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100 basis point hike is straight ahead due to hot inflation: Market researcher Jim Bianco - YouTube
Channel: CNBC Television
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our next guest is delivering a grim
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picture of the inflation fallout jim
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bianco runs bianca research jim great to
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see you
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thanks for having me so you think 100
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basis points is in the cards for july um
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what sort of environment are we are we
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entering um in terms of the economy at
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this point with 100 basis points on the
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table
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yeah the market is pricing in about a 70
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percent chance now that the fed is going
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to go 100 that was like five before the
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number this morning and it's pricing in
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another
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75 on top of that 100 at the september
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meeting so you're looking at a three and
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a half funds rate by the middle of
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september and the reason is
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the federal reserve i think has made it
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abundantly clear
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job one job two job three is going to be
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bring inflation down
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if the economy slips in the recession
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and the inverted yield curve might be
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slip uh signaling that or if the stock
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market struggles it slips in the
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recession and it struggles they're going
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to focus on inflation that's their job
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and so
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right now
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we're in a situation where good news is
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bad news so when you get a strong
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payroll report when you get any kind of
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strength in any of the numbers that just
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opens the fed up for more rate hikes and
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that's why we've got a 100 basis points
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it wasn't just the cpi number that did
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it it was also 373 000 jobs last friday
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that opened the door for that
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jim every once in a while i mean in the
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in the old days you see these emergency
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rate cuts in between meetings i mean it
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seems to me
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9.1 handles bit of emergency situation
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why would they wait why don't they just
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come out and do it what's the point of
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waiting till the meeting
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i think it's optics i think it's optics
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that they don't want to look like
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they're panicking although you could
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argue what is the hundreds now hold on
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one second no no no i got it let me push
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back and let me push back on that a
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second i hear you they're long past
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optics i mean the days of them and
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optics are
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way gone i mean that that
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ship has sailed so if they're worried
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about optics they're worried about the
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wrong things because they have zero
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credibility left sorry to interrupt you
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no you you're you're absolutely right i
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was going to say what's the difference
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between an intermediate move and a 100
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basis point hike it still kind of
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portrays the same thing but you're right
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they're so far behind the curve
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every rate hike campaign has always
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ended with a positive real yield that
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means interest rates above the inflation
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rate now inflation's not going to stay
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at nine percent
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but it's not going to three it might go
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to five it might go to six and every
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rate hike campaign will have to end with
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a positive real rate they've got a long
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way to go that's why i think that the
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100 basis points is coming and i think
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why the market has struggled i'll give
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you a one fun statistic only three up
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weeks in the last 13 in the s p go back
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to 1928 that ties the record of futility
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for the least number of up weeks over
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any 13-week period
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jimmy you say stagflation is a
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possibility what do you think the odds
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of speculation are today
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versus say the last fed meeting
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oh i think you know the odds of
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deflation are probably a hundred percent
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right now
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okay well well let's let's define
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stagflation right high inflation nine
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percent inflation
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low growth the atlanta fed is telling us
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that we might see another negative
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number another consecutive negative
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number if it doesn't go negative it's
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just going to be barely positive that's
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your definition of stagflation
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now the comforting news about
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stagflation is it's a situation that
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doesn't last long maybe a quarter or two
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or several months but it doesn't go on
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for years and years but it's going to be
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a very challenging environment and it's
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going to be challenging for the fed
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because they're going to be pulled and
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pulled by two different things
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they may raise rates 100 basis points on
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july 27th or maybe 75 i think a hundred
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the next day is gdp
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and it could very well be negative or
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under one percent and you know guys
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that's
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optics how about that raise rates 100
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basis points and 24 hours later we get a
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negative gdp report they're in a very
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difficult position but i think when they
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look through it all their focus is going
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to be on inflation and that's going to
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spell trouble for markets because the
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fed's not their friend the fed is their
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enemy right now until this inflation
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thing goes away so stagflation lasts one
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or two quarters and there's a
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short-lived um situation jim what's the
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other side of stagflation is it
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necessarily economic growth
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it can be
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because what speculation should do is it
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should break the back of inflation and
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we should then start to see the economy
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look i've argued we're in a
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post-pandemic economy what that means is
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we got to stop thinking about 2019
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returning it's not we have a different
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economy don't confuse that with
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dystopian it's different and once we
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start understanding that restructure the
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economy for the new post-pandemic
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economy we can get out of this
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unfortunately we spend too much time
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fighting whether or not there actually
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is a post-pandemic economy you know a
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lot of the real estate guys in manhattan
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are just saying you wait everybody's
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coming back to the office no they're not
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and as soon as we figure out why they're
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not and we move forward with that the
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sooner we will get to the post-pandemic
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economy and we can start seeing
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normality return to markets or at least
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what we think is normality last quick
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question this is a one-word answer i
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think jim and i'm going to ask the
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traders this what's better for the stock
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market stagflation or recession
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probably recession
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yep
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jim thank you
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jim bianco bianca research
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same question to you karen i agree
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recession
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yeah bono in same
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guy
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recession
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dan i don't understand the question i
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mean like what i'm saying
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we're going to have a recession and it's
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going to be stagflationary i mean like
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that's the point they're going to be all
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matched up trade better with stagflation
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or recession i think it has to be a
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really deep recession to get a lot of
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these excesses up you need to see
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unemployment go up meaningfully probably
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to four percent it's just that 3.6 you
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talk about housing we need to see real
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data that suggests that the housing
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market has broken the fever that it was
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in we've seen manias as far as risk
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asset mania's break over the last year
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we need to see that and we need to see
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unemployment tick up and you can call it
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whatever you want it's going to feel
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like crap either way so that's the you
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know in the stock market's not going to
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like it stock market bottoms lower than
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here we've been talking about this for
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months and months i went to dan last by
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the way because i knew that he wouldn't
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answer
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you
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