Double D’s

Today I want to look at the double D’s……Data Dependency. Data dependency is something that has become the mantra of central banks, and I think it is important for us to really look at what it means.

Now, I am old enough to remember when data was data, and it was released ,and the market traded on that data. However, the data we get now is, well, there is no real politically correct way to say it – but it is somewhat manipulated. Data isn’t data anymore, but instead it is the information that the platform releasing it wants you to see.

For example, if we look at the December jobs report, the headline was ” Canada creates 100 jobs in December – below consensus“. Now, there’s a couple ways to interpret that:

Did Canada create only 100 jobs in December, and that was below the estimates, or did Canada create 100 jobs below the consensus in December? If you were quickly skimming the headlines of the day, you might think that we missed the expectations of 20,000 new jobs by only 100 jobs. Not bad you might think. No matter where you land in this debate, the headline misses the real problem entirely: Canada actually lost 23,500 FULL TIME jobs, and gained 23,600 PART TIME JOBS. So, did we really create 100 jobs in December? 

Now of course the media eventually dove into that, but not in the headline numbers they released. For the average Canadian skimming the news articles of the day, it could look positive, when in fact it was a massive miss on employment. This is just one example of how the data can be molded to fit a narrative. 

As the old saying goes ” figures never lie, but liars always figure”. There has been so many times over my career when ” data ” was presented that told a narrative that the presenter wanted told. However, should you change the inputs, or expand the timeline, the data told a completely different story. For example, if I was a Big 5 bank, and I was trying to sell you a 5 year fixed rate mortgage ( my most profitable of all the mortgages ), and I showed you a chart of interest rates from Jan 01 2022 to December 31 2023, it would strengthen my case as to why a fixed rate would be better. However, if you expanded the timeline from Jan 01 2001, until Dec 31, 2023, the story would be quite different.

They say that knowledge is power, and I fully agree, however in order to have the knowledge we need the full facts, and the full data to make an informed decision. The real estate industry right now is full of data, and charts, and graphs, and experts. All of them, or at least most of them, have a preconceived narrative, and are changing, massaging, or manipulating the data to suite their preconceived outcome. Let’s face it – no one is going to buy a home from a realtor if the realtor says the market is going to crash and the price will drop further. 

Markets these days are dependant on every data release that comes out. Millions of trades are made within mili seconds of data releases. But exactly what data should you look at? When Canadian inflation is released, should you pay attention to core inflation? Headline Inflation? PCI Trim inflation? What data is correct? All of the data is correct, but it only matters which data suits a preformed narrative.  If the government of the day is on a crusade to lower inflation for political gain, they will look at whatever inflation gauge showed them winning that battle. If they were targeting a specific measure within an inflation sector ( for example, the government made a concerted effort to bring down gasoline prices ), then they would focus on the inflation indicator that showed gas prices for that month.

No matter how you look at it, there is data everywhere, and everyone you talk too wants to add some more data. As we trudge through the depths of a real estate correction, we will use data to try and support our thesis on why and when things should change. Data will be used to strenghten an argument and used to tear apart an opinion that doesn’t suit our own. For proof of this, look no further than the current immigration system. For every person that uses data to show you it is making the economy worse – there is another person who can use and interpret the same data to claim immigration is making the problem better.

When talking to your clients, make sure the data is easy to understand. Make sure you have done your homework on the data you are giving them. Avoid blanket statements like ” 65% of economists predict rates will drop by the Spring “. It leaves too much to interpretation. Who is an economist? How much will rates drop? When does Spring start? It is okay to say the 3 words that we find so difficult….” I don’t know”. Read balanced sources to get your data. If you are going to read a left leaning publication, be sure to read a right leaning publication. Unfortunately in today’s times, the political slant of a newspaper can change how headlines are reported. I think it is beyond stupid, but it is fact. Just because you lean right politically, doesn’t mean you shouldn’t read some of the left leaning publications. No one is always right, and no one is always wrong. Keep balance and perspective – especially when it comes to data that can move markets, and move your career.

Data is becoming more important to our business by the day, and will continue to be more important as we venture into the future. Make sure your data is good, your sources are top notch, and you never put your own slant on the facts.