Another FED Error As Powell Won't Cut Rates? with Jim Bianco

Interview recorded - 12th of March, 2024
On this episode of the WTFinance podcast I had the pleasure to welcome back Jim Bianco. Jim Bianco is President and Index Manager at Bianco Advisors. He is also the President of ‪@BiancoResearch‬.
During our conversation we covered an array of topics, including Jim's outlook on the economy, what actions Powell is likely to take, why the economy is strong but people are struggling, what no interest cuts would have on the markets and how he has positioned himself. I hope you enjoy!
0:00 - Introduction
1:47 - Economy and markets in next 6/12 months
4:00 - What would it take for Powell to cut?
6:38 - What impact does liquidity have on the FED’s actions?
9:20 - How does election provide Powell with less options?
12:55 - What are the main drivers of US economic strength?
18:38 - Economy is strong, but average person is struggling. Why?
21:30 - Boomers continuing to spend
25:05 - What trends will be driving continue economic strength?
28:30 - Onshoring in the US
30:13 - What impact would no change in interest rates have on stock market?
35:55 - Powell hedging his bets?
37:05 - What happens if Powell cuts?
39:40 - Could 3% inflation and 5% interest rates be ok?
42:08 - Fixed vs variable mortgages
43:25 - How will you position yourself?
47:00 - One message to takeaway from our conversation?
Jim Bianco is President and Index Manager at Bianco Research Advisors. He is also the President of Bianco Research LLC. Since 1990, Jim’s commentaries have offered a unique perspective on the global economy and financial markets. Unencumbered by the biases of traditional Wall Street research, Jim has built a decades long reputation for objective, incisive commentary that challenges consensus thinking.
Jim appears regularly on CNBC, Bloomberg, and Fox Business, and is often featured in the Wall Street Journal, Bloomberg News, Grants Interest Rate Observer, and MarketWatch. Jim has a Bachelor of Science degree in Finance from Marquette University (1984) and an MBA from Fordham University (1989).
Jim Bianco:
Research: www.biancoresearch.com/visito...
ETF: www.biancoadvisors.com/
X: intent/follow?scr...
LinkedIn: / james-bianco-117619152
WTFinance -
Instagram - / wtfinancee
Spotify - open.spotify.com/show/67rpmjG...
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iTunes - podcasts.apple.com/us/podcast...
Linkedin - / anthony-fatseas-761066103
Twitter - / anthonyfatseas
Thumbnail Picture from - edition.cnn.com/2022/10/04/ec...

[@WTFinancepodcast]

Do you think Powell will cut rates or will he make the same mistake of not acting soon enough?

[@DB-hm7vk]

Qqqq¹¹¹1¹¹1½22 7n h

[@joebagodonuts8119]

Rates should go higher until Wall Street gets off the drugs

[@acornsucks2111]

What mistake?

[@shanedavison7473]

I think Powell didn't raise rates high enough to offset this insane government spending.

[@shanedavison7473]

We will go into hyperinflation.

[@crankhandle]

Do you really think powell cares about the bottom 50 percent

[@deseosuho]

It's not as if there's a side on the dovish/hawkish spectrum of fed policy that HELPS the bottom 50%. Restrictive monetary policy reduces the amount of investment in new projects, which reduces the total amount of hours of labor being done, which hurts the bottom 50%. Loose monetary policy gooses asset prices and spurs consumption, which drives inflation on essential goods, which hurts the bottom 50%. It sucks to not have a good income and a healthy nest egg. That's a universal.

[@jimclark5037]

I think he cares about the criticism he'd receive about not caring about the bottom 50%

[@danielmarks5133]

Jim is fantastic! Where has this guy been hiding.

[@stevensmith8580]

Great interview. I always learn something from Bianco.

[@deseosuho]

Thanks for having Jim on. I'm intrigued by the idea that the difference that explains why US nominal GDP is growing while nominal GDP is contracting in almost all the other top 10 economies is consumer behavior, and particularly propensity to spend. I would have guessed that it was US govt deficit spending. I guess you should be able to test it empirically. How much have outstanding consumer credit card balances as a fraction of median income increased in the US vs in, say, Japan/UK/Germany/France/Australia since 2020? If Jim's theory is right you should see a much larger growth in credit card debt in the US.

[@deebrake4372]

Poi Iiíjjjjj Uuu Jupyter p I’ll oi😊

[@johndoe1.196]

Bianco is always a good guest. I enjoyed the interview. 👍

[@ryr4770]

Great show!

[@mechannel7046]

7:20 fed tightening canceled out by reverse repo 9:40 fed does not change policy during election yr after summer. Fed not partisan but political. 13:00 Gov can deficit spend to boost economy. Propensity to spend higher in US than elsewhere 17:20 models that predict US recession didn't consider US propensity to spend 19:00 concentration of wealth in US exacerbates this

[@ddprepper5227]

Excellent report

[@DonRua]

32:58 when he said “I am getting $1 NAV everyday ..” he didn’t mean the stock price of the fund. He is actually describing I keep getting $1, or it is safe; 100% everyday, no fluctuations.

[@mickeybeavison1053]

extremely valuable information

[@mr.q8023]

CRE is the credit event we r waiting for.

[@dannypowers4995]

My goodness ,these are normal rates . If anything they need to be higher to bring prices down. Especially housing. IMHO

[@DougSmileyVirgo]

The Fed's dot plot next week will be interesting. Buckle in.

[@marsmotion]

rates stable or higher...the lower crowd is out of their minds. the inflation is way more than 3p its more like 20p if your a human being who eats and sleeps and goes places... i wonder about those amongst us who dont see that inflation....they arent human i guess.

[@petermerelis7355]

Jim is right about everything except for the trajectory of inflation. We aren’t stopping at 3. We are going much lower.

[@yakopro49]

No more than 2 cuts. And OCTOBER and December are the cut

[@warrencollings9784]

What percentage of the (strong) gdp numbers is government spending?

[@infraaa_]

30 to 35%

[@seanoconnor8138]

70% of GDP is consumer spending. for the last few years our GDP growth has been financed by credit card debt at 20% interest. GDP does not measure the health of the US economy.

[@duanejackson6718]

33% is government GDP spending if you don't count graft. If you account for grift government spending including bribes kickbacks War funding for other countries, it's about 66%.

[@jorge1170xyz]

Most of it. Some people say the economy would be totally flat (adjusted for inflation) if you deduct the effect of the money printer last year and this year.

[@JohnDaniels]

Powell is doing the right thing, he needs to keep rates higher for longer and continue QT

[@ralphsimpson4593]

Holding out a rate cut is his way of sweetening the message prior to the election. Just need to hold the 🥕 out until after election then he can continue to sit on his hands.

[@JC-cf4rs]

You can’t always assume a mortgage-and US banks don’t want to extend the low rates that they’re already losing money on

[@JC-cf4rs]

I want to see a rate hike this week… that will be the catalyst for the real correction start… JP knows a correction is needed and these rates are really not restricting anything -yet. They’d have to at least hold these rates until ALL zombie corps have to refinance.

[@karllelliott681]

I think the UK just reported positive growth again 0.2% month on month Jan to Feb 2024.

[@johndoe1.196]

My vote? Higher for longer. No cuts.

[@RichardSKLim]

The Fed must maintain the integrity of the dollar system. Letting it collapse is not an option. All hell will break loose.

[@Relaxlifeisshort2]

If you believe the numbers

[@bradleyqueen3879]

Higher for longer. No rate cuts.

[@JC-cf4rs]

If the 8% average included the 50% recent increase, the next few years won’t give back any gains -likely losses

[@livinthedream7714]

Conjecture

[@thevanman4498]

Heading for 10% Powell risks blowing up the whole game otherwise.

[@vincentmurphy9252]

You could talk 12 weeks on the rate but at 5% and it’s too low they needed to go up to 5.75%-6.25% he’s correct no cut and if it is it’s politically influenced- we may see rates rise

[@dj1055]

It is not a mistake to send the economy into recession... It is the only way to save the bottom 50% (maybe 65%).... Prices have almost doubled, even if inflation goes to zero, disinflation is irrelevant. We need deflation , working deflation in tandem with rebalancing the economy. There will be one interest rate cut this year, 25 basis points, at the very end of the year.

[@ClearOutSamskaras]

RRP

[@prolific1518]

Jim was in the "no landing" camp but now wants Powell to cut. Just close out your longs Jim.

[@JamesG1126]

People aren't going on a spending binge if rates are 0.25% lower. Get real.

[@seanoconnor8138]

that will be the real surprise. just like in 2007, we'll see the markets really decline after rate cuts begin.

[@user-bt9cm7ze4c]

Best thing for stocks right now in NO change in rates. If rates go up Market goes down. If rates get cut Market goes down. @@seanoconnor8138

[@sonnyandreotte5721]

seek help

[@hiatuz3512]

Jim, ain't stimulus money(Stimmy checks) similar to a reverse split? devalue the currency so your enemy's wealth devalues by injecting the cash in your country?

[@jebwatch4433]

Every crash since 1837 (1837, 1857, 1873, 1893, 1907, 1929, 1987, 2008) has happened either in May or in Sept-Oct. Since the Fed is not planning on cutting before June, forget May. The Fed will cut at least by August in order to juice the markets and try and head off any market break in the fall before the election, given the risk any market break will boost the prospect of a Trump win, which large elements of American plutocracy fear. Expect maybe a couple of quarter point rate cuts, in August and again in October. Maybe another one first, in June, but maybe not. The Fed will tease through May in order to try and prop up the markets at least rhetorically. Not cutting in June won't cause a crash in the summer. The Fed has to act by August though. If they wait, and the markets break in the fall, Trump will win. He might be right about June and the past patterns, but he may not be. The Fed may still cut later given the unique political situation this time.

[@detrockcity3]

Jim lost money last year. Ignore Jim. I hope the Fed hikes. Good luck in the new interest rate environment, boys. If you’re not actually good, your career may be in trouble.

[@tactileslut]

They're looking at prices as a proxy for inflation. Interest is a cost that drives up the prices measured. Higher prices for the same stuff reads as economic growth, so we have a positive feedback loop.