Obscure Economic Indicators Worth Following
Using esoteric data to gauge the direction of the economy.
While crossing a greenhouse-like elevated walkway from our hotel back to the airport, I noticed a McDonald's (MCD) down below. There were several tills running and they all had 3-5 people lined up behind them. Nothing slows down fast food more than lineups. When I got back the hotel room CNBC was interviewing an analyst about the fast food chain and he was saying that sales in Germany were an issue. Had I been interested in the future investment potential of McDonald's, I might have dug deeper and checked customer traffic at other German locations. Perhaps the company has implemented menu changes that might lift German sales. I'm sure that analysts will be rushing to Germany during Oktoberfest to see how McPretzels are moving.
Rather than the hard data that goes into a spreadsheet, informal indicators can sometimes hint at trends before the "official data" comes out. Jim Rogers noted on one of his around-the-world trips that he preferred information from taxi drivers and prostitutes as opposed to government officials.
Not all of us can travel the globe in our search for investments. However there are a few obscure economic indicators that are worth considering. If the global economy is picking up, we would expect shipping of bulk commodities to increase. You can't make an omelet without breaking a few eggs and you can't build a skyscraper without smelting some iron ore. That's why people track the Baltic Dry Index. If shipping rates for dry bulk commodities are increasing it usually means economic activity is picking up. Of course it's never that simple. Some argue that China's continued stockpiling of raw materials is a diversification away from US dollars is more than a response to internal economic demand. Major commodity exporters are building their own shipping fleets to help insulate them from the vagaries of spot market shipping prices. Old ships are removed from the global fleet when rates are low and sent to the scrap heap.
Canada's Globe and Mail recently revealed an obscure indicator with a front page piece on the rising price of titanium dioxide. Steven Wright says, "It's a small world... but I wouldn't want to paint it." The people who actually roll up their sleeves to do the painting often choose white and titanium dioxide as the pigment used in white paint. We believe that any unknown multi-syllabic strategic metal ending in "IUM" is worth serious research.
Analysts are using freeway traffic, airport lineups, and taxi availability to gauge the direction of the economy. Some of these indicators are more like tells, useful in a poker game when other signals are inconclusive. There has been no shortage of fiscal manure spread around the globe and it's logical that many indicators are showing evidence of green shoots. Whether they thrive and survive into autumn or whither and die is of interest to all market players.
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