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Jim Bianco Profile picture
@biancoresearch
Oct 2, 2020 • 5 tweets • 2 min read • Read on X
Too many are "misreading" the polls, betting markets and investor opinion around the election. They are not the same.

Please read this short thread ….

The poll analyzers were only giving Trump a 10% to 20% chance of winning (shown are FiveThirtyEight and the Economist)

(1/5)
Betting markets gave Trump a 42% chance of winning yesterday before the announcement of the positive COVID test. His odds were 47% before Tuesday’s debate. Now they give Trump a 39% chance. This marks Biden’s largest lead.

(2/5)
Investors were more aligned with the betting markets than the polls.

FT – (Sep 25) Investors anticipate Joe Biden election win

UK pollster Survation found that 60 percent of 91 investment professionals polled in Sep, most based in the US, believe Mr Biden will win

(3/5)
The difference between polls and bettors was going to be reconciled by election day. Today’s announcement that Trump tested positive for COVID only accelerates the process.

Betting markets are reducing Trump’s odds of victory and are aligning more closely with the polls.

(4/5)
We have contended the markets never fully priced in a Biden victory (and the increased regulation and higher taxes that come with it). Based on trading this morning, it appears they are now taking the prospect of a Biden presidency more seriously.

(5/5)

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More from @biancoresearch

Jim Bianco Profile picture
Jan 3
1/5
*US DEC. ISM MANUFACTURING INDEX RISES TO 49.3; EST. 48.2

ISM beat

And as the chart shows, this is the second-highest reading since October 2022 (26 months).

(best sure to see the last post in this thread)Image
2/5
Prices Paid 52.5 versus the estimate of 51.8

It is staying "sticky" above 50 (meaning more rising than falling prices)

Remind me again ... why is the Fed cutting rates? Image
3/5
New Orders is in the Index of Leading Economic Indicators. Economists think it is that important.

It jumped to 52.5, equaling its highest reading since June 2022 (the month YoY CPI hit 9%).

Remind me again: why is the Fed cutting rates? Image
Read 5 tweets
Jim Bianco Profile picture
Dec 29, 2024
1/3
The repost below expresses a common belief that risk assets are effective inflation hedges.

History suggests they are not.

This chart shows that the inflation of the 1960s and 1970s wiped out 64% of the after-inflation stock gains by 1982 (meaning inflation beat stocks by 64%). And all inflation-adjusted gains of the previous 27+ years (back to 1954) were gone (meaning inflation beat stocks over the previous 27 years).

It took until 1992, 28 years later, for stocks to finally start beating cumulative inflation since 1966.Image
2/3
Too many vastly underestimate the devastating impact of inflation.

Since the 2021 peak, when the Fed called inflation"transitory," stocks have only beaten inflation by just 15% (with dividends).

So a 10% to 12% correct and a little bit more inflation and four years of relative purchasing power is gone (meaning you are no better off than four years ago).Image
3/3
As I argue here, the crypto crowd also forgets inflation when they make their long-term forecasts.

Read 4 tweets
Jim Bianco Profile picture
Dec 28, 2024
1/6
🧵on yields and yield curve
---
The 30-year yield made a new 2024 close high yesterday.

Now, the highest yield since November 2023. Image
2/6
The 10-year yield is just eight basis points away from a new 2024 high.

Two trading days left this year. Image
3/6
The 2-year funds spread is the narrowest since March 2023 (bottom panel).

The massive reversal to negative in March 2023 was driven by the string of bank failures highlighted by Silicon Valley Bank. These failures were driven by fear of unrealized bond losses. So, while the Fed subsequently hiked three more times through July 2023, this spread inverting signaled the "end is near" for the rate-hiking cycle.

Now, at just -5 bps, this spread is the narrowest it has been in ~20 months and close to signaling "the end is near," if not already done, on the rate-cutting cycle.Image
Read 7 tweets
Jim Bianco Profile picture
Dec 25, 2024
1/3
What is TLT Signaling?

TLT is the iShares 20-Treasury ETF, one of today's largest and most influential bond ETFs.

I've been arguing that the bond market rise in yields as the Fed cutting rates has been a rejection of the easing cycle. The bond market is saying the Fed has the wrong policy.

Monetary easing is not necessary given the strength of the US economy (See Atlanta Fed GDPnow) and the coming "Trump Stimulus. Fed easing is raising inflation expectations and driving yields higher.

Here is a chart of TLT's price (black) and cumulative flows (red).

From the day the Fed started hiking (March 16, 2022) to the November 7, 2024, FOMC meeting (labeled), cumulative inflows were steady, totaling over $55 billion.

A reasonable interpretation is that bond investors agreed with the Fed's policy from March 2022 to November 2024, even if it was hiking, as it was fighting inflation.

However, since the Fed cut again in November, bond investors have reversed and fled the bond market. Almost $10 billion has left TLT.Image
2/3
The bottom panel is a rolling 30-day flow into TLT. The last 30 days have seen a cumulative outflow of $8.69B, easily the largest 30-day outflow in TLT's history.

Again, this outflow started with the November 7 Fed cut, which I interpret as the market screaming "no" at the Fed about its move.Image
3/3
The chart below shows TLT's volume since 2023. The blue bars label the six highest-volume days in TLT's history. No volume day was over 80 million before 2023.

Thursday, December 19, was the record volume day at 99 million. This was the day after the Fed cut. The previous record was November 6, the day before the Fed cut on November 7.

The market is focused on the Fed meeting, not payroll or CPI days. Investors believe the Fed is making a mistake by cutting rates when it is not needed.Image
Read 4 tweets
Jim Bianco Profile picture
Dec 20, 2024
1/6
Good Q, I will answer why.

The market is signaling the Fed is not serious about inflation.

10-year yields during rate cut cycles since 1981 (the 100-year inflation and yield high).

2024 (black) is the biggest yield rise in a cutting cycle in at least 40 years. Image
2/6
However, the 2024 yield move (black) looks similar to the yield moves during pre-1981 rate-cutting cycles.

In the 1960s and 1970s, the market worried about inflation.

When the Fed cut, the market screamed "no," and long-term yields rose—like 2024 (black). Image
3/6
The dotted vertical line is the first-rate cut in September.

Look at what inflation expectations have done! Image
Read 6 tweets
Jim Bianco Profile picture
Dec 15, 2024
1/7
The study below says the 60/40 portfolio is dead. Everyone should now be 100% invested in stocks.

However, they recommend 33% in U.S. stocks and 66% in int'l stocks.

Quick 🧵

tl:dr The U.S. has the most momentum and is also the world's most expensive stock market.
2/7
About a 66% Int'l allocation.

The U.S. (upper blue) has outperformed the rest of the world, while everyone else is underperforming the world average (black).

Momentum is a potent drug for investing, and the U.S. has it. It works great—until it doesn't—and it often doesn't without warning.Image
3/7
However, another consideration that often gets ignored when chasing momentum is valuation.

Wall Street's favorite valuation measure is the forward P/E ratio (the estimate of the next 12 months' EPS divided by price).

So, while the US has big-time momentum, it is also the most expensive stock market in the world (upper purple line), recently exceeding India (brown).Image
Read 7 tweets

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