Jim Bianco; Bianco Research Talks Consumer Confidence Report

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Joining us now Yeoman's Duty Early Morning, California, and James Bianco joins his president and founder at Bianco Research, Jim the arch call. Here is your sticky inflation report. Let me digress from that to the theme of the morning. I've heard the word uncertainty forty seven and a half times this morning. Is uncertainty an opportunity or not?

No? I think it's an opportunity. We've overdone the uncertainty thing. A bunch of academics from Stanford have put together an uncertainty index, and last week it hit an all time high.

Now, let me restate that we.

Have more uncertainty now than we did during the COVID shutdown during nine to eleven or during the financial crisis. Now is more than a certain period. It isn't we're overdoing it right now. Everybody's gotten to the point where we're talking about the end of US exceptionalism, which was a term invented two hundred years ago by Alex de Dopeville. So I don't understand why we're getting ourselves all worked up that this isn't just a ten percent correction in

The Stanford people doing this include Nicholas Bloom, who is definitive on work from home. This goes back eleven years to have foundational paper fluctuations in uncertainty. So when is the when Jim Bianco on a time basis, how do you know when to take the opportunity of uncertainty and invest.

Yeah, you know that's a good point because usually you want to wait until you get to kind of the overdone pace. And fortunately this time we got this index that Baker, Bloom and Davis have put together that.

Is added, like I said, a forty year high.

We've also got you know, talk over the top talk I think about the end of US exceptionalism, not understanding what that word means. And now all of a sudden, two hundred years of you know, the American experience has been reduced to a bad quarter in the SMP and it's over. And so it's that kind of environment that you would look for a bottom in the markets, and that's what we've seen in the last couple of weeks while the stock market the SMP has rallied about five percent.

So, Jim, I'm assuming that the recession scenario is not in your forecast.

No, I don't think it is.

The You know, even when you hear economists talk about it, they'll say the soft data is very weak, but the hard data isn't, meaning the actual economic data is actually holding up in the opinion data is what's falling apart. Now, Typically the opinion data lags the soft data the hard data, excuse me, meaning that first the economy turns down. First, people lose their jobs. First, they stop spending. Then they

Point, jimmianco with a thrill that he could be with us.

I can't say enough, folks about his call for sticky inflation.

He was lonely a number of years ago when that occurred.

Good Morning on your commute, ccrastination on the left coast, Jim beyond.

Good morning, an Apple.

Car play and or a auto and serious ex Sam Channel one twenty one, Paul.

Hey, Jim Thomas, just mentioning that, you know, he and I and Lisa Mitay, we hear a lot from our guests about uncertainty in the marketplace, and the market doesn't like uncertainty. How do you let me talk to your clients and they're trying to figure out what this tweet means, what that tweet means, what this pol pronouncement means. How do you suggest they navigate all that?

You know, I think what they have to start with is is the premise that when Trump was elected president and his cabinet and his eighty odd million voters, that they voted for change, and that's what we're going to get. And whenever I hear people tell me, well, they're very worried about the tariffs, They're very worried, you know, about the payment for security that we're demanding out of Europe,

If we don't do that, going back.

To the status quo of two trillion dollar deficits and massive treasury borrowing, that's what they're trying to move away from. So I've argued that we have to give this policy a chance to see if it works. Now if it doesn't work, then we'll have to try a different type of policy. But I don't think we're going back to the status quo. And that's really where I think most people have struggling is is this is not what we're used to, and so we're a little bit unsure of where we're going.

Because it's new territory.

But I don't think we're going back, and that's probably the most important message.

Do you see percent three to one?

Jim Banco?

Do you perceive continued use of cash by companies? Kim Dawnston was in and we're arguing about you know, selected mag seven is a is a utility holding because of free cash flow and quality of free cashlow.

Do you agree with that.

Yeah, I mean cash is taking out a very important role in this this market. Yeah, and largely because it's got such an attractive yield. Right now, a typical money market fund will yield four percent, and that is more than the inflation rate. I'm still in the sticky inflation rate camp, Tom, but I'm in the three percent inflation rate camp. So a money market fund is going to give you a real yield, a yield above the inflation rate.

It's not trash like it was, you know, five years ago. It's not Tina.

There is no alternative to cash like it was pre COVID. Right now, cash is a competitive investment to performing the stock market this year then we've seen in recent years. So anything that can give you cash is going to be a positive.

This is the math of that, Paul.

You do triple leverage four percent as twelve percent grows, I take up my two hundred and ten basis points, and everybody's happy.

Everybody's happy.

The way it works, that's Jim.

That ten percent pullback we had in that peak to trough s and P five hundred was SETI. I guess what some would suggest is a kind of a healthy pullback in an otherwise longer term bull market. Was it something different?

I think it was a typical pullback.

You know, you'll get one about every eighteen months or so. The last one before this month was October of twenty three, so that.

Was fifteen months ago.

You know, that's about what the calendar would expect us to do, and we should do about two five percent pullbacks a year in the market.

That's the typical type of action.

So for the moment right now, this looks like, you know, a typical pullback.

We're right.

We had a catalyst with it, just like in October of twenty three. The catalyst was a five percent ten year yield, and that's all we wound up doing, was the was the ten percent pullback, and then the market kind of stabilized and it started to lift off from there. And I think this is what we're seeing right now.

Giving that backdrop, Jim, where are you suggesting that people look for opportunity over the next six and twelve months, given kind of what we know about some of the uncertainty that's going to be I guess surrounding a lot of these markets going forward.

So while I've been very optimistic, look we've bottomed, the market's going to recover and the like, I don't think it's going to necessarily blast through to all time highs. It may, it may technically make an all time high, but you're not gone.

I think are the years where the S and p's gonn give you twenty percent.

So I think the aforementioned cache and the bond market at five percent, yields in the bond market, I think are going to provide you a competitive investment to this stock market right now. And that's because as the market makes it back to the all time high, I wouldn't be surprised if we start to see yields push well above four fifty towards four to seventy five, And that'll be the newer concern for investors, should we have to bring stocks not go up.

What do you see on the labor economy? Your purview from Chicago, La Diane Swank is different. You're not within three idiots zip codes in Manhattan. The FED models out to that singular headline four point four percent. Do you model out to a higher unemployment rate?

Slightly higher unemployment rate?

I think the biggest thing that we're going to struggle with is going to be the impact of the slow down of migration into the country and what that means for change of population and everything. And I understand the argument that we might see higher unemployment rates as we move forward, but ps fact that it's going to be overstated the amount of labor weakness that we're going to see from the labor market, and that it's probably going to hold up much better.

It's a huge deal.

I mean, Jim Tarzan Slack published, i believe yesterday or the day before his new run rate on non farm payrolls is sub one hundred thousand. Is your new run rate because of a diminished immigration sub one hundred thousand.

I don't think it's going to be that low because typically if you're looking at, you know, the migrant workforce, the migrant workforce is usually not a workforce that gets a W two, that has withholding taxes.

That's who gets measured in the payroll report.

So I suspect that that will stay a little bit stronger now in the household report. They can get picked up in that and that might show up as a higher unemployment rate. So I'm with them at least that there'll be some weakness because of it, but I think it's going to show up in the other report, the houshole report and unemployment as opposed to lower payrolls.

Jim, given all this backdrop here, what do you think our federal Reserve? How do you think they're going to proceed for the remainder of this year?

You know, I think the May meeting is the most important meeting of the year, because if they can't find a reason to cut rates in May, there is no reason to cut rates in May, because they've got the ten percent correction, they've got the handwringing about you know, tariffs, they've got to talk about a recession. And if we get to that May seventh meeting and they still can't find a reason to cut rates, then they're done for the year.

And that the rate cut cycle ended last December. So I don't think they will, And I think that this.

Means that they're pretty much on hold at least until the next cycle emergence. Maybe something else comes along that we can see economy, or we start talking about rate hikes later this year and too next year.

For all of you across the Nation joining US tow surveillance Somalia. James Bianco Jim out of Napa Valley. I mean, I look at the Screaming Eagle in Oakville and it's really really exceptional. But it is a different tinge than the wines of ruugh Of in Napa Valley, aren't they?

Yes, you know, this is a fantastic place to be. If anybody can ever come out here and sip wine and enjoy the weather, I highly recommend it.

Which which wine? Which beverage of the wine do you do you like best? I mean, is there certain nuance to the Napa Velly wine that Michael Barr should know about?

You know they all do.

There's there's vineyards every half mile here, and each one is very different, and so you know, this is the wine connoisseurs heaven to be.

Is it as gorgeous as that apples screen on Sequoia. Everybody's got this now in their computer screen. It is this gorgeous view of I guess Napa Valley?

Is it that beautiful?

Jim Bure, Yes, it is. I wish it wasn't still dark out. I'd flip the camera around and show.

You the view. It's it's unbelievable.

You're a trouper to be with its necessarily nine seven six fine is that? Six fifteen yes, six fifteen in the morning. Thank you, Jim beyoncle