Every time you listen to Chairman Powell, or in fact, any central banker, they will tell you that they take certain actions that are data dependent. Data dependent – meaning that whatever decision they make is going to be based on new data that’s coming in.
Historically, they look backwards:
- What is the GDP (Gross Domestic Product), last quarter, last month?
- What is the inflation rate, last quarter, last month?
- What is the unemployment rate, last quarter, last month?
Everything they look at the quick way is always backward-looking. But they use this backward-looking data to project forward. If you are a data scientist, you understand that backward-looking data is already stale. That backward-looking, first of all, is not even necessarily complete, and second of all, is already old. It’s not telling you what’s going on currently, but it is being used for decisions that are made currently for the future. All this data being collected, is a good idea. They are doing it well, and we are not implying that they are not using high frequency data. But, it’s the high frequency data which provides a fresh look at the real things happening in the economy right now. Where can we find this high frequency data?
OpenTable data. How many people are going out to eat dinner? Going to restaurants?
Theater is another one. How is the recovery?
Flights are another one and the TSA more specifically, because it captures the entire airport. That tells you something about recovery, regardless of what the people are doing or where the people are going.
Satellite images are high frequency data that can certainly be used with Walmart parking lots.
Credit card data: Where are they spending it? Chase has a humungous library of where money is being spent and on which goods and services.
These are just a few examples, but there are more areas collecting high frequency data. This is important because we want to know what’s going on right now. If we are making policy decisions as a central banker, it’s helpful. If I’m an investment manager, which I am, it is helpful.
We want to think in the future:
- Has the economy changed direction?
- Has it pivoted?
I want to be as informed with as much real-time information as possible. High frequency data is an invaluable set of data that data scientists provide to keep us more informed and make better, forward-looking decisions about investments.
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