Single Best Idea with Tom Keene: Torsten Slok & Jeffrey Rosenberg
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A single best idea on a really, really strange Tuesday before a Fed meeting. Of course, we'll do the Fed meeting tomorrow. The Fed decides. We do that at 1.30 Wall Street time. Looking forward to that. And my phrase for this coming off the reading I've done is, X post is after the fact. So the Fed takes in the data and then only X after the fact. X post. But I'm calling it X post squared post.

Because not only are the ex-posts worried about inflation and what's going to happen there, they're ex-posts worried about jobs, jobs, jobs as well. And a squared function means more than just adding them together. And I think that shows the bizarreness, the uncertainty of this Fed meeting. Someone who's really focused on this.

is Torsten Slack of Apollo Global Management. Let's listen. We are absolutely in slackflation. If you look at the quantifications from the Yale Budget Lab, from the Penn Wharton Budget Model, from the Tax Foundation, from the Peterson Institute, they find that inflation over the next 12 months will go up by one percentage point. So if we have inflation going up, the Fed should be hiking inflation.

But if at the same time we have less economic activity, the Fed should be cutting. So exactly to your point, which one is it? What's really most interesting also about this discussion is that the dot plot is actually revealing that they're leaning towards looking at growth because the dot plot is saying that the next move is a cut. So if that's the case, we have our answer right there, that the Fed thinks that in a stagflation scenario, the focus should be on growth. And that's, of course, where the Arthur Burns and the Paul Volcker discussions will come in, because is that a mistake?

If inflation is about to go, remember, COPECE today is 2.8, and if we add 1% to that, we get to 3.8. Can you be cutting if inflation is moving up to 3.8? That gets a really, really complex decision. 3.8, and that's a much smaller number than 4.0. I can't imagine a bundled in three-month moving average of 4.0. I don't hear many people modeling that yet, so let's not get in front of ourselves. One of the secrets of Bloomberg surveillance, and we learned this yesterday,

We are so humbled that our guests tune into the show today.

before they're on. The linkage here of the guest, guest to guest to guest can really be valuable. From BlackRock, listening to Torsten Slock at Apollo Global Management, here's Jeffrey Rosenberg. I'm not sure Torsten wrote about this or certainly people are talking about the kind of typical pattern when you get a shock to the system like the one that we had is the soft survey-based data starts to erode reflective of that shock

on more of a forward-looking basis, because you're asking people in real time, what are your expectations going forward? That erodes before the hard data does. Now, what we're coming off of here, of course, is that following the soft data in the most recent decline in soft data was a really bad strategy because the soft data ended up not being validated in the hard data. So we have this period in time, it's typical where you have the break between soft data

in hard data. And now what we're going to look for and what the Fed will talk about is, does it show up in the hard data? What's critical for Fed policy is they're not going to be forecast dependent here. They're not going to forecast and move policy based on the soft data. They're going to wait. And by waiting, they will be late and they're going to be happy to be late.

Well, whether financial markets are happy that they're late, that'll be a different question. Jeffrey Rosenberg fired up there at BlackRock as well. I hope we have him on the Fed meeting. I'll have to see what the agenda is. He does their thematic investing with a particular focus on fixed income. We're focused on your interest in us, on your community. Thank you so much. Major shout out to 92.9. We had a lot of fun today with the Met Gala and to see Clario there.

a singer-songwriter out of Concord Carlisle High School, out in the burbs, out by Blue Jay Recording, out in Concord in Carlisle, Massachusetts. Very cool link in there. Good morning to 92.9 FM and your Matt Gala. On your community across the nation, and of course on YouTube, subscribe to Bloomberg Podcasts, and on YouTube Podcasts, it's single best idea.

Hiscox Small Business Insurance knows there is no business like your business. Across America, over 600,000 small businesses, from accountants and architects to photographers and yoga instructors, look to Hiscox Insurance for protection. Find flexible coverage that adapts to the needs of your small business with a fast, easy online quote at Hiscox.com. That's H-I-S-C-O-X dot com.

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