Jim Bianco

Core PCE removes food and energy (oil) and is the Fed's favorite inflation measure. It is 80 bps higher than in April 2025. The post-COVID average and std dev (blue) "step-functioned" higher than the previous two cycles (red and green). We are in a new higher inflation regime post-COVID. The era of sub-2% inflation ended six years ago; that was the previous cycle. So, in this environment, don't be surprised that when the Fed cuts rates, the 30-year yield goes straight up and is a few basis points from a 19-year high (repost). Warsh said, "Inflation is a choice." If the Fed "chooses" to do something about it, then the bond yields calm down…

Warsh is trying to change the Fed. * Waller is insulting Warsh in front of colleagues at dinner. * Fed Gov Barr is against balance sheet changes before they are proposed * Now Bostic is worried they will make changes for no reason at all. The Fed is insular and broken

1/2 1-year inflation swaps are useful — like a point spread. That doesn’t mean you should treat them like a sure thing. Before last year’s Super Bowl, the Chiefs were about a 1½-point favorite. The Eagles won by 18 (40–22). The line told you something. The final outcome was something else. Same idea with 1-year inflation swaps. They are a real market signal. They are not a precise forecast of where inflation will be in a year. The chart shows the miss: on average, the swap has been too low on inflation (red below blue since 2020), and the errors get large during regime shifts (2022) — exactly when people lean on these numbers the hardest.…

Trump yesterday: Warsh "wants to do the right thing" but is facing opposition from the Fed board. --- I argued below that the Fed now has 12 independent voters, and Warsh is only 1 of those 12 voters. Trump just confirmed this! A 35%-40 % probability of a hike tomorrow reflects a very real possibility that Warsh could be outvoted, and that we are no longer on forward guidance (hints about what is coming). This is not the Powell/Yellen/Bernanke Fed anymore, so we need to stop explaining how they did things. @EricBalchunas

Market pricing closed today with a 38% probability of a hike, so it is not that far from Citadel. https://t.co/7ebYZnYP1B

Thanks to @cvpayne for a good discussion today on two asset classes and the Fed. https://t.co/29WJcRJEfu

1/4 The odds of a hike at Wednesday’s meeting are 36%. At no point over the last month or two have these odds reached 50%, but again, this is fairly odd to see such uncertainty so close to a meeting. https://t.co/RxRnCIbMNF 2/4 Since the financial crisis ended in June 2009, the Fed has held 135 FOMC meetings. Only four (3%) of them had enough uncertainty for the probability to be between 33% and 66% in the days leading up to the meeting. https://t.co/A5auwKMRgr 3/4 Three of them revolved around financial stress, prompting market players to wonder whether it would force the Fed to be more dovish. The fourth was September 2024, but the u…

Is the stock market now two asset classes? From our new podcast (See the repost below). https://t.co/pdgVqwB2JF Here is my thread on the stock market becoming two asset classes. https://t.co/5WJQTJaTyu

Rational Dissent Episode 001. Why Do Investors Expect So Much? https://t.co/VGiEtYyoK0

Per Bloomberg https://t.co/dhuTx3AWpp

The repost is my spot on @CNBCFastMoney today. The market closed Friday with a 38% probability of a Fed hike next week. I expect they will vote for a hike, and it will get between 3 and 7 votes. This means it will probably not pass (at least right now), but these votes could see 3 to 6 dissents (9 - 3 to 6 - 6). A September hike is 104%. This is why I think we see several dissents. They cannot vote 11 - 1 this meeting and hike next meeting, given that several votes have given speeches saying they think they should hike. This is a new Fed with 12 independent voters. Warsh likes to say "inflation as a choice." Choose to do something about it…

The repost details the biggest risk for a crude oil long position... and as the chart shows, the rally has stalled (for now). https://t.co/lFCG9RWLHq

So, by 2031? https://t.co/XkNa2NX7Ia

Real Yields operate with cycles or regimes. During the "money printing" era from 2009 to 2022 (red), the 10-year real yield averaged just 0.23%. We are not in a zero-yield, money-printing era anymore (thank god). Before this (left blue), the 10-year real yield averaged 2.74%. I have argued the current period (right blue) should look like the pre-money-printing era (left blue), and it does. It also means 10-year real yields can go much higher before they become too restrictive (probably above 3%). What would cause 10-year real yields to go higher? Sticky inflation (we have now) and a Fed that does not "choose" (as Warsh terms it) to act on …

The US 10-Year is at 4.70%, the highest of Trump's second term. What will it take to get it to stop rising? See the repost below. tl;dr: Kevin Warsh says inflation is a "choice." It is time for the Fed to "choose" to act on it, as the market is deeply troubled by its current level and outlook.

Finally, something for markets... over 100 minutes in. Also, a red headline on BB *WARSH: 'MISSION ACCOMPLISHED' NOT MY VIEW AFTER CPI DATA TODAY

1/5 The fed funds futures have a HIKE at the end of the month (July 29) at 45%! (55% no move) Tomorrow morning's CPI report and Warsh's testimony will decide it. -- "When the Fed starts panicking, I can stop panicking." A hike stops rising yields; root for it. 🧵 2/5 The fed funds futures market now puts a July 29 HIKE (at the next FOMC meeting) at 45%. (55% no move) https://t.co/wkIRpC9J7w 3/5 Tomorrow's CPI report/Warsh's testimony (House at 9 AM) will decide. Our June CORE CPI expectations (the metric that counts here) * 0.3% = Fed hikes on July 29th * 0.2% = We debate a July 29th or Sept 16th (next meeting) hike. Sept hike now…

Starlink changed everything https://t.co/uFpbIQHEf0

Nvidia has a market capitalization of $5.12 trillion today.

1/9 Eric asks a reasonable question: what should be done about a future stock market slump? Specifically, should the Fed buy stocks? 🧵 tl:dr * The legal process for the Fed buying stocks means the Treasury actually owns them, the Fed finances it by extending loans to buy the stocks. * Trump will love this idea, as he wants a Sovereign Wealth Fund, and now has the Government holding several US companies. We suspect he will probably want these stocks as permanent government holdings, up to 20% of the stock market ($16n trillion of stocks). * This would balloon the Fed's balance sheet to $25 trillion (from $6.7 trillion now). * What woul…

A soccer match not involving the US, not played in the US, was the highest rated soccer match in the history of US TV ... just below the NFL Conference Championships this past January. To be clear, it was higher rated that the US/Belgium. This TV rating record might be broken again in the coming week, if not later today. --- When the US lost, many in the US said something like "good, now we can stop paying attention to soccer." Maybe something bigger is happening here. Isn't this how investors lose money? Failing to recognize a trend shift when it is happening? Are the snarky posters (trolls) failing to see a trend change?

So using AI is a form of cheating, then they’re told at graduation AI is the future, meaning this professor failed to prepare them. And you wonder why students boo and walk out on AI commencement speakers. If universities were properly doing their job, graduating students would be the most coveted employees in the workforce as they would most prepared to lead their businesses into this new AI world, like graduates did with the internet 25 years ago, and the PC 40+ years ago. Instead students get muddled and conflicting messages about using AI and left confused about what is expected of them. Why is AI cheating in the classroom but these t…

Note that he wrote "Strait of Hormuz," not "Iran."

Wow! Did the economist do it again?!? Hey @donnelly_brent, could we be looking at a new world record from them?

17 minutes after the NYSE closed ... *US MILITARY SAYS IT'S LAUNCHING SERIES OF STRIKES AGAINST IRAN ~105 minutes later ... *WTI OIL JUMPS 2.9% TO $72.46/BBL AT OPEN AFTER US STRIKES IRAN *BRENT OIL GAINS 2.8% TO $76.20/B AT OPEN AFTER US STRIKES IRAN ---- Expect Trump to post tomorrow morning, before the NYSE open that they have a deal with Iran ... again.

The Economist magazine is issuing a Mia Culpa on calling for much higher oil prices, and is now fully bearish Next step $200??? @donnelly_brent This was their March 1999 cover when the price was $10 A year later, it was $40 It is now considered one of their more famous cover story blunders. https://t.co/yLBDFv0nq1

We're looking at and analyzing this employment report, but I'll tell you one person who is not ... Kevin Warsh. If a payroll report is released, and the Fed Chairman is not looking at it, did it make a sound?

Should the Fed hike? I say yes. This AM on Bloomberg TV https://t.co/fz4T9mSgFR

@Vedatklyc Right now, I'm trying to document and understand the divergence (two asset classes). Should this be agreed to, we can stop arguing about its existence and move on to what to do about it.

2/7 They account for 44% of the S&P 500’s market cap and hit a peak of 49% earlier this month. https://t.co/ipW9mwNsyy 3/7 In his May 22 “Flow Show,” Michael Hartnett of BofA highlighted the chart below. It shows the stock market is the most concentrated in a single theme in 150 years. The last time we saw anything resembling this level of concentration was the railroads in the late 19th century. (Note: To say the stock market is the most concentrated in 150 years, we are using the table above showing a 49% peak, not the “AI Big 10” showing 40% that Hartnett uses below.) 4/7 And AI and non-AI stocks are starting to diverge from each…