off. How Bessent is doing it is not the problem. Doing it with inflation means it will not work. https://t.co/8wgAv709sH 3/3 From the pod From 2009 to 2021 (12 years in red), only 5 months had inflation above 2% (3 in 2012, 2 in 2018). Currently (blue), we are in the 65 consecutive months above 2% (and actually above 3%). This is not the 2009 to 2012 cycle. We have to stop pretending it is. https://t.co/2sIbGdeITH

The central bank of AI just announced hike via forward guidance before the Fed. https://t.co/M59bqNeuY8 So which central bank announcement is more important. AI Chairman Jensen Huang announcing a hike yesterday? Fed Chairman Kevin Warsh speaking at Jackson Hole later this week? Don’t laugh, it’s actually a serious question!

I believe he is telling you he believes the rise in yields is about the price of oil. (Get it down, and yields go down too) The problem is that yields (orange) are powering higher even as oil (blue) is well off its spring highs. More than oil is pushing yields higher. https://t.co/dQ08sqKfbh