Why Economic Data No Longer Matters

Tyler Durden's picture

Back in mid-2009, we said that with the Fed and central banks nationalizing capital markets, macro and even micro data and newsflow will matter increasingly less and less, and the only thing that does matter is the Fed's weekly H.4.1 statement, showing the changes to the Fed's balance sheet. It also means that so-called "data dependency" is a farce (it is, and has always been "Dow dependency"), and that the impact of incremental newsflow will shrink with every passing week until virtually nobody pays attention (we have largely reached this state now).

Since then it has been entertaining to watch how one after another stoic trader and commentator has thrown in the towel on conventional market orthodoxy to adopt precisely this kind of "tinfoil" thinking, the latest example being Bloomberg's macro commentator Mark Cudmore, who in his overnight Macro View writes that "traders should should spend less time studying economic releases and listen to the clear guidance from officials instead."

The relevance of data is declining. Policymakers around the world are trying to make crystal clear that they’ll ignore that which doesn’t fit their narrative. Many financial commentators have failed to make the transition and are incorrectly transfixed by each data release.

Or, in short, data no longer matters in a world of central planning.

Here is his latest Macro View in which Cudmore explains why "It’s Time for Traders To Listen Rather Than Watch"

Data-dependency is becoming passé for global policymakers. Traders should should spend less time studying economic releases and listen to the clear guidance from officials instead. 

 

For years, policymakers have been emphasizing data dependency. Investors took a while to fully register the message and, as a result, often got whipsawed by throwaway comments from officials.

 

Market participants fully caught up with the idea in late 2016, but now policy has moved on.

 

The relevance of data is declining. Policymakers around the world are trying to make crystal clear that they’ll ignore that which doesn’t fit their narrative. Many financial commentators have failed to make the transition and are incorrectly transfixed by each data release.

 

The BOE has been hammering home the point that it wants to raise rates. When the most dovish member of the MPC confirms that message, it’s not the time to worry whether U.K. inflation is peaking.

 

Brexit negotiations will matter for U.K. and European assets but again, it’s about listening to the speeches, rather than trading the data prints.

 

U.S. inflation hasn’t hit target in years but Fed members have been consistent in saying that’s a side issue -- the FOMC is focused on normalizing policy while the economy is strong enough to cope. So far in 2017 the year- on-year core PCE index fell from 1.9% to 1.4%, yet guidance remains hawkish.

 

Stop fretting about the marginal data print. Janet Yellen has made clear it will take a momentous and broad economic shift to alter the Fed’s path. And if that shift happens, she’ll make the new approach clear as well.

 

The ECB has flagged that it’s eager to taper quantitative easing. Inflation isn’t at target and the structural imbalances in the euro zone haven’t been fixed, but that doesn’t matter.

 

That isn’t to say that data is completely irrelevant for traders, but it does decrease the importance of individual releases. And don’t be too quick to fade asset price reactions to comments from officials.

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Took Red Pill's picture

Nothing shakes this market. Threats of wars, hurricanes, end of QE, bad economic data it doesn't matter. Stocks just keep going up. A company doesn't make a profit and their stock still goes up. Fundamentals don't matter anymore.

BabaLooey's picture

The short version;

 

Back in mid-2009, we said that with the Fed and central banks nationalizing capital markets, IT ALL BECAME A CASINO OF SHIT.

gatorengineer's picture

You can loose in a casino.  In a perpetually up market, by being long you cant.  Only the shorts (like me) that were too dumb/stubborn/whatever to realize how the game was 100% rigged took a bath.  Now i am trying to learn to trade in THEIR casino, to get some of it back.

BennyBoy's picture

 

Why Economic Data No Longer Matters

It's all fake?

GreatUncle's picture

Fundamentals of trading for profit are gone.

Means capitalism is dead but they are not telling you that.

Too many people are still trying to trade that way.

ejmoosa's picture

I know I have been for way too long....

I've been working at the local level trying to get sane solutions to things such as traffic and overbuilding.

Local government ignores all the data provided, and its full steam ahead for more commercial and more high density.

And traffic?  They make it worse so that they can get the voters to pass TSPLOST so they can get more dollars to spend.

No data matters other than who is elected.  Even then you can slow things down, but you cannot reverse things.

Offthebeach's picture

If corporate managers( looters gaming )  can borrow at 2-5%, and buy shares that go up 5-10%, and dump tail risk on shareholders and future "managers", what do you need profits for?

 Product, profit, that so yesterday.   Financialize every part, every transaction, everybthing of everything, then borrow against it and .......

Thank God the forces that financialized real estate, 2009, have been 'delt with'.

yogibear's picture

Via central banksters and infinite fiat.

In the meantime impoverishing the 99% into submission of debt slavery until a revolution.

breaktwister's picture

No revolution as most will never escape MSM brainwashing.  It will take a serious trigger that sheeple cannot ignore e.g. hyperinflation

poor fella's picture

Correct, but more the hunger caused by hyperinflation. When people literally *snap* out of it, I hope to be home and if not, I'm going straight there, expecting things to look like the "The Warriors" from 1979.

Crazy Or Not's picture

I'm encouraged the streets around my area are NOT plastered with 0% interest loans ...just yet.
Retail Banks are still to put their vacuums on turbo, but boy...that clock is ticking.
Glad you've got a handle on it. ...

carbonmutant's picture

Suspend what you believe and trade what you observe...

libertyanyday's picture

computers dont get scared.  the algos and quants have trillions in liquidity that needs a home. buy buy buy

Blue Dog's picture

All the economic numbers are fake. That's why the economic data doesn't matter. They talk about new jobs created that are totally made up when there's about 100 million working age people out of the workforce. GDP is fake. It's adjusted upward for such things as the rental value of your home that you own and live in yourself. The cost of living no longer measures the cost of a fixed basket of goods. So if you eat dog food instead of steak it doesn't show an increase in the cost of living.

ClassicCommodity's picture

Buy Monero - it's private and untracable. This is the real weapon to trash these fuckers!

GreatUncle's picture

And by design not attached to any physical asset.

Winston Churchill's picture

Fiat is backed by Pb.

Power  grows from the barrel of a gun.

Crypto's are merely treating the symptoms of the problem, a diversion from the cure.

Son of Captain Nemo's picture

How long has this article been mentioned in THE VERY SAME WAY "in other words" since 2008?!!!

GreatUncle's picture

Place your bests 100% on a system that can never fail, for if it did fail then all bets win or lose are lost.

That is how you need to play the FED.

Son of Captain Nemo's picture

Well GU

If you're continuing to bet "100% on it never failing" prepare to lose thy shirt in Boris Trump's own words WORSER!...

If you read my comment then you realize that you've been losing incrementally for the the last decade and that it doesn't make any difference whether you play the Casino or not at this point!

gatorengineer's picture

Disagree --- I started trading with the casino again, by buying every micro dip with either TNA or EDC, and ocassionally a straight stock that is making a new 52 week high with a good RSI.  I play for 1-2 percent gain on each, sell and get out. been a winner 6 out of the 7 times I have pulled the handle with my new approach.  with 6 dollar trades, it works.  I hope to do 6-10 percent gain per month....  It works in this mega low volatility market.  High volatility and I would be whipsawed regularly.

 

Son of Captain Nemo's picture

Well gato

Hope you got your tracks covered on all those "successful" trades you have going for yourself which includes keeping the IRS out of your ass.

Let me give you some personal insight as to how pernicious it's getting these days and how desperate the revenue collectors in your Country of origin in fact "ARE"...

I have a very dear friend who was worth a fortune that has been declared a ward of the State and his own family "allegedly" because of the way his will and POA was assembled has been deemed unfit to take care of him so he now has a court appointed guardian supervising his estate!

Let me know if you need any additional literature on this topic (http://aaapg.net/) of how bad this type of scenario is playing out in every hamlet across this Great Land of Opportunity you can't seem to lose in!

shovelhead's picture

Sounds like he didn't trust his heirs and got some seriously deficient estate planning advice.

Son of Captain Nemo's picture

Nahh. Not the case at all.

Read some of the horror stories of what the states on that website (http://aaapg.net/) are doing to their own taxpayers.

libertyanyday's picture

its sad to see a future cannon fodder trader..........' IT' always works.........until it doesnt.  Unless you have as much capital as the house has to play with, you are going to go away empty handed......sooner or later.

Cloud9.5's picture

Fundamentals matter but their importance is concealed by a torrent of paper that continues to plug the gaps and prop up failed systems.  Companies that cannot make a profit are continuing to supply shale oil to an economy that is little more than a welfare state.   Millions of people who are on social security are pulling out much more than they ever paid in.  Medicare and Medicaid are supporting millions of health care workers with money that is conjured out of a back ally shell game with the Fed.  Bankrupt pension plans are continuing to write more debt just to pay pensions one day longer.  The whole system is a scam based on nothing more than blind faith in the system.

 

Something, I don’t know what is going to break the spell.  Once the scales fall from our collective eyes, the dollar collapses.  This collapse will not be a typical Zero Hedge collapse where the dollar loses a few percentage points on the world stage.  It will be a collapse that relegates the dollar to toilet paper status.  Then and only then will we have the reset that so many have been anticipating.

arby63's picture

Goes to show you why economics is truly a social science.....

Reaper's picture

You'll live forever; I've relabeled next year as 2017.

Bernardo Gui's picture

The perma-put us firmly in place. Central banks have demonstrated that they will do whatever it takes to reinflate asset bubbles.

66Mustanggirl's picture

In 1984, my husband and I were fresh-faced newlyweds of 2 years. He worked in a paint store. I waited tables. If we had a combined income of 30k I would be surprised. Yet, we were able to purchase our first home (with some help from his parents); a cute little bungalow, for $39,000 at 10% interest. We purchased a brand-spankin'-new Chevy Cavalier to drive. We took small vacations. We ate out. My husband hunted and/or fished every single weekend for most of the year. We were, by no means, without financial struggle but we enjoyed life!

Oh.....and the Dow started the year at 1258.64 and ended at 1211.57

Today? We have a combined income of over 80k. We refuse to use credit cards (been down THAT disastrous path in our younger years) so the only debt we carry is a $123,000 mortgage. We both drive cars that are 16 and 15 years old, respectively. We rarely eat out. Don't smoke, gamble, shop, or do drugs. My husband's big luxury is a case of Budweiser every two weeks and a Wednesday golf date with his buddies. FRUGAL is our mantra. Where does our "disposable" income go? Helping our "kids" who graduated college with a ruinous amount of college debt. (They are all professionals; 2 nurses and another who is in upper management for our State Park system). We have one more who is graduating high school this year and wants to be a Veterinarian. (Ha! Good luck with THAT!). My oldest son and his wife saved for 7 years to buy their first home, with our help, for $235,000. They make close to six figures but are struggling. They also refuse to indulge in the credit card mania, so frugality is also their mantra.

Oh! But....blare the trumpets.....the almighty Dow is at 22,419.57!!!!!!

The point of this little tirade? A little dose of economic REALITY! Remember that???

Tick....tock.....that's the sound of this frickin' economic FANTASYLAND created by Wall Street and the FED, where flying rainbow unicorns roam free among cotton candy clouds, and its rapidly approaching date with Karma. And in case you haven't noticed, she's being a royal BITCH this year.

KA-BOOM!! That is the only warning anyone will get when this freak show comes crashing down. And make no mistake.....that day is coming. Fast.

Consuelo's picture

 

 

You were right on the cusp of the new economic era, whereby deficits no longer mattered...

Your numbers from 1984 were actually quite tight on a long term graph, with a slight upwards trajectory in costs vs. incomes.  

66Mustanggirl's picture

That's all I know is that our dollars stretched a helluva lot further than it does today and our quality of life was a thousand times more productive and enjoyable. I would go back to 1984 and our "meager" income in a heartbeat. And take my kids and grandkids with me.

shovelhead's picture

Kids and Govt. are far more expensive than they used to be.

conraddobler's picture

Anywhere you look in any business, it is the triumph of the box checkers over the doers which will only end in complete destrucdtion.

Dong anything is now swiming upstream not only in actual reality as you try and form some order out of chaos but ALSO now you have to swim up the endless stream of bureacrats.

Only collapse and renewal can save us now.

gregga777's picture

The data are all LIES anyway so why pay any attention? Massive unemployment of >40% becomes nearly "full employment" of 4.3%. A decade long string of inflation greater than 7% per year becomes "below the 2% inflation target." Sustained negative GDP becomes weak GDP growth of sub-2%. Every data release is a LIE designed to make the steeple think that things are just great.

Hkan's picture

So THIS is slow death.....

 

Consuelo's picture

 

 

Don't think too hard about the fake economic numbers.

Think hard about why they're being faked.   Extend the thought process out to its logical conclusion (societal upheaval and the attendant threat to domestic stability) and the fakery becomes crystal clear.

Why else would nearly every .gov reporting agency be in on the gangbang...?

shovelhead's picture

They want my precious bodily fluids?

Nomad Trader's picture

Look I've only been in this game since 2003 but I can tell you what the older guys at work told me back then - economic data has never mattered.

ElTerco's picture

Welcome to George Orwell's 1984, though technically the economic reality distortions originated in 1983 from within the USA.

timdug's picture

You are all on crack- here are great trading opportunities every single day. You are not a trader just cause you buy a nominal amount of Apple or netflix shares and then sit on it till you feel the heat. You are just hunting for something better to do with savings- an investor. There is a different. Traders turn investments to profit every day every hour