How Traders Used Google Searches To See The Economic Recovery In Real Time

Joe Weisenthal (0:10)

Hello and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

Tracy Alloway (0:16)

And I'm Tracy Alloway.

Joe Weisenthal (0:18)

So I don't know what day people are going to be listening to this episode, but the stock market hit a record high yesterday.

Tracy Alloway (0:28)

Yeah, it's true. So all the losses that we saw during the COVID crisis have basically been erased, and markets are back where they were before all of this happened.

Joe Weisenthal (0:39)

Yeah, it's essentially six months from the pre-crisis peak to this one. So I think the S&P peaked on February 15th, and then we saw the new peak yesterday, August 18th.

And in a sense, it really feels like we've compressed this sort of gigantic cycle into an extremely short period of time.

Tracy Alloway (1:02)

Yeah, that's true. And I was looking at the latest fund manager survey from Bank of America, and it showed that, I think fund managers have completely flipped from thinking that we're in a recession to thinking that we're in the early stages of a fresh economic cycle. And if they're right, to your point, it does suggest that we've just seen one of the shortest recessions of all time.

Joe Weisenthal (1:25)

Yeah, I mean, you could make the argument that the recession recession in terms of the shrinking of growth was done by the end of March when most data points started turning up. And while the overall level of economic activity is still very depressed and, of course, unemployment rate is still above 10 percent, so hardly time to be declaring victory, we have seen steady improvement on a host of economic data points basically since end of March, early April.

Tracy Alloway (1:52)

That's true, but I also feel like there's something kind of weird going on with the data. Like there's the old stock versus flow argument, which we're seeing everywhere, but particularly in PMIs. So even when we get a big rebound in PMIs, it doesn't necessarily mean that we're getting back to the levels that we saw pre-crisis.

But you're also seeing just sort of weird indicators that are happening simultaneously. And I think one of our colleagues pointed out a really good one recently, and that was intentions to buy a house surging at the same time as mortgage delinquencies, which, I mean, never happens in an economic crisis.

Joe Weisenthal (2:32)

No, it's really weird. But I think because of all the weirdness that we're seeing, this sort of contrary indicators, because there's this weird gap between paces of change, which have been very fast and unexpected, versus levels, which are still at very bad levels, and then also just the fact that it's so compressed, there's probably never been more demand for sort of alternative real time data points and this feeling that the official economic data points that we get, monthly jobs report, monthly retail sales report, they just, there is not enough of them, they're not timely enough to get a sense of what's going on, given how fast the changes have been both on the downturn and the rebound.

Tracy Alloway (3:12)

Yeah, absolutely. And I mean, just on a very simple basis, everyone wants to know what's going on with the recovery, right? And everyone's tracking to what degree the economy has reopened. And some of the most useful indicators for that are arguably alternative economic indicators like open table reservations, things like that.

Joe Weisenthal (3:33)

Yeah, totally. I mean, that is one of the things we've been watching the most. It's like open table. They can keep track of people making reservations or doing in-seating dining. So if you want to sort of understand how behavior has changed or how people are doing different things due to the virus, that's been one of the sort of key data points, not something that people were really tracking before, as far as I know, on a meaningful level. So I think this is really important. I mean, I think obviously real-time alternative data has never been more in demand than what we've seen over the last six months, but I don't think it's going away now. It's kind of another one of these things where real-time data points of all range of things will sort of be part of the conversation for a long time, even if and when we get back to something resembling a normal economy.

Tracy Alloway (4:24)

Yeah, I think that's right.

Joe Weisenthal (4:26)

So today we are going to be talking all about alternative data, what it's showing, and more importantly, how investors actually use it in their process. And so we're going to be speaking with Ben Breitholtz. He's a data scientist at Arbor Data Science, which is part of Arbor Research and Trading.