Sir Rotheram has been murdered, found dead in his bathtub. Scotland Yard is completely baffled so they call the world’s most famous consulting detective, Sherlock Holmes. Holmes immediately notices the bath salts and requests that the police find where they are stored, and while at it look for footprints at all the windows. As Holmes dismisses the police he utters, “Data, data, data, I cannot make bricks without clay.”
After the police leave the room to find this supposedly valuable data, it becomes obvious to the audience that the bath salts hunt was a simple rouse to get the police out of the way while Holmes searches for more meaningful data, which turns out to be Sir Rotheram’s secret study in which he practiced his magical rituals. This data eventually leads to the capture of the movie’s primary villain, Lord Blackwood.
This movie scene has come to mind lately as one of my daily rituals has been disrupted by the government shutdown. We have our investment committee meeting every workday morning, and one of the agenda items is to review the economic data released by our government. We also review the economic data from around the world, but most of what we look at comes from right here at home. With the government shutdown, that data is not flowing.
What is the unemployment rate? We don’t know. How many filed for unemployment last week? No clue. Data, data, data…how are we to make bricks without clay? I will freely admit that my name is Chuck and I am an economic-data-aholic. It has been 20 days since my last economic data update. Having said that, this has actually been a nice reprieve, since much of the data flow from places like the Bureau of Labor Statistics is noise, not news, and we may be better off without it.
Of course, we are investors and not traders, so the daily flow of data is far less concerning to us. I can’t imagine the stress this blindness presents for those who program computers to trade on every utterance from government officials. Meanwhile, we get to focus on the data that actually counts: Corporate earnings. It never ceases to amaze me how many intelligent people lose focus on what we are actually doing when we invest in stock. They forget that stock is ownership in a company, and that in the long run, it is the business results of that company that matter.
This quarter’s corporate earnings reports have just begun so it is too early to tell, but thus far they have been good. Eventually this lack of economic data will be a problem as the economic environment does impact the business results of companies, but in the interim we are reminded that not all data is created equal. What really matters to investors are the business results of the companies in which they are invested. That will be our focus.
There are far more critical functions of government that need doing and we hope this shutdown will be over soon. In the meantime, it might be good to know that the missing data is closer to the location of bath salts than to the critical clues that lead to the capture of Lord Blackwood. A good analyst, like a good detective, knows that while data is the clay with which the bricks are made, not all data is created equal.
Warm regards,
Chuck Osborne, CFA
