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ironically ever since the FED cut because the dollar has rallied and obviously interest rates have gone up but they're still they're still quite above normal so that's pretty much the data we're looking at I'd say the other thing I'm focused on I've been obsessed with whether we were in the 70s um really since 2021 when this whole inflationary episode started and I'd say two years ago or year and a half ago I was very confident that inflation was going to come down which I was right on but I was worried about the economy which I was completely wrong on um more recently and you can take this with a grain of salt since I had one right and one wrong there um I've switched to being more worried about inflation going forward uh then the economy itself why do I say that if we go back to the 70s there was an episode with OPEC that set off an inflation you had a recession and inflation came down I think from about 8 to three and then went back up again yes and what Bo what's bothered me and what I have wanted to see you're exactly right it went back up again it went back up again and the number of months um would correlate to the bottom being right about now yeah so my confidence a year a year and a half ago was we're going to have that period where we came down again and then we'd see and I'm a little worried that the FED has declared Victory too early I don't have conviction like I had in 21 that inflation was going to go up that's when the money supply was growing 40% and all sorts of things were happening but I also don't have conviction that they've snuffed this thing out and won the battle and to 50 basis points with credit spreads tight gold at new highs equities roaring no sign of weakness um material weakness in the economy of course there are some spots um that just makes me nervous that this thing could turn up again what would make you turn up again what would be the factors I think what I just said uh easing into Financial conditions let's say um Trump wins if Trump wins you could have animal spirits from the business Community who are dying for deregulation you could have tariffs which are on the margin inflationary uh immigration has been a great Boon to this country maybe not the way it was done but it certainly enabled us to have growth without inflation and labor materially the last two or three years so the common a of animal spirits recovery doing better than it is I'm just open-minded to it again why is it so urgent for them Central Bank to cut given this honestly um I don't take the nefarious view that pal is doing it for quote unquote political reasons I do think he's obsessed with the soft landing and I think he's obsessed with his legacy and having made the mistake he made in 21 and he's being egged on by other economists in the press to me the fed's job is to avoid the big big mistakes yeah like the 70s like the great financial crisis like the big inflation we just had but all this fine-tuning and worrying about a soft Landing that that is not the job of the FED in my opinion is to maximize employment for the long term not for the next three months or the next four months but I think the fed's obsession with with nailing this so-called soft Landing I would remind everybody that the reason we're having a landing is because they took they let inflation go from 2 to %.
yeah so there was no need for a landing for 20 years but um I think that's what they're obsessed with I don't really I don't know how much of a problem is the forward guidance it's a huge problem um my friend dream Grant says their forward guidance dependent not data dependent um it's a problem because once you do forward guidance you eliminate your optionality yeah and I think Nikolai you and I being in this business we know we have to change our mind when we're wrong yeah this fed has shown over and over again that they think if they change their mind they're losing credibility so it makes them have their hands tied behind their back I'm wrong all the time I think my record is mainly because when I'm wrong I changed my mind not that I'm always right I certainly not forward guidance seems to tie them into positions where and eliminate flexibility they need
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