Jim Bianco: “Bond Traders Can Stop Panicking When the Fed Starts Panicking”

Bianco places AI in an early boom phase—roughly 1997–98, by his explicitly uncertain estimate—while noting that about 60% of U.S. businesses report using AI but only 2%–3% have built workflows that materially affect their businesses. He argues data-center construction is not yet overdone, though a 10-, 20-, or 50-fold gain in compute per unit of power could turn a shortage into overcapacity, as the market feared after DeepSeek; he also says an Anthropic IPO could offer a signal of whether the cycle is nearing a peak.

Bianco identifies two distinct AI risks: testing the Mythos model at major financial institutions and government agencies revealed vulnerabilities that could bring systems down, while he argues model makers could face product-liability claims when users cause losses. The host adds that insurers do not know how to underwrite that exposure, and Bianco says regulation or government indemnification could address it.

Bianco warns that AI-related issuers offering 8%–9% yields could pull investment from traditional borrowers such as Coca-Cola, while AI capital spending has not yet produced broad spillovers such as substantial hiring or spending. He describes convertible bonds as a hot sector for technology and AI issuers, and says technology can draw capital away from other businesses, as it did during the dot-com period when the S&P Infotech index rose 29% while the S&P excluding Infotech fell 12%.

Bianco says Ukrainian attacks have hit 34 of Russia’s 39 refineries and cut Russian refining capacity by 60%; separately, he cites reduced Russian exports as one factor raising European gas-oil prices and redirecting buyers to U.S. supply. He also points to about 3 million barrels of refined product not leaving the Persian Gulf because carriers face conflict risks, alongside U.S. diesel at $6.50 per gallon and record refining margins.

Bianco says diesel’s role in producing commodities and transporting goods can spread higher costs through the economy: fuel for an 80,000-pound Chicago-to-Los Angeles truck trip costs about $2,100, up $400–$500 in recent months. He argues a generalized recession usually needs a shock after the economy has weakened, and the host says he would not be surprised if diesel reached $8–$10 per gallon this year, while presenting that as a possibility rather than a certainty.