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. 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).

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. 2/6

The 10-year yield is just eight basis points away from a new 2024 high.

Two trading days left this year.

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. 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.

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.

https://twitter.com/AnnaEconomist/status/1869838707454554342

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).

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.

https://twitter.com/biancoresearch/status/1868118492416966668

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.

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 head

https://x.com/jkylebass/status/1856710954576134152?s=46&t=uSnZlSLOtzvp-jqg6eHG4Q

1/6

Six questions I would ask Powell (which, of course, he will not answer).

1. Why did this happen? 2/6

2. Question 1 caused this. How is this helping?

1/6

An update 🧵

We manage a fixed-income total return index. It is based on our discretion.

It is called The Bianco Research Total Return Fixed-Income Index.

On Bloomberg, it is BTRINDX <index>, or at its website biancoadvisors.com 2/6

As of Friday, November 1st, our Index outperformed the Bloomberg US Aggregate Index by 107 basis points.

1/3

The Sahm Rule was Triggered in July, red bars. This means a recession has ALREADY STARTED. (The definition is on the chart).

It was "un-triggered" with the October unemployment rate.

@Claudia_Sahm 2/3

The Sahm Rule works because once it is triggered, the unemployment rate soars.

The last time it was triggered and then un-triggered a few months later was in 1959 when the recession was still 2 1/2 years away.

1/6

Like you, I see the regular posts about the Spot BTC inflow records. Running out of superlatives.

They are correct. We have never seen anything like it.

@JSeyff @EricBalchunas @Matt_Hougan @dotkrueger @btcjvs @fejau_inc @qthomp @Tyler_Neville_ @MikeIppolito_ @NateGeraci 2/6

Why isn't the price going up? (orange)

Since the BTC ATH on March 13 ($74.3k):
* Spot BTC ETFs flows >$12B (blue)
* The halving (April 19)
* Trump endorsement (July)
* Tech/SPX mania
* Fed Cut (Sept)

The price should have hit $100k months ago.

Instead, it's down 4%.

1/5

My Favorite Anecdote About The Economy

A good way to measure the perceived health of the US economy is to measure the public's ability to spend on things they want but do not need, aka discretionary spending.

🧵 2/5

The Conference Board's survey of 3,000 Households asking whether they are planning a foreign vacation in the next six months.

This month, the survey hit another all-time high: 22% of US households say they will vacation overseas in the next six months.

1/11

🧵on Election Betting Update and its impact on markets.

Trump’s betting:

Average of all betting markets (black)

The three largest betting markets
Polymarket (blue)
Predictit (orange)
Kalshi (green).

Effectively, they all have the same results and trends. 2/11

Are these markets trading at the wrong level (suggesting manipulation)? I would still argue no.

Real Clear Politics aggregates polls using a simple moving average.

For the first time since August 4, Trump leads in NATIONAL polling.

1/15

Updating ...

Election betting markets continue to trade close to where they should based on available information. Not manipulated.

Betting markets are supposed to anticipate the polls, and that is what they are doing.

Be sure to see the last post in this thread.

🧵 2/15

This chart shows Trump trading to win the election.

The black line is the average of eight betting markets.

Polymarket (blue), Predicit (orange) and Kalshi (green) are shown separately as well.

Trump is trading in all markets >50% and has been in an uptrend for weeks.

1/4

Someone tried to manipulate Polymarket overnight. It did not work. All markets returned to normal before we woke up; presumably, the manipulators lost money.

This is what true manipulation looks like, and it always loses.

🧵 2/4

Between 9:20 PM CT and 11:30 PM CT (shaded area), a flood of Sell Trump and Buy Harris trades flooded Polymarket (thick lines), moving these markets about five points.

This is the perfect time to do this kind of trade ... around midnight ET on Saturday night.

Note the thin lines. Kashi and Predictit did not react to this flood of Polymarket orders.

This manipulation attempt was completely reversed by 3:30 AM CT before you woke up.

Presumably, the manipulators lost money.

1/5

The deficit, (both on a dollar amount (top panel) and % of GDP (which still uses Q2 GDP for the latest plot; Q3 GDP is out Oct 30).

See the horizontal dotted line on the bottom panel; the deficit is STILL larger today than at the peak of most recessions.

https://twitter.com/america/status/1847630986516828403

2/5

Here is a long-term look at the deficit.

(OMB has not yet been updated on yesterday's Treasury release. So the last plot diverges slightly with above.)

1/4

Volatility measures are elevated, suggesting markets are "bracing" for the post-election markets.

🧵

Start with the bond market (stocks in thread #3).

The MOVE Index (the "VIX of the Bond Market") closed at its highest level since December 7, 2023. 2/4

Why?

The MOVE is the implied volatility of 30-day options (from 2-yr to 30-yr). Oct 6 was within 30 days of the election; it spiked right after.

The MOVE is saying "buckle up" for election week.

Hedging post-election volatility (selling calls/buying puts) is now costly.

1/9

I'm also looking forward to this debate with Bloomberg's @JSeyff and Blockwork's @fejau_inc at Permissionless III in Salt Lake.

🧵updating some of my charts.

I will explain onstage.

https://twitter.com/JSeyff/status/1843739326288671227

2/9

Breakdown of Assets

Total asset growth stalled in March. iShares IBIT (blue) is taking a bigger and bigger share from Grayscale GBTC (orange). Everything else (red) is about a third.

1/3

China's Govt keeps firing one stimulus Bazooka after another.

Today's installment ...
SCMP: Shanghai, other top tier-1 cities ease ownership curbs in boost for China’s housing market

Results in ...
*CHINA PROPERTY STOCKS GAUGE JUMPS 11% AFTER EASING MEASURES

And causing ....
*CHINA'S CSI 300 UP 22% FROM SEPT. LOW, HEADED FOR BULL MARKET

(biggest such rally since 2008) 2/3

The Chinese finally stimulating domestic demand gives hope that they will start to consume more.

This idea is significantly contributing to this unfolding rally in industrial metals.

Example
*IRON ORE SURGES ALMOST 8% AS CHINESE CITIES EASE HOME CURBS

1/9

All Models Are Wrong, Some Are Useful

Let the Index of Leading Economic Indicators' failure to predict the post-COVID economy be a reminder that this is no longer the pre-COVID economy.

Assuming it is as too many do, including Powell, is how mistakes are made.
🧵 2/9

The August Index of Leading Economic Indicators (LEI) was released yesterday. It is a model of ten indicators that predict the economy.

conference-board.org/topics/us-lead…

1/3

Below, I described how the Fed meeting now has maximum uncertainty just a few days before they met. This is unprecedented.

🧵 on how the process works. (Very inside baseball).

https://twitter.com/biancoresearch/status/1834998770008048024

2/3

Remember, Powell wants a 12-0 vote for every policy decision. He is now working the phones by calling every FOMC member to "horse trade" into a 12-0 vote.

He believes that a 12-0 vote gives policy credibility. Dissents, in Powell's opinion, create doubt and uncertainty.

Powell explained this to Davis Rubenstein in July.
---
From the raw transcript, I edited it for readability

7:58 Powell: The way it works is I talk to the other 18 participants regularly. I speak to them at least once ten days before the meeting and think about this three or four weeks before.

What should we want to achieve? What data do we need to see? How do we want to change our Communications? All those things.

So, I talk to people, listen to them, and try to put together an answer that has broad support on the committee. So when we go into the committee on Tuesday morning [its start], I'm usually confident that I know where this will go.

8:55 Powell: These call calls are generally scheduled and go all day. The Friday before the meeting, I think I have 11 half-hour calls. We talk about the economy, we talk about very specific aspects of the economy, about our mandate, and then we talk about policy, so there's a lot to talk about. I take careful notes.

You can hear him explain it here.

1/5

Actually, this is different.

Before the June 15, 2002, and March 22, 2023 FOMC meetings, the odds of a Fed move were very uncertain, ~50/50.

@NickTimiraos's stories right before these meetings removed uncertainty.

Yesterday's story created uncertainty (chart).

🧵 2/5

Going into the June 15, 2022, FOMC meeting, things were uncertain with a 35% - 45% odd 75bps hike.

@NickTimiraos cleared it up with this:
June 13, 2022 (48 hours before the meeting)
Fed Likely to Consider 0.75-Percentage-Point Rate Rise This Week
wsj.com/articles/bad-i…