“Of all the liars in the world, sometimes the worst are your own fears.”
-Rudyard Kipling

In the beginning of this epic US stock market ramp, to many investors it was all a lie – Trump’s “rally” was a lie, the “soft” data was lying, and of course the “market’s valuation” was THE ongoing fear.

11 months later, after 4 straight quarters of both US corporate profits and GDP accelerating alongside capex and productivity (all hard data), I got mail yesterday that the 161 and 146 month highs in the ISM manufacturing and service reports were lies.

While I don’t doubt that Trump and the Clintons lie, THE theme this year has been that the rates of change in growth and inflation data aren’t lying; some of the strategists and politicized pundits who weren’t positioned for this move have been.

Big Macro Data, Truths, and Lies - 04.04.2017 soft and hard data cartoon 

Back to the Global Macro Grind…

What’s the truth? I don’t care if someone wants to try to tell me that the back-tested 30 data points per month in our predictive tracking algorithm for GDP are lies. They aren’t. And neither are the YTD returns in my personal accounts.

I’m pretty sure that if you invested alongside a partisan line this year (instead of a data driven one) that someone or something (i.e. the YTD return on that) appears to be lying to you as well.

There’s a popular book that just came out that positions itself as data-driven, but has a glaring political bias. Not ironically, the book is called Everybody LiesBig Data, New Data, And What The Internet Can Tell Us About Who We Really Are.

I don’t know about you, but I don’t need the internet or some journo to tell me who I am.

All that said, I do need to use both the internet, the cloud, and all of its embedded data to continue to push the envelope on finding both the economic and market truth before it becomes reported and realized.

Last week my research and engineering teams held an offsite on the Future of Data Sciene @Hedgeye. For those of you who do research without full-stack software engineers as teammates, I think you need to get to where we’re already going.

There are a lot of perceptions (and fears) out there about NOT using “big data.” My biggest one is seeing my analysts get lazy. If they stop using their brain in lieu of some “data point” short-cut, my business model is dead.

That’s not to say that unique data sets and time series aren’t important. On the contrary, they are critical. But what’s critical in a big data process means nothing if the data can’t be contextualized into bigger ideas.

Since our Global Macro Research #Process is almost entirely driven by the data at this point, I’m not at all surprised that we were early in realizing that the following Big Macro Themes of 2017 weren’t lies:

  1. Reflation’s Peak (Q1)
  2. Reflation’s Rollover (Q2 and Q3)
  3. US Profits and Real GDP #Accelerating all the while

I’ll be hosting our Q4 Global Macro Themes Call at 11AM EST today where I’ll walk through the following themes:

  1. “USA Quad 1 or 2?”
  2. “Profits vs. Tax Reform”
  3. “Synchronized Global #Divergences”

What you should notice in some Hedgeye Macro Themes (especially after multi-quarter-cyclical-moves have had time to play out) is that they become open debates that are subject to… drum-roll… the next wave of incoming data!

Some of our subscribers love that; some of them go squirrely on that. If you accept and embrace a Bayesian probability based research process (you change as the data does), you get more comfortable being uncomfortable with time and space.

Whether it’s big data, new data, or someone’s sad-spin on data, our goal as a firm is to find the truth. A big truth is that a lot of managers live in fear of not having a repeatable-data-driven-process. They’re insecure about all of this and they should be.

Our immediate-term Global Macro Risk Ranges (with intermediate-term TREND views in brackets) are now:

UST 10yr Yield 2.24-2.37% (bullish)
SPX 2 (bullish)
RUT 1 (bullish)
NASDAQ 6 (bullish)
XOP 32.55-34.90 (bullish)
RMZ 1145-1161 (bearish)
Nikkei 20192-20699 (bullish)
DAX 128 (bullish)
VIX 9.16-10.43 (bearish)
USD 92.00-93.97 (neutral)
EUR/USD 1.16-1.19 (neutral)
YEN 111.20-113.30 (bearish)
GBP/USD 1.31-1.35 (bullish)
Oil (WTI) 49.57-52.79 (bullish)
Nat Gas 2.86-3.10 (neutral)
Gold 1 (bearish)
Copper 2.91-3.00 (bullish)

Best of luck out there today,
KM

Keith R. McCullough
Chief Executive Officer

Big Macro Data, Truths, and Lies - 10.05.17 EL Chart