DIY data

Speaker 1 At PGM, expertise across public and private markets today helps build resilient portfolios tomorrow.

Speaker 1 With over $1.4 trillion in AUM, PGM has navigated over 30 market cycles with active investing and disciplined risk management. But it's not just about the numbers.

Speaker 1 Our combined global expertise and local insights give us the strategic perspectives we need to help you reach your long-term goals. PGM, our investments shape tomorrow today.

Speaker 1 Pushkin.

Speaker 2 The US federal government shutdown is dragging on and are now running into its second month. One of the effects of that is that we have very little economic data to work with.

Speaker 2 We're not flying entirely blind, but we are wearing aviator shades and it's already dark.

Speaker 2 In the blackout, investors are scrambling around looking for alternative data points to give them a picture of what the US economy is up to, from car sales to family restaurants.

Speaker 2 Today on the show, we're looking at DIY data, what it is, whether it's reliable and how long this frankly ridiculous situation is likely to last.

Speaker 2 This is Unhedged, the Markets and Finance podcast from the Financial Times and Pushkin.

Speaker 2 I'm Katie Martin, a markets columnist at the FT in a weirdly mild London, and I'm joined down the line all the way from New York City by the head honcho of the Unhedged newsletter, my very good friend and very nice, Rob Armstrong.

Speaker 3 I like that metaphor a lot that you used. It's dark and we have our sunglasses on.

Speaker 2 Yeah, we have our sunglasses on.

Speaker 3 And it's not because we're cool,

Speaker 3 it's because we're idiots.

Speaker 2 We are also cool. Now, Rob,

Speaker 2 we received some correspondence this week, did we not? We did. Listeners, we love to hear from you, unhedged atft.com.
But one listener wrote in to say that I'm too mean to you.

Speaker 3 I'm glad that someone else is noticing the systematic pattern of workplace cruelty

Speaker 3 that we've been experiencing on this podcast. Do you want to read out a little bit from that email of that person?

Speaker 3 I don't have it on me, but the guy basically said, I feel bad for Rob because Katie is so mean to him on air.

Speaker 2 Apparently, I use you as a punching bag. And also, I'm becoming very tiresome.

Speaker 3 They're really listening, Katie. They really get the point of the show.
Speaking of punching bags, the U.S. economy.

Speaker 2 We will get to the U.S. economy in a sec, but I did say that you can handle it.
And I reckon you can.

Speaker 3 Yeah, I'm tough. Big boy.

Speaker 2 But also, I'm going to try and be nice to you. So.
Katie.

Speaker 2 Speaking of punching bags, yes, U.S. economy.
I mean, if we don't get U.S. economic data, does the U.S.
economy really exist? Question mark. Well, it's...
I mean, what's going on?

Speaker 3 Part of what is hard about this situation for me as a person who writes about the American economy and its effect on American markets is that there's always a flow of big chunky pieces of news.

Speaker 3 And then you kind of contextualize those big chunky pieces of news against this more systematic

Speaker 3 and careful or statistically well-grounded background of big government reports about what is going on with things like inflation or jobs or for that matter, retail sales.

Speaker 3 And now we have a lot of the big chunky headlines, but we have less and less of that sort of background context that the official reports provide.

Speaker 3 So we're sort of trapped in anecdote land in some way. Yes.

Speaker 2 If this situation continues, you're not going to know what to write about every day day in your newsletter. Won't anyone think of the journey?

Speaker 3 Yeah, well, who will think of the journalists? Yeah, exactly.

Speaker 2 So the situation, as I understand it, is as follows, right? We got the September inflation data for the U.S. We got that in October.
That's the way this always works.

Speaker 2 It takes a few weeks to kind of put all the numbers together.

Speaker 2 But effectively, it's going to be as if October never happened because the people who go out with clipboards to write down prices of things are not going to be doing it or haven't done it in October.

Speaker 2 So they're going to have nothing to report back in November.

Speaker 3 Yeah, that's information we will never get. I think that's correct.

Speaker 3 If someone at the government is collecting those prices and is waiting to spring them on us, call Unhedged First, I say to that person.

Speaker 2 Yes, if you have a clipboard, we want to know about it.

Speaker 2 So I asked someone who knows about these things, Chris Giles, our sort of econ pointy head, and he said payrolls data, so non-farm payrolls data, the big U.S.

Speaker 2 employment employment report, it might be possible for the government to say, okay,

Speaker 2 give us your past two months of data so they can kind of catch up, but the whole clipboards and shops thing basically can't happen again.

Speaker 2 So and also he was saying that the data that we got for September in October might be a little bit wobbly because it might have some gaps in it. So

Speaker 2 there are numbers that might not be 100% reliable. There are some numbers that are going to go missing.
So, you know, what is a diligent diligent investor to do?

Speaker 2 This is the sort of information that you just need to make sensible decisions.

Speaker 3 It's always a puzzle, right? That metaphor people always use is a mosaic. You know, you're trying to construct a picture of the U.S.

Speaker 3 economy and it's never complete and you're always putting bits into the mosaic, but it's never complete and you have to make some assumptions.

Speaker 3 But as I said, Anecdoteville, and we got a heck of an anecdote today, which was something from a company with the fabulous name of Challenger, Gray, and Christmas.

Speaker 3 Which is not a workhouse in a Dickens novel.

Speaker 3 It is a firm that specializes in, I think, basically helping companies fire people humanely.

Speaker 3 And if the people Challenger, Gray, and Christmas want to contest that, but they call themselves Challenger.

Speaker 2 I've got a little thing in front of me, actually, here. It says it is a global outplacement and executive coaching firm.
So I think that means it fires people, but I don't know. Yes.

Speaker 3 In any case, one useful function they provide, the Challenger Report, as it is known, just adds up all the official announcements of layoffs by companies.

Speaker 3 And here is what the good people at Challenger Gray and Christmas said for October. U.S.-based employers announced 153,074 job cuts in October, up 175% 175%

Speaker 3 from the 55,597 cuts announced in October 2024. It is up 183%

Speaker 3 from the prior month. So this is the kind of anecdote that scares you.

Speaker 3 So while we're sitting there in a room with the lights out, with our sunglasses on, somebody shouts into the room, everybody got fired in October.

Speaker 2 And in an ideal world, we would have government statistics for this because you really know what you're getting. So, as you say, in the gap, you do use stuff like challenger numbers.

Speaker 2 We've spoken about these numbers before, but there's also data from ADP, which is a payrolls processor.

Speaker 2 They put out jobs data every month, and it's kind of considered, it normally comes just before non-farm payrolls from the government. And it's normally quite a sort of volatile number.

Speaker 2 It can be a little bit of a head fake. But

Speaker 2 contrasting with the number from from Challenger, they said that private employers in the U.S. added 42,000 jobs in October, which was more than expected.

Speaker 3 And remember that the Challenger report is just about announced layoffs. Yeah.

Speaker 3 Most companies, when they sack somebody, when the FT gets around to firing us, Katie, they're probably not going to put out a news release. They'll just do it.

Speaker 2 Rob First

Speaker 2 Rob first.

Speaker 3 They'll just send us walking out the door. Nor do companies generally issue huge press releases when they hire people.

Speaker 3 So it's not a complete picture, but we do have a very good government data series that is mostly still going right now, which is the weekly initial jobless claims.

Speaker 3 So when you get sacked, the first thing you do is you go to your local unemployment office and you register for unemployment. You make an unemployment claim so you can get your jobless benefits.

Speaker 2 How come we still have those numbers? I don't get it.

Speaker 3 We have those numbers because they are collected by the states.

Speaker 3 And all the federal government does is collect what all the states says.

Speaker 3 But this is why we have investment bank research departments which scurry around to each state and to the sums to add up what all the states have said. And

Speaker 3 a little bit of the data is missing, but we basically have all the data. And the picture from the jobless claims data is one of stability.

Speaker 3 That we've been running along at, and these are new claims again. This people who are asking for their joblessness insurance for the first time.

Speaker 3 It's been running steadily in the kind of 220,000 to 240,000 people a week range for a while and it doesn't seem to be falling off the table. So this is good news.

Speaker 3 And it raises actually an interesting question, which is if they're actually on a net basis, not that many people getting sacked, why are a lot of big companies making big layoff announcements?

Speaker 2 Oh, it's all very confusing, isn't it? I'll tell you what else is confusing.

Speaker 2 If you are a listener listening to this and you dabble in things called bond derivatives or inflation-linked bonds, like inflation-linked bonds need inflation numbers to say

Speaker 2 what they're supposed to be doing. And Toby Nangel himself, and I say this with affection, a gigantic nerd, has written a very interesting piece about this for FT Alpha Ville.

Speaker 2 If that is your jam, check it out, because all of a sudden you've got lots of bond documentation lawyers running around saying, hang on, we had not anticipated just not having any data for a really long time.

Speaker 2 We don't know how this works. So that could get really sticky if you're in that part of the business.

Speaker 2 But yeah, as you say, we're not getting sort of immediate signs that everything is terrible, either, you know, in spite of or because of the

Speaker 2 shutdown.

Speaker 2 It's just a very unsatisfactory situation, isn't it?

Speaker 3 Another source of information that is very important for our jobs, but again, is basically anecdotal, is reading through companies' earnings reports and listening to what the executives say in conference calls every quarter.

Speaker 3 Again, you're going to get something from the perspective of a very specific company that has a very specific set of customers.

Speaker 3 But let me read to you what the CEO of Chipotle, or as I like to call it, Chipotle. And for those of you who don't know, they sell burritos, basically, and taco bowls and stuff like that.

Speaker 2 And it's quite,

Speaker 2 I like the food.

Speaker 3 I eat it quite a bit. And it's kind of like one notch above fast food, I would say.

Speaker 2 It's like Nando's in the UK.

Speaker 3 Yeah, something like that.

Speaker 3 Anyway, uh this is what scott boatwright who's the chipotle chipotle ceo said earlier this year as consumer sentiment declined sharply we saw a broad-based pullback in frequency among all income cohorts frequency being of course how many people walk into the store

Speaker 3 Since then, the gap has widened with low to middle income guests further reducing frequency. We believe that this guest with a household income below $100,000,

Speaker 3 in other words, it's journalists, basically, represents about 40% of our total sales. And based on our data, that customer is dining out less due to concerns about the economy and inflation.

Speaker 3 A particularly challenged cohort is the 25 to 35-year-old age group.

Speaker 3 And then here's the kicker line. We believe that this trend is not unique to Chipotle.

Speaker 3 And as if to reinforce the point,

Speaker 3 it's not just burritos that

Speaker 3 people are struggling to sell.

Speaker 2 It's also toothpaste.

Speaker 3 Here is Colgate Palmol of Chief Executive Noel Wallace late last week. Consumers are exhibiting behavior consistent with purchasing around paycheck cycles.

Speaker 3 Right? Meaning like our sales go up on like the second Friday of the month

Speaker 3 and the last Friday of the month.

Speaker 3 He goes on to say, you know, like our really premium and super premium stuff is selling okay, but further down in the price point portfolio, things are really struggling. So

Speaker 2 people are scrimping and saving, or even on stuff like toothpaste and soap.

Speaker 3 Now, I should say consumer goods companies and food companies, what I broadly call branded consumer good companies, have been having trouble for a long time.

Speaker 3 There has been this slow move away from the big brands, Colgate, Toothpaste, or Heinz Ketchup or whatever it is,

Speaker 3 towards the discount brands. And I think increasingly Americans, rich, poor, or in between, are like, look, it's the same stuff in the tube.

Speaker 3 That's a headwind that that whole industry has been fighting against anyway. So we have to take these comments.

Speaker 3 You know, when Kraft Heinz says we didn't have great sales growth this quarter, part of that is just a secular trend away from branded food.

Speaker 2 I'm not sure this is relevant, but I'll tell you anyway that my husband has just started making his own dishwasher tablets.

Speaker 3 I mean, everybody's got to have a hobby.

Speaker 2 Heaven forbid a man has a hobby.

Speaker 2 He texted me today. He's made his first batch.

Speaker 3 How do you make a dishwasher tablet? What do you make it out of? Oh, God.

Speaker 2 He's looked it up and

Speaker 2 I don't know. I don't know what the result of this is going to be.

Speaker 3 It's like the tallow from after he slaughters the cow that you keep and he mixes it with lye or something.

Speaker 2 I'll probably get home and open the door to my house and just foam will come out my entire house.

Speaker 3 I think you're lucky if there's a house there at all. I think you should count yourself lucky.

Speaker 2 I don't know why he's doing it. Luckily, I don't think he bothers listening to the podcast, so he won't hear me

Speaker 2 wondering what he's up to.

Speaker 3 He hasn't bought a Porsche or had an affair. You know, if his middle-aged sin is making dishwasher tablets,

Speaker 3 i think that's a good sign for your marriage katie

Speaker 2 i mean yes oh i'll update but it's bad it's bad for the people who make dishwasher tablets that's the point of this if he finds a way to make them at scale then this could save us up to five pounds a month it could be an extraordinary saving

Speaker 3 so i i mentioned earlier this question of why would we have big layoff announcements when we have like the claims data actually shows there's not a massive wave of net layoffs.

Speaker 3 And part of the reason is you got to ask for every CEO who has to go up in front of all the mean people on the conference call and explain why their results weren't very good, it is easier for them to say, boy, the consumer is soft and the economy is getting worse than it is for them to say, man, we really dropped the ball this quarter.

Speaker 3 Frankly, you ought to think about firing me.

Speaker 2 That's extremely cynical, but you might not be wide of the mark there.

Speaker 2 But one thing, I was talking to someone at a very large US investment firm recently who was saying that because they are a very large US investment firm, they own shares in like pretty much every listed American company.

Speaker 2 And they've also got like lots of visibility on the performance of... private companies as well through their private market investments.

Speaker 2 And they can use that surveillance that they do of all the companies whose shares and bonds they own anyway

Speaker 2 to pull together something that looks a little bit like official data and that has a certain kind of correlation with official data to kind of produce a bit of guesswork around what the real number might be so if you're a really big bank or if you're a really big investment firm you might have a bit of an edge here because you just have that extra data that you're gathering for the rest of us it is all a little bit

Speaker 2 it is difficult.

Speaker 3 It is hard. It's also, and this is something that comes to how we do our jobs, Katie, something that I've been struggling, I've written a bit about this lately and that I'm struggling with is

Speaker 3 it's always easier to write the story about the bad news, right? It's juicy, you know,

Speaker 3 and it's always easy to think of yourself as a journalist, as someone who

Speaker 3 it's their job is to warn and to look for where there is trouble. But it's very important in moments of uncertainty like this that that we think, okay,

Speaker 3 where's the good news? Let's talk about that too.

Speaker 2 You know what I mean?

Speaker 3 And when the official data isn't there, we become even more subject to our biases is the point that I'm trying to make. There's another systematic source that we should talk about,

Speaker 3 which is there are these big company surveys. called the ISM.
In an ISM survey, you call up companies and say, you know, is business better this month than it was last month?

Speaker 2 Yeah.

Speaker 3 And they say, are you hiring more people this month than you did last month? Are you paying higher prices for inputs than you did last month? Whole list of questions.

Speaker 3 Anyway, just this week we got the services survey, the ISM services survey. ISM stands for Institute of Supply Management, I think.
Anyway, it was really interesting. So

Speaker 3 new orders, which is like, are you getting new business? That was up strongly. So that's good news.
Employment down.

Speaker 3 And that's kind of like the mystery of the U.S. economy right there in a nutshell.
It's like business seems to be okay,

Speaker 3 but no one's hiring anyone. You know, even if they're not firing a ton of people, and we just had that debate, it seems pretty clear there's not a lot of hiring going on.

Speaker 2 Yeah. Right.
Yeah.

Speaker 3 And why, when business is okay, and I would say just looking at earnings reports in general, business is okay for most American companies.

Speaker 2 Why aren't they hiring people?

Speaker 3 I mean, this brings us to discussion of AI and everything else, but I think that's not a sufficient explanation.

Speaker 2 No, no.

Speaker 3 So how do we kind of summarize this conversation? I mean, as I've tried to indicate,

Speaker 3 it feels to me as we drive in the fog, which was Jay Powell, the chairman of the Fed, that was the metaphor he used. You know, he said, when you're driving in the fog, you slow down.

Speaker 2 I think that's the conclusion to this whole thing is that Jay Powell, chairman of the Federal Reserve, last time he made a big statement, he was saying, look, we're not in a hurry to to just keep cutting interest rates, you know, willy-nilly, because it is still possible that inflation comes back.

Speaker 2 The soft data that we're seeing in the form of like ADP numbers and other things suggests that he's probably right. He's probably right to do that.

Speaker 2 Like, we don't know for sure that inflation is coming down. It's much easier to,

Speaker 2 you know, to pull inflation up than to, than to pull it down.

Speaker 2 So

Speaker 2 it probably does just mean that central bankers and the Fed in particular have to be that little bit more cautious about declaring victory over inflation when we just don't know what the numbers are.

Speaker 3 Aaron Powell, and in terms of the economy, the kind of growth side of the ledger, I guess what I would say is this. For me, as a company's guy, the true north is company earnings and

Speaker 3 earnings and revenues. And that news has been pretty good.

Speaker 3 And for me, feeling my way around the fog, the kind of light in the distance is reported revenues and earnings have been pretty good.

Speaker 3 Jobless claims are not shooting up. We're still doing okay.

Speaker 3 Where it's dark, we tend to see monsters. Yeah.
And I'm like trying to remind myself there are some guideposts here and it doesn't look that bad.

Speaker 3 I'm not prepared to say more than that, but I am prepared to say that.

Speaker 2 So it's dark, it's foggy, and we've got sunglasses on, but we think things are probably okay. That feels like a reasonable, a reasonable place to land.
I like that.

Speaker 2 So listeners, we will be back in just one second with Long Short.

Speaker 1 At PGM, expertise across public and private markets today helps build resilient portfolios tomorrow.

Speaker 1 With over $1.4 trillion in AUM, PGM has navigated over 30 market cycles with active investing and disciplined risk management. But it's not just about the numbers.

Speaker 1 Our combined global expertise and local insights give us the strategic perspectives we need to help you reach your long-term goals. PGM, our investments shape tomorrow, today.

Speaker 2 Okie dokie, it is time for long, short, that part of the show where we go long, a thing we love, or short, a thing we hate. Rob, what you got?

Speaker 3 I'm going to go short, the flying taxi, Katie.

Speaker 3 And I think of this only because of this, which I read in today's Financial Times.

Speaker 3 China's leading flying taxi company aims to launch airborne service for major airports within three years that will cost as little as $30

Speaker 3 as the race to deploy electric vertical takeoff and landing vehicles heats up.

Speaker 2 I

Speaker 3 fearlessly predict that in my working life,

Speaker 3 people will not take flying taxis

Speaker 3 to the airport in New York City. I'm not going to make any comments about China, a country about which I know fairly little, or other cities.

Speaker 3 And certainly, if they do take this flying taxi, it ain't cost to know $30 because a plain old taxi costs you like $65.

Speaker 2 Why would you?

Speaker 3 It's going to be cheaper and it's going to fly and it's not going to crash into things. I'm short that possibility.
Call me a hater, but that's what I'm going with.

Speaker 2 Flying into an airport seems a particularly bad idea, right? Because you're going to crash into a plane. I don't know.

Speaker 3 Yeah, no, I'm just not buying it. Now, if I'm wrong, great.
I look forward to the utopian future of the flying, basically the giant drone that can carry me, but I don't think it's going to happen.

Speaker 3 And I'm saying in my working life, maybe in some future longer than that. By the way, I'm quitting this job tomorrow.

Speaker 2 Because I'm mean to you.

Speaker 3 Because Katie is mean to me. Katie, what are you long or short today?

Speaker 2 I am short. Once again, people saying stupid things about the UK on the internet.
We are not going to default on our debt. Come on now, be serious.

Speaker 2 People are saying silly things about UK government bonds.

Speaker 3 People are saying that? I wasn't even aware that that was a claim being made about.

Speaker 2 Oof, it's annoying, Rob Armstrong. It's so annoying.
But people do it anyway, and they're going to carry on doing it no matter how many times I say it's silly. But it's silly, and I'm short it.

Speaker 2 Fair enough. Yes, fair enough.
Listeners, that is it for today. We will be back in your ears on Tuesday with the episode that I'm recording in Kilkenny at the Kilkenomics Festival this weekend.

Speaker 2 We'll see you there. Please don't heckle.
Please say nice things.

Speaker 2 So yeah, Tuesday, wherever you get your podcast, listen up.

Speaker 2 Unhedged is produced by Jake Harper and edited by Brian Erstad. Our executive producer is Jacob Goldstein.
Topa Vorges is the FT's acting co-head of audio.

Speaker 2 Special thanks to Laura Clark, Alistair Mackey, Greta Cohn and Natalie Sadler. FT Premium subscribers can get the Unhedged newsletter for free.
A 30-day free trial is available to everyone else.

Speaker 2 Just go to ft.com/slash unhedged offer. I'm Katie Maltin.
Thanks for listening.