ACTIONABLE ADVICE FOR FINANCIAL ADVISORS: Newsletters and Commentaries Focused on Investment Strategy

Follow us on
 Facebook  Twitter  LinkedIn  RSS Feed

    Last 14 days

Most Popular Articles


Most Popular Commentaries

    Last 12 Months

Most Popular Articles


Most Popular Commentaries



More by the Same Author

Economic Insights
   Employment
   Housing
   Inflation
   Quantitative Easing
   Recession
Fixed Income
   Corporate Bonds
Global Markets
   Europe
Specialty Investments
   Commodities
   Currencies
Jim Bianco Markets Will Benefit From
Disastrous Fed Policy
By Robert Huebscher
September 25, 2012

Go to page 2, 3, Next          Bookmark and Share  Email Article   Display as PDF   Remind Me Later


Jim Bianco

The Fed’s quantitative easing policy will be “disastrous,” according to Jim Bianco, but prices for riskier assets will rise over the near term as a result.  In remarks last week, Bianco, the head of the Chicago-based economic research firm that bears his name, also gave the US economy a near-failing grade of C-, and warned that inflation will be “problematic.”

Assessing Fed policy and its effects on the economy and the markets was the subject of a talk Bianco gave last Wednesday at a lunch sponsored by the Boston Security Analyst Society. 

“Fed policy will produce the worst possible outcome,” he said. “It will make rich people richer, because rich people own stocks, and they will go up. And it will make a poor people poorer, because it is not going to create jobs and they are going to pay higher gasoline prices.”

Let’s review Bianco’s forecast for the economy and inflation and how he believes the Fed’s policies will affect markets.

A weak economy

Bianco called himself an “old-school” economist who believes in leading, coincident and lagging indicators.  He cited several such indicators to justify his weak forecast for the US economy.

The economy is not in or heading toward a recession, he said, despite warnings from the Economic Cycle Research Institute (ECRI).  But he said that firm’s leading indicator – as well as the Chicago Fed National Activity index – both forecast GDP growth of approximately 2.5%.  Bloomberg is estimating 1.8% GDP growth in the third quarter and only 2% for the fourth quarter. 

Bianco said economists have been consistently downgrading their Q3 and Q4 GDP forecasts, as well as forecasts for sub-components such as industrial production and payroll.

Operating earnings for the S&P 500 were down approximately 1% in Q2, he said, and Q3 is expected to be negative as well.  Forecasts for Q4 are falling rapidly, Bianco said, although some analysts are forecasting a rebound.

On the revenue side, there was 1% growth in Q2 and forecasts call for negative growth in Q3, he said.  That would be ominous, according to Bianco, because every time quarterly S&P 500 revenues have shrunk, a recession has followed shortly thereafter.  That follows naturally, since approximately $11 trillion of our $16 trillion economy comes from the sales of S&P 500 companies.  Without growth in that component, it’s unlikely the overall economy will grow, Bianco said.

Go to page 2, 3, Next     

Display article as PDF for printing.

Would you like to send this article to a friend?

Remember, if you have a question or comment, send it to .
Website by the Boston Web Company