MacroVoices #341 Jim Bianco: Inflation Is Not Going Away

Episode Summary

Executive Summary: Macro Voices episode 341 features Eric Townsend, Patrick Serezna, and Jim Bianco arguing that inflation is becoming secular rather than transitory, driven by the end of cheap labor, cheap goods, and cheap energy. They expect higher rates, persistent dollar strength, more commodity volatility, and weaker support for gold and long-duration growth stocks, while warning the Ukraine war and energy crisis are part of a broader geopolitical realignment.

Main Topics: Inflation as a secular regime shift (Priority: 5/5): Townsend and Bianco argue the market still assumes inflation will fade back to 2%, but structural changes since the pandemic may have permanently lifted inflation and interest-rate floors. Cheap labor, cheap goods, and cheap energy disappearing (Priority: 5/5): Bianco breaks inflation’s old disinflationary pillars into labor, China goods, and Russian/cheap European energy, arguing all three are deteriorating simultaneously. Interest rates, Fed policy, and the bond market (Priority: 5/5): Rising inflation expectations are forcing yields higher, challenging the Fed’s ability to rescue markets and potentially repricing bonds, mortgages, and credit markets. Oil and the energy crisis (Priority: 5/5): They discuss crude’s short-term weakness versus a longer-term bull case, with SPR releases, White House replenishment comments, recession fears, and supply constraints shaping the trade. Gold’s disappointing behavior (Priority: 4/5): Both hosts question why gold is not responding more strongly to inflation, arguing it is behaving more like a currency versus the dollar than a pure inflation hedge. Equities, valuation rotation, and market structure (Priority: 4/5): The discussion centers on the S&P 500’s technical weakness, the possibility of another leg down, and a regime shift away from speculative tech toward value, industrials, and commodities. Geopolitics and economic warfare (Priority: 4/5): Ukraine/Russia is framed as part of a broader global conflict involving sanctions, energy leverage, supply-chain fragmentation, and the rise of economic nationalism.

Key Arguments: Inflation is not a one-off pandemic spike; it may be a secular trend caused by long-running changes in labor markets, supply chains, and energy. The market’s belief in a near-term Fed pivot is complacent because higher inflation constrains central banks’ ability to cushion asset prices. Cheap labor has faded due to stronger worker bargaining power, the great resignation, remote work, and wage pressure. Cheap Chinese goods are less reliable because of zero-COVID policy, geopolitical tensions, and supply-chain fragility. Cheap European energy is ending because Russian gas leverage and higher natural gas prices are raising manufacturing costs. The crude oil market can fall further in the near term, but longer-term supply constraints make much higher prices likely once demand returns. Gold is underperforming because rising real rates and dollar strength matter more than inflation rhetoric; financialized gold products may not protect against systemic stress. The bond market may ultimately reprice to higher yields, but it will still be funded because debt markets are senior in the capital stack. The Russia-Ukraine conflict is not isolated; it is part of a wider shift toward economic warfare and fragmentation of globalization. Portfolio positioning should favor value, industrials, energy, commodities, and higher-rate environments over long-duration growth and speculative tech.

Data Points: Macro Voices episode: 341 - Episode number of the podcast discussed Recording date: September 15, 2022 - Date the episode was recorded S&P 500 level: Under 4,000 - Eric notes the market weakness after inflation data Dollar index level: Near 110 - Dollar strength discussed as continuing trend Crude oil spot level: Around $85 - Oil fell back from near $90 on the October contract White House SPR replenishment trigger: $80 per barrel - Announcement that SPR buying would begin when spot crude hits $80 SPR drawdown: 8.4 million barrels - Weekly draw from the Strategic Petroleum Reserve cited as offsetting a crude inventory draw Headline crude inventory change: Build of 2.4 million barrels - EIA report showed a build due to the SPR draw Underlying crude inventory draw: 6.0 million barrels - Inventory draw excluding SPR effect Gasoline inventory change: Down 1.8 million barrels - Weekly gasoline stocks draw Distillate inventory change: Up 4.1 million barrels - Weekly distillate stock build U.S. oil production: 12.1 million barrels per day - Production held flat week over week Gold intraday low: 1668 - Gold sold off sharply after the inflation print Gold breakdown level: 1675 and below 1700 - Gold broke multi-year and 2021/2022 lows 10-year Treasury yield: Near 3.5% - Yield retested 2022 highs on inflation concerns Unemployment rate: 3.7% - Bianco cited tight labor market conditions Atlanta Fed wage tracker, job switchers: 6.7% YoY - Wages for workers switching jobs Atlanta Fed wage tracker, non-switchers: 4.9% YoY - Wages for workers staying in their jobs Wage spread: 1.8 percentage points - Largest-ever gap described between job switchers and non-switchers Remote workforce share before pandemic: About 5% - Stanford’s Nick Bloom estimate cited by Bianco Remote workforce share after pandemic: About 20% - Shows accelerated adoption of remote work Shift in timeline: 20 to 25 years ahead - Pandemic compressed the remote-work trend by decades Global freight/port efficiency rank: Port of Los Angeles ranked 370th of 370 - Used to illustrate supply-chain brittleness Global port efficiency rank: Port of Long Beach ranked 369th - Second-worst-ranked port mentioned China trade amount: $6 trillion - Bianco cited cumulative goods imported from China over 40 years Pacific Rim trade amount: $9 trillion - Broader cheap-goods channel beyond China German cheap energy to manufacturing ratio: $27 billion of cheap energy enabling $2 trillion of goods - Illustrates how cheap Russian gas supported European industrial output Energy price shock: 600% rise in natural gas - Used to explain cost pressures on European manufacturing Natural gas price reference: 14-year high in the U.S. - Shows energy cost pressure extending beyond Europe Bianco Research age: 24 years - Firm history described in closing remarks Macro Voices audience: Over 170,000 listeners - Podcast advertising/readership pitch in outro Registered accredited investors: More than 20,000 - Audience statistic given by the show Estimated accredited investor audience: At least 40,000 - Macro Voices’ estimate of accredited listeners

Pivotal Quotes: "I think we're in a new secular inflation." — Eric Townsend: Opening discussion on why inflation may not retreat to pre-pandemic norms "This inflation is a one-time thing. It's going to go away forever." — Jim Bianco: Bianco describing the consensus view he believes is wrong "Gone are the days of 2% inflation, gone are the days of 1% to 2% interest rates." — Jim Bianco: Conclusion on the likely higher-rate regime ahead

Implications: Listeners should expect a more volatile, inflationary macro regime with higher rates, stronger dollar bias, and more sector rotation toward energy, commodities, industrials, and value. Gold and speculative tech may struggle unless the macro backdrop changes materially.