MacroVoices #510 Jim Bianco: From FED Cuts, to inflation, to Gen Z’s Infatuation with Socialism
Summary
Fed Policy & Funding Markets: A 25 bp cut and new reserve market purchases were announced alongside a split vote, with concern that expanding funding capacity enables chronic deficits and fuels inflation.
Bond Vigilantes: Despite 175 bp of cuts and cheaper gasoline, long-end yields rose, signaling bond vigilantes are pushing back and undermining the assumption that policy cuts lower long rates.
Secular Inflation: Aggressive “cut, baby, cut” risks unanchoring inflation expectations; lagging inflation data, shifting labor supply/population dynamics, and affordability angst point to persistent inflation pressures.
US Treasuries: The guest warned that over-cutting could backfire by lifting mortgage and corporate borrowing rates as the back end sells off on inflation fears.
Precious Metals: Gold and silver strength is framed as a hedge against uncertainty (inflation, deflation, political risk), with Asian demand, Japan’s inflation, and China’s policy stance adding tailwinds.
Equities & AI: AI-linked names dominate nearly half of S&P 500 market cap and most of the gains, while non-AI stocks post middling returns; early inflation can aid earnings before input costs squeeze margins.
Political/Economic Risks: Rising affordability stress is shifting voters toward price controls and intervention, raising the risk of policy-induced distortions and further inflation.
Mentions & Vehicles: No specific single-stock tickers were pitched; the guest noted WisdomTree’s ETF tracking his fixed-income index (WTBN) as an access vehicle.
Transcript
This is Macrovoices, the free weekly financial podcast targeting professional finance, high- netw worth individuals, family offices, and other sophisticated investors. Macrovoices is all about the brightest minds in the world of finance and macroeconomics telling it like it is. Bullish or bearish, no holds barred. Now, here are your hosts, Eric Townsend and Patrick Szna. Macrovoic's episode 510 was produced on December 11th, 2025. I'm Eric Townsend. The widely anticipated December rate coat finally happened, coming in at 25 basis points, with Moran dissenting in favor of 50 basis points instead of 25. And I can think of no one better qualified than Bianco Research founder Jim Biano to dissect what just happened, what it means for markets, and what comes next as the Trump administration continues to press hard for lower policy rates on the foregone assumption that they can only lead to lower long-term borrowing rates farther out on the curve. A myth that Jim Biano will dispel in this week's feature interview. Then be sure to stay tuned for our postgame segment after the feature interview when Patrick will translate Jim's views into an asymmetric trade. And I'm Patrick Szna with the macro scoreboard week overweek as of the close of Wednesday, December 10th, 2025. The S&P 500 index up 54 basis points to 68.86. Market trading along highs going into next week's key economic news. We'll take a closer look at that chart and the key technical levels to watch in the postgame segment. The US dollar index down 24 basis points trading at 9863. The January WTI crude oil contract down 152 basis points trading at 58.46. The January Arb gasoline down 273 basis points to 178. The uh February gold contract up 21 basis points trading at 4224. Precious metals remain well bid with silver leading the way. March copper down 74 basis points to 535. December uranium up 164 basis points to 7725 and the 10-year Treasury yield up three basis points trading to 412. The key news to watch next week is the much anticipated delayed jobs data release, the retail sales, flash manufacturing and services PMIs, the CPI and PCE price index inflation numbers. This week's feature interview guest is Biano Research founder Jim Biano. Eric and Jim discuss market signals, bond vigilantes, inflation, and more. Eric's interview with Jim Biano is coming up as Macro Voices continues. right here at macrovoices.com. And now with this week's special guest, here's your host, Eric Townsend. Joining me now is Bianca Research founder Jim Biano. Jim, what a perfect time. We're speaking Wednesday afternoon, just literally minutes after the Fed press release. We've got a cut which was expected, some bill purchases which some people expected and I think it's also important to talk about the divide. You know, this was not a unanimous decision of the Fed. What is in your mind the signaling of a split Fed on a decision like this that was widely anticipated? Let's cover all those things. >> All right. Well, let's start with the cut. The Fed cut the funds rate by 25 basis points for a total of 175 basis points since they started cutting in September of 2024. They kind of left the door open to the idea that they might be done or pausing for a while. The dot chart which was updated or dot plot which was updated only shows a median of one more rate cut for all of 2026. Of course, there's eight meetings. One rate cut means seven of them. You're not going to get a rate cut if that's indeed what they wind up doing. The other thing they announced, as you pointed out, they call it reserve market purchases, RMPPS. Don't call it QE. Uh they're going to buy $40 billion of bills, maybe out to three-year notes if necessary, but mainly bills, a month going forward. Now, what's that all about? The Fed has been doing quantitative tightening. They have reduced the size of their balance sheet which also reduces bank reserves to the point now where the funding markets are not big enough for the underlying treasury market. Remember the funding markets, the repo market and everything else. What is their purpose? To finance the 38 39 trillion Treasury market. They're not big enough to do that. There's a tightness in that market and those rates have been going up. So, the Fed announced $40 billion of buying to try and add more reserves into the system, give banks more capacity to hand out more repo loans to meet the size of that market. Now, the push back I'll give you, let's stop there real quick before I talk about the vote. The question that everybody's been attacking has been, I think, from the wrong side. They've been saying there's tightness in the repo market. So, the Fed's got to do quantitative easing, refer market purchases. they need to change the supplementary leverage ratio or maybe expand the standing repo facility or all these other things to accommodate the funding market to meet the needs of the Treasury market. And I've said, but no one's turning it around and saying maybe the funding markets are giving a signal that the Treasury market's too big as opposed to the funding markets being too small. And that signal is Congress, you can't keep borrowing. You can't be keep borrowing at this level. You can't keep running $2 trillion deficits and keep with these massive budgets. Because if the Fed were to expand the funding markets, which is what they're doing, maybe they're sending a signal to Congress, go ahead, keep running these big deficits. Go ahead, expand your budget, start new programs. And what's the concern there? I think that in the postcoid environment after the supply shock of 21 that caused inflation to spike into 22, the next biggest driver of inflation is government spending. And if the repo market or the funding markets were too small saying you got to back off in the government spending and our answer is no, we have to expand the repo market so they can continue the government spending. then we're going to be worried about that they're just encouraging or enabling more government which enables higher inflation. Finally, as you pointed out, the vote was 9 to3. Uh that's the first time since 2019 that we've seen three dissents and they were two-sided. Two dissenters, Schmidt of Kansas City, Goulby of Chicago desented that they did not want to cut rates and Steven Marin wanted to cut rates 50 basis points. So, we had a hawkish descent and we had a dovish descent. But going into this meeting, the expectations were for a bigger amount of dissents. I'll quote Nick Timmeros, the Wall Street Journal Fed Watcher. Yesterday's paper, he pointed out that if you listen to all of the Fed speak since the last meeting on October 29th, there's 19 members of the Fed. 12 of them are current voters. They rotate the voters. 10 of them have come out with statements or that they are uneasy about continuing to cut rates and five of them were voters. But we only got two dissents against cutting rates and overall we got six soft descents. Now what's a soft descent? The Fed put out its dot chart again today and there was still a 25 dot plot in there and six of those dot plots were for three and 78 which was the rate before the meeting. So six of the members put down as their dot that the Fed should not be cutting rates although 10 of them have given speeches suggesting it and only two of them dissented. So, a couple of these members that said that they didn't want to cut rates actually relented and went along with it. Now, why is that important? Because in May, we're going to get a new Fed chairman. Kevin Hasset seems to be the leader in the clubhouse right now. And that Fed chairman is presumably going to do the bidding of Donald Trump, who has made it very clear he thinks that the funds rate should be a lot lower than where it currently is. There's a number of Fed officials that are more concerned about inflation to continue to aggressively cut rates. In theory, they could stand up and push back and say, "Yeah, but you're only one of 12 votes, new Fed chairman. Who's the other six that are going to vote with you to give you a majority because we're not in agreement here with you that we should be cutting rates?" which is all fine and good, but if they wait until May to finally push back on that, they look the Fed looks highly partisan because you waited for Trump's guy and then you got a spine with all your dissents. But when we had when we had Powell and before him yelling and before her Bernani, you never descended on any of that stuff. But now with Trump's guy, you're dissenting. And so they would have been better off in my opinion having a 75 vote now to kind of show, look, we're pushing back, but he had enough to get the cut through, but we're really of the opinion that we shouldn't be aggressive with these rate cuts in the future. Note to next Fed chairman, but they didn't do that, and I think that might come back to haunt them when we get that next Fed chairman. I'll come back to Kevin Hasset in a few minutes, but I want to go back right now to some of the comments that you made a few minutes ago about how the market is responding to the government continuing to run all these deficits. It sounds like you're saying, okay, early stages of bond vigilantes showing up uh in fighting armor might be, you know, starting to show their faces. Is that what you meant? And I guess if so the qualification I think is boy for any sane thinking person we've all felt for the last 20 years like US government spending is out of control surely the bond vigilantes are going to show up and it's all going to be you know force their hand but that hasn't happened in the last 20 years. So what would be the changing factor that would cause bond vigilantes to actually be able to change the uh or to force the hand of the government and why hasn't that happened for the last 20 years? I'd say for the last part of the question, the last 20 years, let's say precoid, no matter what we could do, we couldn't get inflation above 2% to any great degree except for brief moments here and there. So, we were always in a very low inflationary environment. So, the bond vigilantes really had nothing to be vigilant about. But in the postcoid environment, we are five years, we are approaching the fifth anniversary of the COVID shutdowns right now. I actually excuse me the sixth anniversary is coming in a few months in February of 2026 and the inflation rate is still 3% or higher depending on which ones you look at. So they can't get inflation below three now as opposed to above three. So the bond vigilantes I think are as you pointed out putting on their armor and starting to push back. Now, I would argue again what I said before, 175 basis points of cuts and the 10-year notice 55 basis points higher. On top of that, I would point out that gasoline prices in the last couple of days have now broken below 3% as $3 as national average. That is the first time since the Russian invasion of Ukraine that we have seen gasoline prices below $3. So that alone should have been very bullish for bonds. So you've got falling gasoline prices, you've got 175 basis points of cuts, and you've got the 10-year yield higher by 55 basis points. While all that's happening, that sounds to me like a real push back in terms of bond vigilantes. Even though you might say, "But yeah, but it's still 4:15. It's not five. It's not six." Yeah, but they've ignored what should have been incredibly bullish stories for bond yields to fall and fall quite a bit and they haven't. So yeah, I think that the bond vigilantes are out there in force right now. And if we continue to push, hey, we need more cuts. We need to be cutting by 50. The president criticized J. Paul after the press conference saying that they should have cut 50 basis points today. uh and not even be talking about being close to being done that the bond vigilantes are there that that we should probably be in the low 3s right now all things being equal but we're at 415 so there is an impact from them >> let's stay on inflation before we come back to Kevin Hasset you know obviously we just got a 25 basis point cut but more importantly as you say starting in May President Trump has been super clear he wants a lot more cuts he wants to see 1% % cut, baby cut. Well, obviously the textbook fear is that really starts to unleash inflation. I suppose the counterargument to that would be, well, while that does unleash inflation, it won't unleash any significant inflation before November's midterm elections. And I think that's probably what's driving the the president. So, do we have a setup here for cut, baby cut that sets up a big inflation response, which maybe doesn't actually kick in before those midterm elections, but boy, it seems to me like we could have a setup for inflation to start to run away in late 2026 into 2027. Uh, am I right to think that? >> Yes. For the inflation statistics, the inflation statistics are officially classified as lagging indicators. So they will take some time to kick in and show the inflation. Bond markets are forward-looking. They're not going to wait for the inflation. They're going to anticipate the inflation. So if you wind up cutting too aggressively and the markets are worried about inflation, they'll react to it almost immediately. And that could be the story of 2026 if we were to wind up getting um, you know, a single-minded focused Fed chairman who wants to aggressively cut interest rates. By the way, let me talk about that inflation by diving off a little bit into the labor market. Why did the Fed cut rates? What is the Fed most concerned about? They're concerned about that jobs are falling. that a year ago, a year and a half ago, the US economy was cranking out 150,000 180,000 jobs. The beginning of the year was still churning out 80 to 100,000 jobs. Now, it's churning out somewhere around 10 to 30,000 jobs. And I say that somewhere because we don't have the official statistics because of the government shutdown. They're still only current through September. We're looking at things like ADP. We're looking at things like challenge of grain Christmas layoff announcements. We're looking at some alternative data to that degree. So the Fed is worried that the labor market is producing less and less jobs. Absolutely true. But they only give very short notification about what the Fed calls labor supply which the market calls the break even rate. How many jobs does the US economy need to create? The biggest driver in deciding that number is the population growth of the country. So if you go back to 23 and 22 when we were cranking out almost 200,000 jobs a month, the population of the country was booming. Why was it booming? Because of undocumented workers and illegal immigration. We were getting 3 million plus illegal immigrants into the country a year in 2023. That was making the population of the country swell by more than 1%. Today, I'll go with the numbers that Trump used at his cabinet meeting last week, and he's repeated these numbers many times, that the illegal immigration into the US in the last 6 months, he says, has been zero. Zero, not one person. He also says 2 million people have deported. 500,000 of them have been through ICE arrests and one and a half million have self-deported. Now, he's not showing his work. We don't know if those numbers are accurate, but conceptually they are accurate. We do know just from the watching the economy, the number of undocumented workers coming into the country is down a lot. The number of people deported being deported versus last year is up orders of magnitude. Whether or not it's 2 million and zero or some number near that, we don't know. But that brings up an issue that it's possible that the population growth in the United States is either zero or negative. In the 250 years this country has existed, there's only been one other year that we've had negative population growth. That was 1918, the Spanish flu. We got close in 2020. We got down to like 10 basis points of growth. We didn't even have negative population growth during the Civil War when we killed 6% of the population of the country because the fertility rate, the average woman had about six kids. That's why we didn't have negative population growth. But we could be having it for the second time now or something very close to zero. If you don't have population growth, Paul actually said this, if you don't have population growth, you don't need a lot of jobs. And we might be cranking out 20 or 30,000 jobs a month. We don't need many more than that. And if you are cranking out 20 or 30,000 jobs a month, every other or every third month might be a negative month and then you have a 50,000 month to kind of offset it there along the way. If that's the case and the Fed is cutting rates because they're worried about the labor market, they just cannot make that jump. Yeah, we we're producing 180,000 jobs a month. Now we're producing 30, but we only need 30 or 20 or zero and we're okay with 30. So don't worry about the labor market. They can't make that jump. They're saying, "What if we're wrong? What if the labor market keeps sinking? We got to keep doing what Paul has referred to as riskmanagement cuts." And they're not necessary. Then all that stimulus is just going to go in the prices and push inflation even higher. So that's really the question about the labor market and about how inflation fits into this. How bad is the labor market right now? And to answer that question, you have to ask ask the question, how many jobs do we need? Is it zero? Is the break even rate zero? Any positive number is okay? Again, over a three or six month average, you can have negative numbers in there and some positive numbers in there as well too. That is really the open question. And if we come to the answer that yes, it is somewhere near zero. Yes, 30,000 is enough. All these rate cuts are just going to go towards inflation and we know everybody's angry about affordability and you're just going to push inflation even more. That could become a real problem. >> Help me if I'm misinterpreting the news flow here because what I think I've heard is a few weeks ago, President Trump announced, "Okay, look, it's the fix is in. It's a done deal. I've made my final decision who the new Fed chair is going to be. I'm not going to announce it till after the end of the year, but it's a done deal. It's decided. That's it. And then this week, he started interviewing other guys for the job. So, okay. Did he change his mind? What happened? I think almost everybody in the market assumed when he said that his decision had been made that he was talking about Kevin Hasset. So, I guess I should ask first, do you agree that's who he meant when he was saying that the VIX was in? How come he seems to be backtracking on that? Is he is it no longer a certainty that Kevin Hassid is the pick? What do you think? >> Yes, I think Kevin Hasset was the pick. I think that there is some doubt if you want to go with betting market numbers. Kevin Hasset was trading mid to high 80s after that announcement came out that Trump has made his decision and now he's trading 69. It's still above 50. He's still the favorite, but doubt is creeping in. Why is that doubt creeping in? As best I can tell is after it kind of became known that Hasset was going to be the guy, a lot of press reporting was corporate America and Wall Street was pushing back about Hasset and they were unsure whether or not he should be the Fed chairman. Not because of his resume. From a resume standpoint, Colombia professor of economics has worked in the White House, has worked at the Fed. He has got a resume that makes him qualified to be the Fed chairman. Question is, are we going to get the Kevin Hasset of the resume or are we going to get Kevin Hasset stoogge of Donald Trump whose job is to just cut interest rates and not even think about anything else. Wall Street and corporate America was worried we were going to get Kevin Hassid stoogge and they were saying what we were what I was trying to argue before. you cut too much, you're too aggressive, you might have a backlash in the bond market because you're not being sufficiently vigilant about inflation and you could actually have higher rates. So what I think happened was Hassid who's been out there almost every day has been trying to assuage these concerns about the idea that he would um he would overdo the rate cuts and I think Trump doesn't like hearing that from him. Also Trump likes the way that Scott Besset the Treasury Secretary is a respected and calming voice in the market. and Hasset while he's a very qualified and he's a competent person, he's not getting that respect from the marketplace right now. Seems like Trump is maybe having second thoughts and he's opening up the uh the selection process to interviews. But let's be clear, question one is, what are you going to do to get the funds rate to 1%. How are you going to ignore anybody who gets in your way in order to get the funds rate to 1% is be question two. So he's not looking for an objectively minded person. He's looking for somebody who wants to be single focused in lowering interest rates. >> Well, let's talk about the prudence of the president's agenda because I can't believe he really cares that much about policy rates, which is what the Fed actually sets. I'm assuming the reason he cares about that is he's making the assumption that those policy rates translate, you know, you you lower the policy rate, it's going to translate to lower rates further out on the curve. As you've described, it doesn't always work that way. I'm not sure if the president sees that, but boy, if you imagine the Democrat party saying, "Okay, we want to do anything we can against President Trump." How many economists could we round up to express publicly the view that aggressively cutting policy rates doesn't necessarily result in lower interest rates on something like mortgages or car loans or things that voters care about. Uh it seems to me like there's a pretty large contingent of economists that don't really like the president who would be ready to take that view. And I think that frankly, you know, the way I understand monetary policy transmission is a lot of it has to do with the mood of the marketplace. So that kind of propaganda, if you will, could be very effective in maybe causing the back of the curve to respond opposite the way the president is assuming. Am I reading too much into that? No, you're reading exactly into that. That is the concern. And there will be enough people that will come out, me included, that would say, "Look, aggressively cutting rates is going to backfire on you and produce higher long-term interest rates because that's where mortgage rates are set and that's where corporate borrowing is set and those are the rates you want to lower." Remember, Trump has already said that he thinks he should be Fed chairman, but he acknowledged he can't be. Um, he wants to appoint himself because he's a real estate guy. So that makes him in his mind an expert in interest rates. And in fairness to Trump, every real estate guy I've ever met thinks that they're an expert in interest rates. And they always have their expertise go in one direction. They're too high and they need to go lower. That's what every real estate guy thinks because they think in terms of mortgages because that's the way that they've they've cut their teeth. So he's of that opinion right now that he needs to see interest rates come down. And I still think that he that's why he believes that the economy will boom if we were to see the Fed continue to cut rates. That eventually long-term rates, mortgage rates, all of those borrowing cost rates will come down. And if they've been slow in coming down now, Trump's readymade answer is too late. That's what he calls pal. you should have been cutting rates aggressively and earlier and we'd have a much lower 10-year notes. We'd have much lower 30-year mortgages if we were to do that. Although, I would argue no, it's more about worrying that you're overcutting, worrying that there's an inflation problem and that that's what's holding it back. And the only reason we're down to 415 is drill baby drill seems to be working because gasoline prices are down. But you still can't even get the funds rate. I mean the 10ear rate below when you started cutting the funds rate um at this point. So yeah, I think that's exactly what it is is that the president is pushing really hard on it and there's going to be some push back if that's where they're going to go in the future. That is the new Fed chairman is going to be single-minded focused about being aggressive in cutting rates. It seems to me that this is all a great big setup for the president to accidentally unleash. I think there's a secular inflation in the making anyway, but it seems like, you know, it takes a catalyst to really get an inflation to run away. Didn't you just kind of lay out the game plan for creating that catalyst? >> Yes. And that is my concern about why I think interest rates could go higher from here because we're not talking about being vigilant about inflation. Jay Powell said today that every member of the Fed expressed a concern that inflation is too high. I agree with him. Not one member of the Fed according to J. Pal has as their base base case any consideration to raising rates in the future. doesn't mean we have to, but think about what I just said. We're all worried about inflation, but we're not going to do anything about it. We're because doing something about it would mean raising rates. And so that is a that is going to be a real concern. And as a matter of fact, right before we we started uh talking, Jal said something at the press or two that was kind of interesting. He said that the inflation rate x tariffs is in the low twos. Now there is no measure called inflation rate x tariffs. So obviously the Fed has invented one. They haven't shown their work as to where they come up with it. But I was looking at some of the breakdowns of the inflation numbers and I was looking at CPI services because we're not tariffing services. That's above three. CPI services less energy is above three and a half right now. I don't know. Yes, he's correct. CPI goods, which is largely a lot of tariff stuff, is in there, is rising rapidly, and that does account for the majority of the rise of inflation over the last several months. But if you take that out of the equation, services are still above 3%. I don't know where he comes up with the low twos. Obviously, he's got a measure that he came up with to come up with that, but I wish like like the president would show his work about what the population growth of the US is. I wish that J. Paul would show his work as to how he came up with that low twos number of, you know, inflation x tariffs. Let's talk a little more about inflations, particularly secular inflations, and how they work. Because I could imagine, you know, somebody from the Trump administration was listening to the two of us talking about this. They'd say, "Look, guys, come on, relax. We think that we can bring policy rates down. That should bring long-term rates down. In the unlikely event that Jim Biano is right and what really happens is that that pushes longerterm rates up because of inflation fears. We can make an adjustment at that point. Maybe we'd have to hike rates in order to bring longerterm rates down. But we'll find that sweet spot and it's all going to be fine. I don't think inflation works that way. I think the way inflation works is once you start to see a runaway, not so much in inflation itself, but in inflation expectations, what happens is it changes consumer behavior. People start buying things now in order to uh you know, buy them before the price goes up and all of the sudden you get a runaway situation that's out of control and can't be stopped. It seems to me like we're playing we're playing with fire here. We're playing with matches at a time that we don't understand that the forest is really dry and potentially uh at risk of once something gets burning, we can't stop it. Am I exaggerating to think that's a risk? And what could go wrong here? >> No, it's a real risk and it's happening right now. And I'll even Jay Pal addressed this and I disagreed with him there. There's two broad measures of inflation expectations. One broad measure is market-based measures. You can look at the inflation swaps market. You can look at the Treasury inflation protected securities market to back into what's called the inflation break even rate. You know, what is the market pricing in for inflation? So if you look at market levels of inflation, they're anchor to use the Fed term, they're low in the low twos. They're not moving. They don't have a lot of volatility. And they would give the Fed and the administration comfort. See the market-based measures of inflation are not a problem. But if you look at the consumer-based measures, the surveys, the University of Michigan survey of inflation, if you look at the political polls, the number one issue according to the political polls is affordability. The president's approval rating is falling because everybody's talking about affordability. What they mean is the level of inflation. CPI is up 27% since April of 2020. and they would like to see, you know, some relief on these high prices. In their example, inflation for the public is unanchored and they're very, very upset about it right now. J Pal dismissed it by saying that the inflation numbers are well behaved in the surveys. I'm like, we've only been talking about the University of Michigan being at 30 and 40 year highs in inflation expectation all year. And you know, I'm sure he's found some other survey that says that no, that's not the case. But the big ones that we look at are showing that that's the case. That really comes down to what is more important. that a bunch of bond traders aren't pricing in future inflation or the public is tanking the president's approval rating and is spitting mad about affordability. I'm going to go with the public being more important than a bunch of bond traders and that the public is the one that's going to lead towards unanchored inflation because they want something to be done. I'll say the last thing about this is how mad are they? They just voted a socialist in this New York City mayor. They almost voted a congressman who was a socialist in in a very red district in Tennessee and they voted a socialist in the night before we're recording as mayor of Miami. So they're now turning towards socialists that are saying you want affordability. I'll just cap the price. I'll just make it illegal for these prices to go up anymore. Does it make economic sense? No. But I just want relief. And if they're offering me relief, I'll take the relief is what we're getting right now. So yeah, it is a problem. And just because the tips desk at Goldman Sachs is not pricing it in, therefore doesn't mean it's a nonpro. >> Well, Jim, I couldn't agree with you more. Let's uh shift gears now and talk about the consequences of all of this stuff in markets. If you and I agree that uh there's a very s significant risk that we're about to unleash a secular inflation, uh the first thought is both precious metals and crypto. Then I guess the next thought is let's talk about what happens in a big inflation to the stock market. I think a lot of people, you know, remember the 1970s and think inflation up, stocks down. I don't think it really works that way. I think it's inflation up, stocks up at first a lot and then stocks down only after the feedback loops kick in. So, let's get into what this is going to mean for markets. >> Yeah. So, let's start with um the precious metals markets. Obviously, they're flying. Uh year to date, I'm just looking at my screen right now. Silver's up 110%. Gold is up 61% year to date. Silver traded over $61 the day we're recording at one point earlier in the day, and gold is still at around 4,200. They're not pure inflation plays. I don't think they are. What they are is they are uncertainty, bad things happening kind of plays. That's why you buy gold. One bad thing obviously is inflation. Deflation could be another one. Political strife could be a third one, you know, and the like. And so the fact that gold has been moving up quite a bit has been a signal to the marketplace. It's worried. There's worried that there is a problem here. And a lot of that's been coming out of Asia right now because you could actually argue uh that within Asia the inflation problems and the worries are bigger. Japan has got a real inflation problem. For the first time in 50 years, 50 years, Japan has a higher inflation rate than the United States. You got to go back to 1977 to find the last time that they actually that the they had a higher inflation rate than us as they do right now. China is in I've been a very big bearer on China. I think that their economy is struggling. I think they've got a real estate problem. So that's been the big catalyst for gold. And the problem with China is if their economy is struggling, their answer is print, more accommodation, more government spending, and that would lead to inflation over in China. Now the stock market, you're right. The stock market, as we talk right now, is just closed a few points short of an all-time high. The all-time high, by the way, was set on October 29th, which was the last day that the Fed cut rates. And so, at this point, I think we need to define the stock market two ways. There are the AI companies and then there's the nonAI companies. I use Michael Kemblas at JP Morgan. They went through and they identified what they call 41 AI related companies. It's the Mag 7. It's a couple of other companies along those lines. It's a few power companies that get primarily their business from supplying data centers with power. Couple of capital equipment maker companies, 41 of them. Those 41 companies are 47% of the S&P 500 market cap. The other 459 companies in the S&P are 53% of the S&P. Now, what I just said is one theme is half the US stock market. When was the last time one theme was half or more of the US stock market? The argument is, and I've looked at the data, too. You'd probably have to go back to the railroads of the late 19th century to find the last time that we've seen a theme concentrated to that degree. The AI companies have been 70% of the gain of the S&P 500 over the last few years. The other companies the have the other 459 companies been only about 30% of the gain. We stated the nonAI part of the stock market is up about 8% peranom over the last couple of years. Not a bad number, but we're all used to this 20% gain that the index has. That's largely because of AI. So, we've got a transformative technology coming in right now in the form of AI and that has gotten the marketplace to get excited to push those stocks up. Beyond that, you've been getting rather middling kind of stock market returns, 7 8% type of returns in the market. And you're right, in the initial stages of an inflation, the earnings look good. Companies can raise prices and they can fatten their margins, but as the inflation goes on, that reverses because then something else happens. Their input costs go up, whether it's labor or raw material goods, especially if it's raw material goods from overseas that's being tariffed. They go up and they're going to start getting squeezed. That's why if you go back to the 70s example, if you go back to the late60s, early '7s, people were openly saying the best inflation hedge is stocks because they can raise prices and keep up with inflation. So own stocks. And then by the mid late7s that completely reversed and it completely went the other way because it was yes, but your input costs go up and your margins get squeezed and it's really hard to make a profit and the stock market was a terrible performer until the early 1980s. And so that's where I think we are. We're in the early stages of the um of the inflation boom. Even with that, the nonAI part of the stock market, which would be more interest sens inflation sensitive, is really, you know, 7 8% returns a year. It's not the 15 to 20% that we've kind of gotten used to with the overall index. That's because of AI. Jim, let's come back to what you said earlier about socialists being elected and so forth. You know, it seems to me what's going on here is in decades gone by, younger generations didn't vote and therefore didn't have much say in things. They were busy going to nightclubs and partying and having fun and you know nobody voted. Uh therefore the the opinions of 20somes didn't really matter in terms of electoral outcomes. Seems like generation Z is voting and they're voting for socialists and there doesn't seem to be any amount of hey guys have you looked at the history of this and do you understand the reasons that the United States has been more financially successful than socialist countries? You know, the answer is they're not interested in hearing anything from old people. Okay, boomer, whatever you say. We don't think that your capitalist system is working for us. We're going to pick the opposite of it, whatever that means, and we don't really want to think any more about it than that. At least that's the way I perceive it. It seems to me like that's, you know, they're more than half of the people. They're growing in their numbers. They're going to continue to dominate majorities as long as we have a democracy. Seems to me we're going to have more socialists, not just mayors, but Congress people, and eventually move toward a socialist system in the United States. Am I wrong to think that's almost inevitable? And if it does, what's the long-term outlook for markets? >> I think you're right. And I think you're right for the following reason. It hasn't been working for them. The widely quoted statistic that a lot of people have been saying is the the average age of a first-time home buyer is 40. The reason it's 40 is you need to um save for many years in order to buy a house. Prices, as I pointed out, are up 27%. They are finding it very difficult in order to make ends meet when it comes to prices. Then on top of that, you've got the whole idea about what AI is going to do to the labor market, the jobs market. I'm graduating with a degree from a recognized university. You know, in other words, I'm not getting a basket weaving degree and from a university you've never heard of. I'm getting a degree from the University of Michigan in business or something like that. Good degree, you know, good school and I'm not being able to find jobs. And what I've been told is all the jobs I want to be f I would like to get, those entry- level jobs are being replaced by a large language model. So, they're feeling that prices are too expensive, opportunities are too few, and then here comes a guy like Mandami. We're going to have free buses. We're going to we're going to have cheaper grocery stores. We're going to put a cap on the amount that your rent can go up. And the boomers are telling them, "Well, that stuff doesn't work." And they're saying, "Yeah, well, what you're doing isn't working for me now, so why should I listen to you? because I'm not happy that I got to save till I'm 40 to buy a house. I can't get a job because I'm being priced out of every job because of a large language model. I can't afford anything at the store now. And you're telling me that if I vote for this guy, it's going to be worse. It's pretty bad right now is what they're trying to say. And so I understand that. And you're right. until we can tackle this affordability problem, until we could show them that capitalism is the way to go. Look, I'm of the age that I came into the workforce in the early 80s during the Reagan boom during after the 82 bottom in the stock market when the 25 year olds all wanted to wear yellow suspenders or yellow ties and suspenders and get a job on Wall Street and make a lot of money because there was opportunities there left and right. That is not the case today. So, I understand where they're going. you might refer to this as a fourth turning type of thing and that um you know that we are in that fourth turning that winter that we're going to see with the push back that we're getting. So on one respect I get it. I understand their frustration. I understand that lecturing them about the evils of socialism and the virtues of capitalism when they don't see it isn't really going to help them right now. And yeah, it might get worse until it gets better. Now, the way it could get better is we start to attack with this issue. Take housing. How do you fix the housing problem? More supply. Well, the problem there is the president keeps yelling that the affordability thing is a con and it's a hoax and it doesn't exist and prices are coming down and things are becoming more affordable. That's not the way to answer that question about affordability. that you're wrong, everything's fine is really what is what his answer is. So, we're not going to address it and we're going to have a push back. So, I hope that we're going to start to address it. We need more homes built being built. The number that I've seen that I believe is from 2009 to today, there's been about 21 million new households formed in the United States. 2009 to 2025, there's been 18 million new homes built. So we have a deficit of about 3 million homes plus probably another 2 million existing homes have been condemned and torn down because they were just old and in disrepair. So we might have a deficit of about 5 million homes. We need to loosen up say zoning laws, building laws, land use laws in order to let contractors and let builders and developers build more homes. problem is the the boomers that own the homes don't want to hear that because that sounds like more supply, more competition, my house might fall in price. So, yeah, we've got real issues we got to work through. And if Neil How was here, I think he would probably say, "Yeah, and that's exactly why we have fourth turnings." And maybe we're getting very close to one right now. >> Well, isn't it true then? I mean, the fourth turning usually breaks down and replaces all of the biggest trusted institutions and so forth. seems like we are indeed uh very definitely in the late stages of a fourth turning because they last for about 25 years. The expectation would be sometime in the early 2030s. We kind of start the first turning with newly constructed systems that the younger generation is in charge of designing and you know it would be the millennials are in charge and Gen Z is doing all the work in order to usher in new systems to replace what we have today. Uh, I don't know. You know, it's it feels to me like the the feelings of generation Z are completely understandable, but I think about I don't think they really understand the consequences of socialism. What do you do? You could try to reach out to them and communicate with them, respecting their views, trying to engage them in a a respectful debate about the benefits of different economic models and maybe why socialism isn't the solution. The thing is, Jim, the last guy who tried that was Charlie Kirk, and it didn't really end well for him. >> I agree. I mean what you have to do is instead of lecturing them about the evils of socialism do like what I saw when I was 23 24 years old you know in 1983 1984 and that was the opportunities that capitalism was presenting that you can get these jobs that could give you decent careers and get you moving along to being able to afford nice houses and nice things and do the things in life that you want to do. show them the opportunities. Instead, we tell them socialism bad. Save till 40 and don't complain about the prices at the store. I'm sorry, that's just the way it is. That's not a solution for them. So, they they're going to need to have something more than that. So, hopefully we'll get to that point. You're right in the first turning maybe with large language models and AI being the transformative technology. I am a big believer that technology is a net creator of jobs. I've seen the studies that say 50 million jobs will be displaced by AI of 160 million in United States. So roughly a third, maybe about 30%. Okay, I I think that might be right, but I also think that AI might create 70 million new jobs. And those new jobs it's going to create are currently in industries that don't exist. And so maybe we could get to the point where we turn to the millennials and the Gen Z's and say, you know, those 70 million jobs in those industries that don't exist, go create those. Go create those industries. Go do that. And you will make and that's the wave that your generation will ride, you know, in order to become more financially secure and not wait for the boomers to do it or the boomers won't do it or the Gen Xers to do it because the Gen Xers are now starting to approach 60 years old anyway. and the older ones are at least. And so that hopefully could be where they're going to go with this in the first turn. And I actually think they will. And I think that, like I said, at the end of the day, technology is a net creator of jobs. The problem is I can identify the job that's going to go away. The job that it's going to create doesn't exist. So it's always a concept that it's out there. And uh but they usually are. And those jobs go make those jobs reality. And so hopefully they will do that. >> Well, Jim, I can't thank you enough for a terrific interview as usual. Before I let you go, let's talk a little bit about what you do at Bianca Research. You are not actually running an ETF. You manage an index which Wisdom Tree follows with an ETF. So people who want to invest around your views and your strategy have a way of doing so. Tell us more about it. >> Yeah, so I do manage I'm a fixed income guy by by by training and by practice. And so we do manage the Bianco Research Total Return Index. You can find out about it at biancoadvisors.com. We set the parameters on the index and wisdomree as an ETF that tracks our index. I've used the example. Think of me like the head of the S&P 500 index committee and spy tracks my index. Well, that's kind of the setup that we we've got. WTBN is the ticker symbol for the um Wisdom Tree Biano Fund. And my day job still exists is that is is being the researcher of Bianco research. You could find out more more about us at the words Bianco research. Either biancorresearch.com is our website. Biancor research on Twitter. Biancore research on YouTube. Either Jim Bianco or Biano Research on LinkedIn. And so you could follow me on any of the socials. I try to stay active on the socials as well too or check us out on our on our website. Patrick Szna and I will be back as MacroVoices continues right here at macrovoices.com. Now back to your hosts, Eric Townsend and Patrick Szna. >> Eric, it was great to have Jim back on the show. Listeners, you're going to find the download link for the postgame trade of the week in your research roundup email. If you don't have a research roundup email, that means you have not yet registered at macrovoices.com. Just go to our homepage, macrovoices.com, and click on the red button over Jim's picture saying, "Looking for the downloads." Patrick, you pimped your new asymmetric trading challenge product on last week's show, but how about giving our listeners a solid example of an asymmetric trade design by translating some of Jim Biano's views into a trade with more upside return potential than downside risk if it doesn't pan out. Eric, what really jumped out at me in Jim Biano's comments is that the bond market is not behaving the way a classic easing cycle says it should. The Fed has already cut aggressively and yet the 10-year yields are higher than when they started cutting. So for this week's trade of the week, I wanted to build a trade for those who believe that the bond vigilantes will ultimately prevail. Now when we had Jim on a few months ago, we expressed his view with a bare steepener of the 530s curve. That chart is on page two of the deck. Today I want to come at the same theme through a short long duration US Treasury position using options. On page three, you can see the 30-year US government yield chart with a very clear resistance around 5% over the last 2 years. If bond vigilantes reawaken the way we saw with the JGBs or guilts, it's entirely plausible they'll make another run at the 5% level, if not higher. The key to using options here is on page four. Implied volatility on the TLT long bond ETF is sitting down at its lows of the year. This makes this kind of convex expression much cheaper to put on than almost at any point earlier in the cycle. So, I'm looking for a capital efficient, riskcontrolled way to profit if yields break above 5%. Which is where I think volatility will start to get spicy very quickly. Now, the structure I'm looking at is the July 2026 TLT 85x 80 bare put spread. We're long the $85 put and short the $80 put, paying about a $1.20 for a $5 wide spread. That gives you a better than 3:1 riskreward profile if long yields move higher and the TLT trades down to the low8s or below with your maximum loss strictly limited to the $120 capital outlay. It's also worth noting that anyone currently long TLT shares on an economic contraction thesis can use the same spread as a hedge overlay. It's a relatively inexpensive way to dampen the downside if we get a breakout in the long-end yields that runs counter to the duration bet while still keeping your core long bond position in place. >> Patrick, where should our listeners go if they want to find out more about the asymmetric trading challenge? >> Eric, we're hosting a one-time special webinar on the asymmetric trading challenge we're running for 2026. We are hosting it on Tuesday, December 16th at 400 p.m. Eastern time. It is free to attend. So, if you want to reserve your spot, go to our homepage, bigpicturertrading.com. You will also find the link in your research roundup email. All right, Eric, let's talk about these equities. Well, Patrick, we got the long-awaited, widely anticipated December rate cut along with the predictable, instantaneous spike higher in the S&P index in a brisk face ripping rally that lasted uh for a good hour and a half before it fully retraced to the downside and then some with S&P futures trading in the overnight session below where they stood at 2 p.m. when the rate cut was confirmed. So now the question becomes whether that rate cut will be the predicted catalyst for a Santa Claus rally that takes the S&P to new all-time highs by New Year's or if maybe it was actually a sell the news event that marks the short-term top just 90 minutes after the cut announcement and which might not be exceeded again before years end. Now only time will tell but the brevity of the immediate upside reaction suggests that the latter scenario could very well be in play. Well, Eric, what we've seen over the last couple weeks has been a complete contraction of realized volatility. This dampening is somewhat to be expected as we've moved far away from trigger points on this market and now approach some key overhead resistance. The key was that so far the market hasn't done any extraordinary move in the post FOMC period. This puts that jobs number next week in line. But with option expiration next week, if the jobs numbers are not an outlier that causes a big swing in the markets, it's very likely we're going to pin into the option expiration. And at that stage, with the low volume over the holiday period, it's very likely that the rest of the month of December could be stuck in a brutal, choppy trade range, leaving the next major market move to the new year. Let's see if that happens. Obviously, we have a big hurdle to pass with that jobs numbers released next week, but if it isn't an outlier, uh odds are very high that this is going to be a pretty boring month for the stock markets. All right, Eric, let's talk about this dollar. Well, the Dixie is not crashing, but it's looking more and more like a short-term top is in and we're well into a swing trade lower, at least for now. As I've said before, I think the action on the dollar is going to be headline driven and Trump and Bessant's next policy moves will likely determine the direction of the next major leg for the dollar. Absent policy action looks to me like a new down channel is being established on the chart. Well, Eric, the US dollar has been weakening. We spent 2 months above the 50-day moving average in a retracement that should have even gone as high as 102 103 on the upside. instead uh the 100 level acted as substantial overhead resistance and now we're breaking down towards the critical 98 level. And I want to stress to me the 98 level on Dixie is real tell because if we see that the market is interpreting the Fed path to still have a relatively dovish tone and we give out the 98 level, there's a real chance that the dollar could re-resume its downwards trend that's been in place all year long. Would that mean a break to fresh new lows? Well, you know, at this stage, we're sort of in a no man's land in the consolidation. The next real major support line for the dollar index was established over the last decade down along the 90 level. So if we see any deterioration in this trend over the rest of December, it could reopen the downside window of the dollar into next year. All right, Eric, let's touch on oil. Well, it's getting really interesting. Despite Cushing inventories being at operational minimum, so that means shortage of oil. We should see big backwardation on on the uh front of the curve, we're actually seeing front of curve time spreads softening. That's a bearish sign. So my outlook is unchanged. The fundamentals here are decidedly bullish. I think we're at the beginning of a secular inflation. I think there's lots of reasons whether you look at the Cushing inventories or or lots of other uh fundamental indicators that are decidedly bullish, but I also see room for invisible hands to keep oil prices low through the midterm elections. And the Trump administration is very, very strongly incentivized to keep prices at the pumps low through November's elections. crude seasonal low is normally in February. So, I'm definitely not in any rush to put any longs on before then. Now, a dip down to let's say $50 WTI would be hard to resist. 45 would be really hard to resist because I'm convinced that the fundamentals will eventually carry this market higher. But right now in the high50s, the question in my mind is how long the Trump administration can delay that inevitable outcome of a move much higher in oil prices. And I think the answer is probably quite a while. Time will tell. Really, there's no other way to put it. It's been an incredibly boring trade range. Now, there's been no momentum breakdowns. Usually, when you trade this way below a 50-day moving average, there should have been easily a breakdown to 55 or even down towards 50 with this type of price action, but instead it's been a consolidation sideways. It It's almost like oil has found a new fair value zone. And while there's no catalyst to take it higher, it doesn't seem to be in any rush to break down. Now, obviously, new some sort of a news catalyst will likely break this trend. Want to observe that the prevailing downtrend is the dominant one. There there has simply been zero sustained buying at any point. But it is a consensus trade to be short. There's very little interest in this and all CTAs are positioned on that short side. So if whatever catalyst was ever introduced to create a short squeeze, it can certainly be the pain trade that emerges on the market. But right now there's zero technical evidence of that at this stage. This might be the story continuing sideways for the uh rest of the month. All right, let's jump into gold. Well, the rally in gold after the Fed cut lasted much longer and didn't retrace nearly as hard as the retracement in stocks. The short-term overbought signal is being shaken off by time rather than price with a sideways price consolidation for more than a week now, causing the slow stochastics to retrace back down to about half mast. So, I think the rally toward new all-time highs is probably on, but there's still plenty of room for more consolidation before the next big leg higher begins. Well, gold is trading a stone throw away from its 52- week highs. It's been very well accumulated holding up there and maybe uh in this post FOMC period and especially in the post jobs number period maybe gold will have the tailwind to potentially break out to a fresh new high. This uh will be yet to be seen. I think I'm going to reserve uh my market call on this uh next week when we're post that news. But it is noteworthy to talk about silver which I have on the chart deck on page 10. And what we see is continued parabolic rise in silver prices. We've now hit $62, which is a basic measured move target, but there's a bigger measured move that is all the way up to the $70 mark. This is clearly being very well bid. Every little dip gets bought. Consolidations are sideways and breakouts to new highs happen almost immediately. This is a market that continues to take flows and it's certainly giving a bullish tailwind to all four of the precious metals. All right, Eric, let's touch on uranium. Well, as I said more times than I can count, I couldn't possibly be more bullish about the long-term fundamentals for uranium and for nuclear energy generally. And while this consolidation has been a little bit frustrating, the weekly charts really starting to look great in terms of oversold stochastics setting the stage for another big leg higher. The sticking point has been the spot price of uranium, which was stubbornly unchanged for more than a week, but which has now finally, as of Wednesday's trading action, just barely started to tick up. Let's see if we can sustain a rally in the spot price because that's what's going to give the the next leg up for the miners. Well, Eric, when I'm looking at these pullbacks in the uranium stocks and in uranium itself, uh we've now seen that overbought state get completely unwound and in some cases some oversold uh readings coming out on the markets. We've seen already a 50% retrace of the rallies. So, the asymmetry has reset in the uranium markets. The bigger question is does it start on the upside in a big way here in December or is it going to be a January story? Overall that very overbought state is gone and so now it's just really about setting up where could a potential new bull breakout really get underway. Patrick, before we wrap up this week's episode, let's hit that 10-year Treasury note chart. Finally, Eric, just touching on that chart on the 10-year yield and what we have seen over the last six months was a sequence of lower highs and lower lows as the yield worked uh from the 460 level all the way down temporarily below 4%. Now, we have seen that pattern slightly change. Uh majority of that decline, uh the yield stayed below their 50-day moving average, just simply depicting the trend of lower rates. we have seen that descending trend reverse here. And so this is the first time in uh in half a year that we've seen a higher high on yields. The bigger question here is this a turning point. Is this where we're going to see that 10-year make a push back to the highs where it was earlier this year? That's the puzzle to solve. Certainly this is the first time the price action has pivoted this way. Let's see whether or not the jobs numbers really shake up this 10-year to follow through on the upside. >> Folks, if you enjoy Patrick's chart decks, you can get them every single day of the week with a free trial of BigPictur Trading. The details are on the last pages of the slide deck or just go to bigpicturetrading.com. Patrick, tell them what they can expect to find in this week's research roundup. Well, in this week's research roundup, you're going to find the transcript for today's interview, as well as the link to the asymmetric trading challenge that we talked about earlier during the trade of the week. You'll find the chart book we just discussed here in the postgame and a link to a number of articles that we found interesting. You're going to find this link and so much more in this week's research roundup. That does it for this week's episode. We appreciate all the feedback and support we get from our listeners and we're always looking for suggestions on how we can make this program even better. Now, for those of our listeners that write or blog about the markets and would like to share that content with our listeners, send us an email at researchroundup@macrovoices.com and we'll consider it for our weekly distributions. If you have not already, follow our main account on x macrovoices for all the most recent updates and releases. You can also follow Eric on X, Eric S. Townson. That's Eric spelled with a K. You can also follow me at Patrick Sesna. On behalf of Eric Townson and myself, thank you for listening and we'll see you all next week. 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MacroVoices #510 Jim Bianco: From FED Cuts, to inflation, to Gen Z’s Infatuation with Socialism
Summary
Transcript
This is Macrovoices, the free weekly financial podcast targeting professional finance, high- netw worth individuals, family offices, and other sophisticated investors. Macrovoices is all about the brightest minds in the world of finance and macroeconomics telling it like it is. Bullish or bearish, no holds barred. Now, here are your hosts, Eric Townsend and Patrick Szna. Macrovoic's episode 510 was produced on December 11th, 2025. I'm Eric Townsend. The widely anticipated December rate coat finally happened, coming in at 25 basis points, with Moran dissenting in favor of 50 basis points instead of 25. And I can think of no one better qualified than Bianco Research founder Jim Biano to dissect what just happened, what it means for markets, and what comes next as the Trump administration continues to press hard for lower policy rates on the foregone assumption that they can only lead to lower long-term borrowing rates farther out on the curve. A myth that Jim Biano will dispel in this week's feature interview. Then be sure to stay tuned for our postgame segment after the feature interview when Patrick will translate Jim's views into an asymmetric trade. And I'm Patrick Szna with the macro scoreboard week overweek as of the close of Wednesday, December 10th, 2025. The S&P 500 index up 54 basis points to 68.86. Market trading along highs going into next week's key economic news. We'll take a closer look at that chart and the key technical levels to watch in the postgame segment. The US dollar index down 24 basis points trading at 9863. The January WTI crude oil contract down 152 basis points trading at 58.46. The January Arb gasoline down 273 basis points to 178. The uh February gold contract up 21 basis points trading at 4224. Precious metals remain well bid with silver leading the way. March copper down 74 basis points to 535. December uranium up 164 basis points to 7725 and the 10-year Treasury yield up three basis points trading to 412. The key news to watch next week is the much anticipated delayed jobs data release, the retail sales, flash manufacturing and services PMIs, the CPI and PCE price index inflation numbers. This week's feature interview guest is Biano Research founder Jim Biano. Eric and Jim discuss market signals, bond vigilantes, inflation, and more. Eric's interview with Jim Biano is coming up as Macro Voices continues. right here at macrovoices.com. And now with this week's special guest, here's your host, Eric Townsend. Joining me now is Bianca Research founder Jim Biano. Jim, what a perfect time. We're speaking Wednesday afternoon, just literally minutes after the Fed press release. We've got a cut which was expected, some bill purchases which some people expected and I think it's also important to talk about the divide. You know, this was not a unanimous decision of the Fed. What is in your mind the signaling of a split Fed on a decision like this that was widely anticipated? Let's cover all those things. >> All right. Well, let's start with the cut. The Fed cut the funds rate by 25 basis points for a total of 175 basis points since they started cutting in September of 2024. They kind of left the door open to the idea that they might be done or pausing for a while. The dot chart which was updated or dot plot which was updated only shows a median of one more rate cut for all of 2026. Of course, there's eight meetings. One rate cut means seven of them. You're not going to get a rate cut if that's indeed what they wind up doing. The other thing they announced, as you pointed out, they call it reserve market purchases, RMPPS. Don't call it QE. Uh they're going to buy $40 billion of bills, maybe out to three-year notes if necessary, but mainly bills, a month going forward. Now, what's that all about? The Fed has been doing quantitative tightening. They have reduced the size of their balance sheet which also reduces bank reserves to the point now where the funding markets are not big enough for the underlying treasury market. Remember the funding markets, the repo market and everything else. What is their purpose? To finance the 38 39 trillion Treasury market. They're not big enough to do that. There's a tightness in that market and those rates have been going up. So, the Fed announced $40 billion of buying to try and add more reserves into the system, give banks more capacity to hand out more repo loans to meet the size of that market. Now, the push back I'll give you, let's stop there real quick before I talk about the vote. The question that everybody's been attacking has been, I think, from the wrong side. They've been saying there's tightness in the repo market. So, the Fed's got to do quantitative easing, refer market purchases. they need to change the supplementary leverage ratio or maybe expand the standing repo facility or all these other things to accommodate the funding market to meet the needs of the Treasury market. And I've said, but no one's turning it around and saying maybe the funding markets are giving a signal that the Treasury market's too big as opposed to the funding markets being too small. And that signal is Congress, you can't keep borrowing. You can't be keep borrowing at this level. You can't keep running $2 trillion deficits and keep with these massive budgets. Because if the Fed were to expand the funding markets, which is what they're doing, maybe they're sending a signal to Congress, go ahead, keep running these big deficits. Go ahead, expand your budget, start new programs. And what's the concern there? I think that in the postcoid environment after the supply shock of 21 that caused inflation to spike into 22, the next biggest driver of inflation is government spending. And if the repo market or the funding markets were too small saying you got to back off in the government spending and our answer is no, we have to expand the repo market so they can continue the government spending. then we're going to be worried about that they're just encouraging or enabling more government which enables higher inflation. Finally, as you pointed out, the vote was 9 to3. Uh that's the first time since 2019 that we've seen three dissents and they were two-sided. Two dissenters, Schmidt of Kansas City, Goulby of Chicago desented that they did not want to cut rates and Steven Marin wanted to cut rates 50 basis points. So, we had a hawkish descent and we had a dovish descent. But going into this meeting, the expectations were for a bigger amount of dissents. I'll quote Nick Timmeros, the Wall Street Journal Fed Watcher. Yesterday's paper, he pointed out that if you listen to all of the Fed speak since the last meeting on October 29th, there's 19 members of the Fed. 12 of them are current voters. They rotate the voters. 10 of them have come out with statements or that they are uneasy about continuing to cut rates and five of them were voters. But we only got two dissents against cutting rates and overall we got six soft descents. Now what's a soft descent? The Fed put out its dot chart again today and there was still a 25 dot plot in there and six of those dot plots were for three and 78 which was the rate before the meeting. So six of the members put down as their dot that the Fed should not be cutting rates although 10 of them have given speeches suggesting it and only two of them dissented. So, a couple of these members that said that they didn't want to cut rates actually relented and went along with it. Now, why is that important? Because in May, we're going to get a new Fed chairman. Kevin Hasset seems to be the leader in the clubhouse right now. And that Fed chairman is presumably going to do the bidding of Donald Trump, who has made it very clear he thinks that the funds rate should be a lot lower than where it currently is. There's a number of Fed officials that are more concerned about inflation to continue to aggressively cut rates. In theory, they could stand up and push back and say, "Yeah, but you're only one of 12 votes, new Fed chairman. Who's the other six that are going to vote with you to give you a majority because we're not in agreement here with you that we should be cutting rates?" which is all fine and good, but if they wait until May to finally push back on that, they look the Fed looks highly partisan because you waited for Trump's guy and then you got a spine with all your dissents. But when we had when we had Powell and before him yelling and before her Bernani, you never descended on any of that stuff. But now with Trump's guy, you're dissenting. And so they would have been better off in my opinion having a 75 vote now to kind of show, look, we're pushing back, but he had enough to get the cut through, but we're really of the opinion that we shouldn't be aggressive with these rate cuts in the future. Note to next Fed chairman, but they didn't do that, and I think that might come back to haunt them when we get that next Fed chairman. I'll come back to Kevin Hasset in a few minutes, but I want to go back right now to some of the comments that you made a few minutes ago about how the market is responding to the government continuing to run all these deficits. It sounds like you're saying, okay, early stages of bond vigilantes showing up uh in fighting armor might be, you know, starting to show their faces. Is that what you meant? And I guess if so the qualification I think is boy for any sane thinking person we've all felt for the last 20 years like US government spending is out of control surely the bond vigilantes are going to show up and it's all going to be you know force their hand but that hasn't happened in the last 20 years. So what would be the changing factor that would cause bond vigilantes to actually be able to change the uh or to force the hand of the government and why hasn't that happened for the last 20 years? I'd say for the last part of the question, the last 20 years, let's say precoid, no matter what we could do, we couldn't get inflation above 2% to any great degree except for brief moments here and there. So, we were always in a very low inflationary environment. So, the bond vigilantes really had nothing to be vigilant about. But in the postcoid environment, we are five years, we are approaching the fifth anniversary of the COVID shutdowns right now. I actually excuse me the sixth anniversary is coming in a few months in February of 2026 and the inflation rate is still 3% or higher depending on which ones you look at. So they can't get inflation below three now as opposed to above three. So the bond vigilantes I think are as you pointed out putting on their armor and starting to push back. Now, I would argue again what I said before, 175 basis points of cuts and the 10-year notice 55 basis points higher. On top of that, I would point out that gasoline prices in the last couple of days have now broken below 3% as $3 as national average. That is the first time since the Russian invasion of Ukraine that we have seen gasoline prices below $3. So that alone should have been very bullish for bonds. So you've got falling gasoline prices, you've got 175 basis points of cuts, and you've got the 10-year yield higher by 55 basis points. While all that's happening, that sounds to me like a real push back in terms of bond vigilantes. Even though you might say, "But yeah, but it's still 4:15. It's not five. It's not six." Yeah, but they've ignored what should have been incredibly bullish stories for bond yields to fall and fall quite a bit and they haven't. So yeah, I think that the bond vigilantes are out there in force right now. And if we continue to push, hey, we need more cuts. We need to be cutting by 50. The president criticized J. Paul after the press conference saying that they should have cut 50 basis points today. uh and not even be talking about being close to being done that the bond vigilantes are there that that we should probably be in the low 3s right now all things being equal but we're at 415 so there is an impact from them >> let's stay on inflation before we come back to Kevin Hasset you know obviously we just got a 25 basis point cut but more importantly as you say starting in May President Trump has been super clear he wants a lot more cuts he wants to see 1% % cut, baby cut. Well, obviously the textbook fear is that really starts to unleash inflation. I suppose the counterargument to that would be, well, while that does unleash inflation, it won't unleash any significant inflation before November's midterm elections. And I think that's probably what's driving the the president. So, do we have a setup here for cut, baby cut that sets up a big inflation response, which maybe doesn't actually kick in before those midterm elections, but boy, it seems to me like we could have a setup for inflation to start to run away in late 2026 into 2027. Uh, am I right to think that? >> Yes. For the inflation statistics, the inflation statistics are officially classified as lagging indicators. So they will take some time to kick in and show the inflation. Bond markets are forward-looking. They're not going to wait for the inflation. They're going to anticipate the inflation. So if you wind up cutting too aggressively and the markets are worried about inflation, they'll react to it almost immediately. And that could be the story of 2026 if we were to wind up getting um, you know, a single-minded focused Fed chairman who wants to aggressively cut interest rates. By the way, let me talk about that inflation by diving off a little bit into the labor market. Why did the Fed cut rates? What is the Fed most concerned about? They're concerned about that jobs are falling. that a year ago, a year and a half ago, the US economy was cranking out 150,000 180,000 jobs. The beginning of the year was still churning out 80 to 100,000 jobs. Now, it's churning out somewhere around 10 to 30,000 jobs. And I say that somewhere because we don't have the official statistics because of the government shutdown. They're still only current through September. We're looking at things like ADP. We're looking at things like challenge of grain Christmas layoff announcements. We're looking at some alternative data to that degree. So the Fed is worried that the labor market is producing less and less jobs. Absolutely true. But they only give very short notification about what the Fed calls labor supply which the market calls the break even rate. How many jobs does the US economy need to create? The biggest driver in deciding that number is the population growth of the country. So if you go back to 23 and 22 when we were cranking out almost 200,000 jobs a month, the population of the country was booming. Why was it booming? Because of undocumented workers and illegal immigration. We were getting 3 million plus illegal immigrants into the country a year in 2023. That was making the population of the country swell by more than 1%. Today, I'll go with the numbers that Trump used at his cabinet meeting last week, and he's repeated these numbers many times, that the illegal immigration into the US in the last 6 months, he says, has been zero. Zero, not one person. He also says 2 million people have deported. 500,000 of them have been through ICE arrests and one and a half million have self-deported. Now, he's not showing his work. We don't know if those numbers are accurate, but conceptually they are accurate. We do know just from the watching the economy, the number of undocumented workers coming into the country is down a lot. The number of people deported being deported versus last year is up orders of magnitude. Whether or not it's 2 million and zero or some number near that, we don't know. But that brings up an issue that it's possible that the population growth in the United States is either zero or negative. In the 250 years this country has existed, there's only been one other year that we've had negative population growth. That was 1918, the Spanish flu. We got close in 2020. We got down to like 10 basis points of growth. We didn't even have negative population growth during the Civil War when we killed 6% of the population of the country because the fertility rate, the average woman had about six kids. That's why we didn't have negative population growth. But we could be having it for the second time now or something very close to zero. If you don't have population growth, Paul actually said this, if you don't have population growth, you don't need a lot of jobs. And we might be cranking out 20 or 30,000 jobs a month. We don't need many more than that. And if you are cranking out 20 or 30,000 jobs a month, every other or every third month might be a negative month and then you have a 50,000 month to kind of offset it there along the way. If that's the case and the Fed is cutting rates because they're worried about the labor market, they just cannot make that jump. Yeah, we we're producing 180,000 jobs a month. Now we're producing 30, but we only need 30 or 20 or zero and we're okay with 30. So don't worry about the labor market. They can't make that jump. They're saying, "What if we're wrong? What if the labor market keeps sinking? We got to keep doing what Paul has referred to as riskmanagement cuts." And they're not necessary. Then all that stimulus is just going to go in the prices and push inflation even higher. So that's really the question about the labor market and about how inflation fits into this. How bad is the labor market right now? And to answer that question, you have to ask ask the question, how many jobs do we need? Is it zero? Is the break even rate zero? Any positive number is okay? Again, over a three or six month average, you can have negative numbers in there and some positive numbers in there as well too. That is really the open question. And if we come to the answer that yes, it is somewhere near zero. Yes, 30,000 is enough. All these rate cuts are just going to go towards inflation and we know everybody's angry about affordability and you're just going to push inflation even more. That could become a real problem. >> Help me if I'm misinterpreting the news flow here because what I think I've heard is a few weeks ago, President Trump announced, "Okay, look, it's the fix is in. It's a done deal. I've made my final decision who the new Fed chair is going to be. I'm not going to announce it till after the end of the year, but it's a done deal. It's decided. That's it. And then this week, he started interviewing other guys for the job. So, okay. Did he change his mind? What happened? I think almost everybody in the market assumed when he said that his decision had been made that he was talking about Kevin Hasset. So, I guess I should ask first, do you agree that's who he meant when he was saying that the VIX was in? How come he seems to be backtracking on that? Is he is it no longer a certainty that Kevin Hassid is the pick? What do you think? >> Yes, I think Kevin Hasset was the pick. I think that there is some doubt if you want to go with betting market numbers. Kevin Hasset was trading mid to high 80s after that announcement came out that Trump has made his decision and now he's trading 69. It's still above 50. He's still the favorite, but doubt is creeping in. Why is that doubt creeping in? As best I can tell is after it kind of became known that Hasset was going to be the guy, a lot of press reporting was corporate America and Wall Street was pushing back about Hasset and they were unsure whether or not he should be the Fed chairman. Not because of his resume. From a resume standpoint, Colombia professor of economics has worked in the White House, has worked at the Fed. He has got a resume that makes him qualified to be the Fed chairman. Question is, are we going to get the Kevin Hasset of the resume or are we going to get Kevin Hasset stoogge of Donald Trump whose job is to just cut interest rates and not even think about anything else. Wall Street and corporate America was worried we were going to get Kevin Hassid stoogge and they were saying what we were what I was trying to argue before. you cut too much, you're too aggressive, you might have a backlash in the bond market because you're not being sufficiently vigilant about inflation and you could actually have higher rates. So what I think happened was Hassid who's been out there almost every day has been trying to assuage these concerns about the idea that he would um he would overdo the rate cuts and I think Trump doesn't like hearing that from him. Also Trump likes the way that Scott Besset the Treasury Secretary is a respected and calming voice in the market. and Hasset while he's a very qualified and he's a competent person, he's not getting that respect from the marketplace right now. Seems like Trump is maybe having second thoughts and he's opening up the uh the selection process to interviews. But let's be clear, question one is, what are you going to do to get the funds rate to 1%. How are you going to ignore anybody who gets in your way in order to get the funds rate to 1% is be question two. So he's not looking for an objectively minded person. He's looking for somebody who wants to be single focused in lowering interest rates. >> Well, let's talk about the prudence of the president's agenda because I can't believe he really cares that much about policy rates, which is what the Fed actually sets. I'm assuming the reason he cares about that is he's making the assumption that those policy rates translate, you know, you you lower the policy rate, it's going to translate to lower rates further out on the curve. As you've described, it doesn't always work that way. I'm not sure if the president sees that, but boy, if you imagine the Democrat party saying, "Okay, we want to do anything we can against President Trump." How many economists could we round up to express publicly the view that aggressively cutting policy rates doesn't necessarily result in lower interest rates on something like mortgages or car loans or things that voters care about. Uh it seems to me like there's a pretty large contingent of economists that don't really like the president who would be ready to take that view. And I think that frankly, you know, the way I understand monetary policy transmission is a lot of it has to do with the mood of the marketplace. So that kind of propaganda, if you will, could be very effective in maybe causing the back of the curve to respond opposite the way the president is assuming. Am I reading too much into that? No, you're reading exactly into that. That is the concern. And there will be enough people that will come out, me included, that would say, "Look, aggressively cutting rates is going to backfire on you and produce higher long-term interest rates because that's where mortgage rates are set and that's where corporate borrowing is set and those are the rates you want to lower." Remember, Trump has already said that he thinks he should be Fed chairman, but he acknowledged he can't be. Um, he wants to appoint himself because he's a real estate guy. So that makes him in his mind an expert in interest rates. And in fairness to Trump, every real estate guy I've ever met thinks that they're an expert in interest rates. And they always have their expertise go in one direction. They're too high and they need to go lower. That's what every real estate guy thinks because they think in terms of mortgages because that's the way that they've they've cut their teeth. So he's of that opinion right now that he needs to see interest rates come down. And I still think that he that's why he believes that the economy will boom if we were to see the Fed continue to cut rates. That eventually long-term rates, mortgage rates, all of those borrowing cost rates will come down. And if they've been slow in coming down now, Trump's readymade answer is too late. That's what he calls pal. you should have been cutting rates aggressively and earlier and we'd have a much lower 10-year notes. We'd have much lower 30-year mortgages if we were to do that. Although, I would argue no, it's more about worrying that you're overcutting, worrying that there's an inflation problem and that that's what's holding it back. And the only reason we're down to 415 is drill baby drill seems to be working because gasoline prices are down. But you still can't even get the funds rate. I mean the 10ear rate below when you started cutting the funds rate um at this point. So yeah, I think that's exactly what it is is that the president is pushing really hard on it and there's going to be some push back if that's where they're going to go in the future. That is the new Fed chairman is going to be single-minded focused about being aggressive in cutting rates. It seems to me that this is all a great big setup for the president to accidentally unleash. I think there's a secular inflation in the making anyway, but it seems like, you know, it takes a catalyst to really get an inflation to run away. Didn't you just kind of lay out the game plan for creating that catalyst? >> Yes. And that is my concern about why I think interest rates could go higher from here because we're not talking about being vigilant about inflation. Jay Powell said today that every member of the Fed expressed a concern that inflation is too high. I agree with him. Not one member of the Fed according to J. Pal has as their base base case any consideration to raising rates in the future. doesn't mean we have to, but think about what I just said. We're all worried about inflation, but we're not going to do anything about it. We're because doing something about it would mean raising rates. And so that is a that is going to be a real concern. And as a matter of fact, right before we we started uh talking, Jal said something at the press or two that was kind of interesting. He said that the inflation rate x tariffs is in the low twos. Now there is no measure called inflation rate x tariffs. So obviously the Fed has invented one. They haven't shown their work as to where they come up with it. But I was looking at some of the breakdowns of the inflation numbers and I was looking at CPI services because we're not tariffing services. That's above three. CPI services less energy is above three and a half right now. I don't know. Yes, he's correct. CPI goods, which is largely a lot of tariff stuff, is in there, is rising rapidly, and that does account for the majority of the rise of inflation over the last several months. But if you take that out of the equation, services are still above 3%. I don't know where he comes up with the low twos. Obviously, he's got a measure that he came up with to come up with that, but I wish like like the president would show his work about what the population growth of the US is. I wish that J. Paul would show his work as to how he came up with that low twos number of, you know, inflation x tariffs. Let's talk a little more about inflations, particularly secular inflations, and how they work. Because I could imagine, you know, somebody from the Trump administration was listening to the two of us talking about this. They'd say, "Look, guys, come on, relax. We think that we can bring policy rates down. That should bring long-term rates down. In the unlikely event that Jim Biano is right and what really happens is that that pushes longerterm rates up because of inflation fears. We can make an adjustment at that point. Maybe we'd have to hike rates in order to bring longerterm rates down. But we'll find that sweet spot and it's all going to be fine. I don't think inflation works that way. I think the way inflation works is once you start to see a runaway, not so much in inflation itself, but in inflation expectations, what happens is it changes consumer behavior. People start buying things now in order to uh you know, buy them before the price goes up and all of the sudden you get a runaway situation that's out of control and can't be stopped. It seems to me like we're playing we're playing with fire here. We're playing with matches at a time that we don't understand that the forest is really dry and potentially uh at risk of once something gets burning, we can't stop it. Am I exaggerating to think that's a risk? And what could go wrong here? >> No, it's a real risk and it's happening right now. And I'll even Jay Pal addressed this and I disagreed with him there. There's two broad measures of inflation expectations. One broad measure is market-based measures. You can look at the inflation swaps market. You can look at the Treasury inflation protected securities market to back into what's called the inflation break even rate. You know, what is the market pricing in for inflation? So if you look at market levels of inflation, they're anchor to use the Fed term, they're low in the low twos. They're not moving. They don't have a lot of volatility. And they would give the Fed and the administration comfort. See the market-based measures of inflation are not a problem. But if you look at the consumer-based measures, the surveys, the University of Michigan survey of inflation, if you look at the political polls, the number one issue according to the political polls is affordability. The president's approval rating is falling because everybody's talking about affordability. What they mean is the level of inflation. CPI is up 27% since April of 2020. and they would like to see, you know, some relief on these high prices. In their example, inflation for the public is unanchored and they're very, very upset about it right now. J Pal dismissed it by saying that the inflation numbers are well behaved in the surveys. I'm like, we've only been talking about the University of Michigan being at 30 and 40 year highs in inflation expectation all year. And you know, I'm sure he's found some other survey that says that no, that's not the case. But the big ones that we look at are showing that that's the case. That really comes down to what is more important. that a bunch of bond traders aren't pricing in future inflation or the public is tanking the president's approval rating and is spitting mad about affordability. I'm going to go with the public being more important than a bunch of bond traders and that the public is the one that's going to lead towards unanchored inflation because they want something to be done. I'll say the last thing about this is how mad are they? They just voted a socialist in this New York City mayor. They almost voted a congressman who was a socialist in in a very red district in Tennessee and they voted a socialist in the night before we're recording as mayor of Miami. So they're now turning towards socialists that are saying you want affordability. I'll just cap the price. I'll just make it illegal for these prices to go up anymore. Does it make economic sense? No. But I just want relief. And if they're offering me relief, I'll take the relief is what we're getting right now. So yeah, it is a problem. And just because the tips desk at Goldman Sachs is not pricing it in, therefore doesn't mean it's a nonpro. >> Well, Jim, I couldn't agree with you more. Let's uh shift gears now and talk about the consequences of all of this stuff in markets. If you and I agree that uh there's a very s significant risk that we're about to unleash a secular inflation, uh the first thought is both precious metals and crypto. Then I guess the next thought is let's talk about what happens in a big inflation to the stock market. I think a lot of people, you know, remember the 1970s and think inflation up, stocks down. I don't think it really works that way. I think it's inflation up, stocks up at first a lot and then stocks down only after the feedback loops kick in. So, let's get into what this is going to mean for markets. >> Yeah. So, let's start with um the precious metals markets. Obviously, they're flying. Uh year to date, I'm just looking at my screen right now. Silver's up 110%. Gold is up 61% year to date. Silver traded over $61 the day we're recording at one point earlier in the day, and gold is still at around 4,200. They're not pure inflation plays. I don't think they are. What they are is they are uncertainty, bad things happening kind of plays. That's why you buy gold. One bad thing obviously is inflation. Deflation could be another one. Political strife could be a third one, you know, and the like. And so the fact that gold has been moving up quite a bit has been a signal to the marketplace. It's worried. There's worried that there is a problem here. And a lot of that's been coming out of Asia right now because you could actually argue uh that within Asia the inflation problems and the worries are bigger. Japan has got a real inflation problem. For the first time in 50 years, 50 years, Japan has a higher inflation rate than the United States. You got to go back to 1977 to find the last time that they actually that the they had a higher inflation rate than us as they do right now. China is in I've been a very big bearer on China. I think that their economy is struggling. I think they've got a real estate problem. So that's been the big catalyst for gold. And the problem with China is if their economy is struggling, their answer is print, more accommodation, more government spending, and that would lead to inflation over in China. Now the stock market, you're right. The stock market, as we talk right now, is just closed a few points short of an all-time high. The all-time high, by the way, was set on October 29th, which was the last day that the Fed cut rates. And so, at this point, I think we need to define the stock market two ways. There are the AI companies and then there's the nonAI companies. I use Michael Kemblas at JP Morgan. They went through and they identified what they call 41 AI related companies. It's the Mag 7. It's a couple of other companies along those lines. It's a few power companies that get primarily their business from supplying data centers with power. Couple of capital equipment maker companies, 41 of them. Those 41 companies are 47% of the S&P 500 market cap. The other 459 companies in the S&P are 53% of the S&P. Now, what I just said is one theme is half the US stock market. When was the last time one theme was half or more of the US stock market? The argument is, and I've looked at the data, too. You'd probably have to go back to the railroads of the late 19th century to find the last time that we've seen a theme concentrated to that degree. The AI companies have been 70% of the gain of the S&P 500 over the last few years. The other companies the have the other 459 companies been only about 30% of the gain. We stated the nonAI part of the stock market is up about 8% peranom over the last couple of years. Not a bad number, but we're all used to this 20% gain that the index has. That's largely because of AI. So, we've got a transformative technology coming in right now in the form of AI and that has gotten the marketplace to get excited to push those stocks up. Beyond that, you've been getting rather middling kind of stock market returns, 7 8% type of returns in the market. And you're right, in the initial stages of an inflation, the earnings look good. Companies can raise prices and they can fatten their margins, but as the inflation goes on, that reverses because then something else happens. Their input costs go up, whether it's labor or raw material goods, especially if it's raw material goods from overseas that's being tariffed. They go up and they're going to start getting squeezed. That's why if you go back to the 70s example, if you go back to the late60s, early '7s, people were openly saying the best inflation hedge is stocks because they can raise prices and keep up with inflation. So own stocks. And then by the mid late7s that completely reversed and it completely went the other way because it was yes, but your input costs go up and your margins get squeezed and it's really hard to make a profit and the stock market was a terrible performer until the early 1980s. And so that's where I think we are. We're in the early stages of the um of the inflation boom. Even with that, the nonAI part of the stock market, which would be more interest sens inflation sensitive, is really, you know, 7 8% returns a year. It's not the 15 to 20% that we've kind of gotten used to with the overall index. That's because of AI. Jim, let's come back to what you said earlier about socialists being elected and so forth. You know, it seems to me what's going on here is in decades gone by, younger generations didn't vote and therefore didn't have much say in things. They were busy going to nightclubs and partying and having fun and you know nobody voted. Uh therefore the the opinions of 20somes didn't really matter in terms of electoral outcomes. Seems like generation Z is voting and they're voting for socialists and there doesn't seem to be any amount of hey guys have you looked at the history of this and do you understand the reasons that the United States has been more financially successful than socialist countries? You know, the answer is they're not interested in hearing anything from old people. Okay, boomer, whatever you say. We don't think that your capitalist system is working for us. We're going to pick the opposite of it, whatever that means, and we don't really want to think any more about it than that. At least that's the way I perceive it. It seems to me like that's, you know, they're more than half of the people. They're growing in their numbers. They're going to continue to dominate majorities as long as we have a democracy. Seems to me we're going to have more socialists, not just mayors, but Congress people, and eventually move toward a socialist system in the United States. Am I wrong to think that's almost inevitable? And if it does, what's the long-term outlook for markets? >> I think you're right. And I think you're right for the following reason. It hasn't been working for them. The widely quoted statistic that a lot of people have been saying is the the average age of a first-time home buyer is 40. The reason it's 40 is you need to um save for many years in order to buy a house. Prices, as I pointed out, are up 27%. They are finding it very difficult in order to make ends meet when it comes to prices. Then on top of that, you've got the whole idea about what AI is going to do to the labor market, the jobs market. I'm graduating with a degree from a recognized university. You know, in other words, I'm not getting a basket weaving degree and from a university you've never heard of. I'm getting a degree from the University of Michigan in business or something like that. Good degree, you know, good school and I'm not being able to find jobs. And what I've been told is all the jobs I want to be f I would like to get, those entry- level jobs are being replaced by a large language model. So, they're feeling that prices are too expensive, opportunities are too few, and then here comes a guy like Mandami. We're going to have free buses. We're going to we're going to have cheaper grocery stores. We're going to put a cap on the amount that your rent can go up. And the boomers are telling them, "Well, that stuff doesn't work." And they're saying, "Yeah, well, what you're doing isn't working for me now, so why should I listen to you? because I'm not happy that I got to save till I'm 40 to buy a house. I can't get a job because I'm being priced out of every job because of a large language model. I can't afford anything at the store now. And you're telling me that if I vote for this guy, it's going to be worse. It's pretty bad right now is what they're trying to say. And so I understand that. And you're right. until we can tackle this affordability problem, until we could show them that capitalism is the way to go. Look, I'm of the age that I came into the workforce in the early 80s during the Reagan boom during after the 82 bottom in the stock market when the 25 year olds all wanted to wear yellow suspenders or yellow ties and suspenders and get a job on Wall Street and make a lot of money because there was opportunities there left and right. That is not the case today. So, I understand where they're going. you might refer to this as a fourth turning type of thing and that um you know that we are in that fourth turning that winter that we're going to see with the push back that we're getting. So on one respect I get it. I understand their frustration. I understand that lecturing them about the evils of socialism and the virtues of capitalism when they don't see it isn't really going to help them right now. And yeah, it might get worse until it gets better. Now, the way it could get better is we start to attack with this issue. Take housing. How do you fix the housing problem? More supply. Well, the problem there is the president keeps yelling that the affordability thing is a con and it's a hoax and it doesn't exist and prices are coming down and things are becoming more affordable. That's not the way to answer that question about affordability. that you're wrong, everything's fine is really what is what his answer is. So, we're not going to address it and we're going to have a push back. So, I hope that we're going to start to address it. We need more homes built being built. The number that I've seen that I believe is from 2009 to today, there's been about 21 million new households formed in the United States. 2009 to 2025, there's been 18 million new homes built. So we have a deficit of about 3 million homes plus probably another 2 million existing homes have been condemned and torn down because they were just old and in disrepair. So we might have a deficit of about 5 million homes. We need to loosen up say zoning laws, building laws, land use laws in order to let contractors and let builders and developers build more homes. problem is the the boomers that own the homes don't want to hear that because that sounds like more supply, more competition, my house might fall in price. So, yeah, we've got real issues we got to work through. And if Neil How was here, I think he would probably say, "Yeah, and that's exactly why we have fourth turnings." And maybe we're getting very close to one right now. >> Well, isn't it true then? I mean, the fourth turning usually breaks down and replaces all of the biggest trusted institutions and so forth. seems like we are indeed uh very definitely in the late stages of a fourth turning because they last for about 25 years. The expectation would be sometime in the early 2030s. We kind of start the first turning with newly constructed systems that the younger generation is in charge of designing and you know it would be the millennials are in charge and Gen Z is doing all the work in order to usher in new systems to replace what we have today. Uh, I don't know. You know, it's it feels to me like the the feelings of generation Z are completely understandable, but I think about I don't think they really understand the consequences of socialism. What do you do? You could try to reach out to them and communicate with them, respecting their views, trying to engage them in a a respectful debate about the benefits of different economic models and maybe why socialism isn't the solution. The thing is, Jim, the last guy who tried that was Charlie Kirk, and it didn't really end well for him. >> I agree. I mean what you have to do is instead of lecturing them about the evils of socialism do like what I saw when I was 23 24 years old you know in 1983 1984 and that was the opportunities that capitalism was presenting that you can get these jobs that could give you decent careers and get you moving along to being able to afford nice houses and nice things and do the things in life that you want to do. show them the opportunities. Instead, we tell them socialism bad. Save till 40 and don't complain about the prices at the store. I'm sorry, that's just the way it is. That's not a solution for them. So, they they're going to need to have something more than that. So, hopefully we'll get to that point. You're right in the first turning maybe with large language models and AI being the transformative technology. I am a big believer that technology is a net creator of jobs. I've seen the studies that say 50 million jobs will be displaced by AI of 160 million in United States. So roughly a third, maybe about 30%. Okay, I I think that might be right, but I also think that AI might create 70 million new jobs. And those new jobs it's going to create are currently in industries that don't exist. And so maybe we could get to the point where we turn to the millennials and the Gen Z's and say, you know, those 70 million jobs in those industries that don't exist, go create those. Go create those industries. Go do that. And you will make and that's the wave that your generation will ride, you know, in order to become more financially secure and not wait for the boomers to do it or the boomers won't do it or the Gen Xers to do it because the Gen Xers are now starting to approach 60 years old anyway. and the older ones are at least. And so that hopefully could be where they're going to go with this in the first turn. And I actually think they will. And I think that, like I said, at the end of the day, technology is a net creator of jobs. The problem is I can identify the job that's going to go away. The job that it's going to create doesn't exist. So it's always a concept that it's out there. And uh but they usually are. And those jobs go make those jobs reality. And so hopefully they will do that. >> Well, Jim, I can't thank you enough for a terrific interview as usual. Before I let you go, let's talk a little bit about what you do at Bianca Research. You are not actually running an ETF. You manage an index which Wisdom Tree follows with an ETF. So people who want to invest around your views and your strategy have a way of doing so. Tell us more about it. >> Yeah, so I do manage I'm a fixed income guy by by by training and by practice. And so we do manage the Bianco Research Total Return Index. You can find out about it at biancoadvisors.com. We set the parameters on the index and wisdomree as an ETF that tracks our index. I've used the example. Think of me like the head of the S&P 500 index committee and spy tracks my index. Well, that's kind of the setup that we we've got. WTBN is the ticker symbol for the um Wisdom Tree Biano Fund. And my day job still exists is that is is being the researcher of Bianco research. You could find out more more about us at the words Bianco research. Either biancorresearch.com is our website. Biancor research on Twitter. Biancore research on YouTube. Either Jim Bianco or Biano Research on LinkedIn. And so you could follow me on any of the socials. I try to stay active on the socials as well too or check us out on our on our website. Patrick Szna and I will be back as MacroVoices continues right here at macrovoices.com. Now back to your hosts, Eric Townsend and Patrick Szna. >> Eric, it was great to have Jim back on the show. Listeners, you're going to find the download link for the postgame trade of the week in your research roundup email. If you don't have a research roundup email, that means you have not yet registered at macrovoices.com. Just go to our homepage, macrovoices.com, and click on the red button over Jim's picture saying, "Looking for the downloads." Patrick, you pimped your new asymmetric trading challenge product on last week's show, but how about giving our listeners a solid example of an asymmetric trade design by translating some of Jim Biano's views into a trade with more upside return potential than downside risk if it doesn't pan out. Eric, what really jumped out at me in Jim Biano's comments is that the bond market is not behaving the way a classic easing cycle says it should. The Fed has already cut aggressively and yet the 10-year yields are higher than when they started cutting. So for this week's trade of the week, I wanted to build a trade for those who believe that the bond vigilantes will ultimately prevail. Now when we had Jim on a few months ago, we expressed his view with a bare steepener of the 530s curve. That chart is on page two of the deck. Today I want to come at the same theme through a short long duration US Treasury position using options. On page three, you can see the 30-year US government yield chart with a very clear resistance around 5% over the last 2 years. If bond vigilantes reawaken the way we saw with the JGBs or guilts, it's entirely plausible they'll make another run at the 5% level, if not higher. The key to using options here is on page four. Implied volatility on the TLT long bond ETF is sitting down at its lows of the year. This makes this kind of convex expression much cheaper to put on than almost at any point earlier in the cycle. So, I'm looking for a capital efficient, riskcontrolled way to profit if yields break above 5%. Which is where I think volatility will start to get spicy very quickly. Now, the structure I'm looking at is the July 2026 TLT 85x 80 bare put spread. We're long the $85 put and short the $80 put, paying about a $1.20 for a $5 wide spread. That gives you a better than 3:1 riskreward profile if long yields move higher and the TLT trades down to the low8s or below with your maximum loss strictly limited to the $120 capital outlay. It's also worth noting that anyone currently long TLT shares on an economic contraction thesis can use the same spread as a hedge overlay. It's a relatively inexpensive way to dampen the downside if we get a breakout in the long-end yields that runs counter to the duration bet while still keeping your core long bond position in place. >> Patrick, where should our listeners go if they want to find out more about the asymmetric trading challenge? >> Eric, we're hosting a one-time special webinar on the asymmetric trading challenge we're running for 2026. We are hosting it on Tuesday, December 16th at 400 p.m. Eastern time. It is free to attend. So, if you want to reserve your spot, go to our homepage, bigpicturertrading.com. You will also find the link in your research roundup email. All right, Eric, let's talk about these equities. Well, Patrick, we got the long-awaited, widely anticipated December rate cut along with the predictable, instantaneous spike higher in the S&P index in a brisk face ripping rally that lasted uh for a good hour and a half before it fully retraced to the downside and then some with S&P futures trading in the overnight session below where they stood at 2 p.m. when the rate cut was confirmed. So now the question becomes whether that rate cut will be the predicted catalyst for a Santa Claus rally that takes the S&P to new all-time highs by New Year's or if maybe it was actually a sell the news event that marks the short-term top just 90 minutes after the cut announcement and which might not be exceeded again before years end. Now only time will tell but the brevity of the immediate upside reaction suggests that the latter scenario could very well be in play. Well, Eric, what we've seen over the last couple weeks has been a complete contraction of realized volatility. This dampening is somewhat to be expected as we've moved far away from trigger points on this market and now approach some key overhead resistance. The key was that so far the market hasn't done any extraordinary move in the post FOMC period. This puts that jobs number next week in line. But with option expiration next week, if the jobs numbers are not an outlier that causes a big swing in the markets, it's very likely we're going to pin into the option expiration. And at that stage, with the low volume over the holiday period, it's very likely that the rest of the month of December could be stuck in a brutal, choppy trade range, leaving the next major market move to the new year. Let's see if that happens. Obviously, we have a big hurdle to pass with that jobs numbers released next week, but if it isn't an outlier, uh odds are very high that this is going to be a pretty boring month for the stock markets. All right, Eric, let's talk about this dollar. Well, the Dixie is not crashing, but it's looking more and more like a short-term top is in and we're well into a swing trade lower, at least for now. As I've said before, I think the action on the dollar is going to be headline driven and Trump and Bessant's next policy moves will likely determine the direction of the next major leg for the dollar. Absent policy action looks to me like a new down channel is being established on the chart. Well, Eric, the US dollar has been weakening. We spent 2 months above the 50-day moving average in a retracement that should have even gone as high as 102 103 on the upside. instead uh the 100 level acted as substantial overhead resistance and now we're breaking down towards the critical 98 level. And I want to stress to me the 98 level on Dixie is real tell because if we see that the market is interpreting the Fed path to still have a relatively dovish tone and we give out the 98 level, there's a real chance that the dollar could re-resume its downwards trend that's been in place all year long. Would that mean a break to fresh new lows? Well, you know, at this stage, we're sort of in a no man's land in the consolidation. The next real major support line for the dollar index was established over the last decade down along the 90 level. So if we see any deterioration in this trend over the rest of December, it could reopen the downside window of the dollar into next year. All right, Eric, let's touch on oil. Well, it's getting really interesting. Despite Cushing inventories being at operational minimum, so that means shortage of oil. We should see big backwardation on on the uh front of the curve, we're actually seeing front of curve time spreads softening. That's a bearish sign. So my outlook is unchanged. The fundamentals here are decidedly bullish. I think we're at the beginning of a secular inflation. I think there's lots of reasons whether you look at the Cushing inventories or or lots of other uh fundamental indicators that are decidedly bullish, but I also see room for invisible hands to keep oil prices low through the midterm elections. And the Trump administration is very, very strongly incentivized to keep prices at the pumps low through November's elections. crude seasonal low is normally in February. So, I'm definitely not in any rush to put any longs on before then. Now, a dip down to let's say $50 WTI would be hard to resist. 45 would be really hard to resist because I'm convinced that the fundamentals will eventually carry this market higher. But right now in the high50s, the question in my mind is how long the Trump administration can delay that inevitable outcome of a move much higher in oil prices. And I think the answer is probably quite a while. Time will tell. Really, there's no other way to put it. It's been an incredibly boring trade range. Now, there's been no momentum breakdowns. Usually, when you trade this way below a 50-day moving average, there should have been easily a breakdown to 55 or even down towards 50 with this type of price action, but instead it's been a consolidation sideways. It It's almost like oil has found a new fair value zone. And while there's no catalyst to take it higher, it doesn't seem to be in any rush to break down. Now, obviously, new some sort of a news catalyst will likely break this trend. Want to observe that the prevailing downtrend is the dominant one. There there has simply been zero sustained buying at any point. But it is a consensus trade to be short. There's very little interest in this and all CTAs are positioned on that short side. So if whatever catalyst was ever introduced to create a short squeeze, it can certainly be the pain trade that emerges on the market. But right now there's zero technical evidence of that at this stage. This might be the story continuing sideways for the uh rest of the month. All right, let's jump into gold. Well, the rally in gold after the Fed cut lasted much longer and didn't retrace nearly as hard as the retracement in stocks. The short-term overbought signal is being shaken off by time rather than price with a sideways price consolidation for more than a week now, causing the slow stochastics to retrace back down to about half mast. So, I think the rally toward new all-time highs is probably on, but there's still plenty of room for more consolidation before the next big leg higher begins. Well, gold is trading a stone throw away from its 52- week highs. It's been very well accumulated holding up there and maybe uh in this post FOMC period and especially in the post jobs number period maybe gold will have the tailwind to potentially break out to a fresh new high. This uh will be yet to be seen. I think I'm going to reserve uh my market call on this uh next week when we're post that news. But it is noteworthy to talk about silver which I have on the chart deck on page 10. And what we see is continued parabolic rise in silver prices. We've now hit $62, which is a basic measured move target, but there's a bigger measured move that is all the way up to the $70 mark. This is clearly being very well bid. Every little dip gets bought. Consolidations are sideways and breakouts to new highs happen almost immediately. This is a market that continues to take flows and it's certainly giving a bullish tailwind to all four of the precious metals. All right, Eric, let's touch on uranium. Well, as I said more times than I can count, I couldn't possibly be more bullish about the long-term fundamentals for uranium and for nuclear energy generally. And while this consolidation has been a little bit frustrating, the weekly charts really starting to look great in terms of oversold stochastics setting the stage for another big leg higher. The sticking point has been the spot price of uranium, which was stubbornly unchanged for more than a week, but which has now finally, as of Wednesday's trading action, just barely started to tick up. Let's see if we can sustain a rally in the spot price because that's what's going to give the the next leg up for the miners. Well, Eric, when I'm looking at these pullbacks in the uranium stocks and in uranium itself, uh we've now seen that overbought state get completely unwound and in some cases some oversold uh readings coming out on the markets. We've seen already a 50% retrace of the rallies. So, the asymmetry has reset in the uranium markets. The bigger question is does it start on the upside in a big way here in December or is it going to be a January story? Overall that very overbought state is gone and so now it's just really about setting up where could a potential new bull breakout really get underway. Patrick, before we wrap up this week's episode, let's hit that 10-year Treasury note chart. Finally, Eric, just touching on that chart on the 10-year yield and what we have seen over the last six months was a sequence of lower highs and lower lows as the yield worked uh from the 460 level all the way down temporarily below 4%. Now, we have seen that pattern slightly change. Uh majority of that decline, uh the yield stayed below their 50-day moving average, just simply depicting the trend of lower rates. we have seen that descending trend reverse here. And so this is the first time in uh in half a year that we've seen a higher high on yields. The bigger question here is this a turning point. Is this where we're going to see that 10-year make a push back to the highs where it was earlier this year? That's the puzzle to solve. Certainly this is the first time the price action has pivoted this way. Let's see whether or not the jobs numbers really shake up this 10-year to follow through on the upside. >> Folks, if you enjoy Patrick's chart decks, you can get them every single day of the week with a free trial of BigPictur Trading. The details are on the last pages of the slide deck or just go to bigpicturetrading.com. Patrick, tell them what they can expect to find in this week's research roundup. Well, in this week's research roundup, you're going to find the transcript for today's interview, as well as the link to the asymmetric trading challenge that we talked about earlier during the trade of the week. You'll find the chart book we just discussed here in the postgame and a link to a number of articles that we found interesting. You're going to find this link and so much more in this week's research roundup. That does it for this week's episode. We appreciate all the feedback and support we get from our listeners and we're always looking for suggestions on how we can make this program even better. Now, for those of our listeners that write or blog about the markets and would like to share that content with our listeners, send us an email at researchroundup@macrovoices.com and we'll consider it for our weekly distributions. If you have not already, follow our main account on x macrovoices for all the most recent updates and releases. You can also follow Eric on X, Eric S. Townson. That's Eric spelled with a K. You can also follow me at Patrick Sesna. On behalf of Eric Townson and myself, thank you for listening and we'll see you all next week. 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