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Jim Bianco Profile picture
@biancoresearch
Sep 15, 2021 • 6 tweets • 3 min read • Read on X
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A thread about transitory vs persistent inflation and why persistent might be actually be winning.

This comes from @economics And it breaks down CPI by reopening and non-reopening components.
Of the 5.25% inflation rate in the last year, only 1.62% was reopening components.

1/6
Breaking it down for August we find that reopening CPI components (or transitory inflation) FELL by 0.22% while CPI non-reopening components (or persistent inflation) ROSE by 0.35%

2/6
Detailing this we find that CPI non-reopening (persistent) components are surging to its highest monthly level since at least 2016.

Restated, this series of persistent inflation is trending higher, and is 78% of overall CPI.

3/6
The CPI reopening components (transitory) fell by the most since the lockdown.

Restated, this series of transitory inflation is falling and is just 14% of overall CPI.

4/6
So, why are the CPI reopening components falling? Is the Delta variant hurting the economy and sapping demand?

Consider these two charts.

Airline ticket prices collapsed by 9% annualized in August. Why? Because demand is also collapsing as measured by the TSA?

5/6
In sum transitory components are falling and their demand is off as Delta is hurting economic activity.

Meanwhile persistent inflation components are surging higher and higher.

Is this why stocks turnaround today? Weakening demand and higher inflation squeezing margins?

6/6

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More from @biancoresearch

Jim Bianco Profile picture
Dec 28
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
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
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
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
Jim Bianco Profile picture
Nov 16
It turns out that the biggest soap opera in Trump's nominations is the Treasury Secretary. As the graphic below shows, it is as close to 50/50 as it gets.
---

My Take

The Treasury Secretary gets to sit in the room and opine on policy. And their voice will be taken seriously.

But they do not set the policy; the President does. When the president says what they will do, they expect the Treasury Secretary to sell that policy as if it were theirs.

The second part, selling something they don't believe in but are told to do, is something Jamie Dimon will never do, so he will never be the Treasury Secretary. (Dimon wants to tell everyone else what they should sell).

Lutnick will sell whatever you tell him and do it with gusto! Bessert will do so too, but he does not command the room like Lutnick.

In other words, the Treasury Secretary is the administration's chief spokesman. This is a sales job, and it needs a salesperson.

The problem with Yellen was that she needed to be a better salesperson. Yes, she is an outstanding economist, but she was never a good spokesperson for the Biden Agenda.

She would have been a better National Economic Council head, the "smart person in the shadows advising the President."

If I had to guess ....

Lutnick = Treasury Secretary
Bessert = National Economic Council headImage
Read 4 tweets
Jim Bianco Profile picture
Nov 7
1/6
Six questions I would ask Powell (which, of course, he will not answer).

1. Why did this happen? Image
2/6
2. Question 1 caused this. How is this helping? Image
3/6
3. I know you think inflation has either been defeated or is about to be defeated. So, why did the market react this way after you cut in September? Image
Read 6 tweets

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