Pod Insights Masters in Business At the Money: What Data Matters and What Doesn't About this episode What would YOU like to hear about on Bloomberg? Help make shows like ours even better by taking our Bloomberg audience survey https://bit.ly/48b5Rdn.
Bill McBride of Calculated Risk has spent the past 20 years taking apart economic data, creating “opinion-free” analysis of the economy, and accurately identifying booms, busts, bubbles, and recoveries in real-time, including the great financial crisis and its subsequent housing bottom + recovery. He speaks with Barry Ritholtz about the data that matters, and the data that doesn’t, and how investors can tell them apart.
See omnystudio.com/listener https://omnystudio.com/listener for privacy information.
Transcript Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.
0:00 Speaker 00 At KKR, we've spent 50 years understanding what matters to our clients and companies. From pioneering private equity to investing across credit, real assets, insurance and sports, KKR has built the experience to navigate complexity, the judgment to recognize opportunity, and the conviction to create lasting value. Because when people and institutions are counting on us, understanding what matters isn't just important, it's everything. KKR, understanding what matters. Visit kkr.com/whatmatters.
0:30 Speaker 01 When you're a business owner interested in expanding to new markets, there's a lot to consider and countless questions to answer before making the call. The most important one being, are you ready? That's where ChatGPT comes in. Give it a goal, add your files, and ask chat to help you map out different scenarios for the future of your business. So when growth is on the table, you've got an expansion plan ready to implement. Get started at ChatGPT.com.
1:10 Barry Ritholtz? When it comes to the economy, it seems like everybody has an opinion about what's going to happen next. Are we getting a recession? Can we execute a soft landing? Is the Fed about to cut rates? Or are they standing pat? And what about inflation? Has it stabilized and bottomed? Or is it about to pick up again? The answer to these questions are mostly just opinions, guesses from folks with rather questionable track records. As it turns out, you can cut through all of this confusing noise and let the economic data tell you its own story. I'm Barry Ritholtz, and on today's edition of At the Money, we are going to discuss
1:54 Barry Ritholtz? how to allow economic data to reveal itself to you without the guesswork, opinions, or the usual pundit pontifications. To help us unpack all of this and what it means for your portfolio, let's bring in Bill McBride. He runs calculated risk. Bill has used economic data to create opinion-free analysis of the economy over the past two decades. And he has accurately identified booms, busts, bubbles, and recoveries in real time and at major turning points, including the great financial crisis and its subsequent housing bottom and recovery.
2:36 Barry Ritholtz? So, Bill, let's just start with economic data. Typically, it's noisy, most of the time not especially meaningful. How do you identify what data series to follow and which releases are important?
2:50 Speaker 03 Well, there are several major releases, the employment report, the GDP report, and since my major focus is on the housing market, it's also housing starts and new home sales. But I follow quite a few other data releases, mostly just to see if something's not tracking what you kind of expect. And it's really kind of the surprises that change your views or brings you, you know, insights into what's actually changing in the economy.
3:22 Barry Ritholtz? So it sounds like you're paying the most attention, non-farm payrolls, which comes out every month, GDP, which comes out quarterly, and then housing, sales, and new home starts, both of which are monthly. Do I have that right?
3:36 Speaker 03 That's correct. I think those are the major releases to follow.
3:39 Barry Ritholtz? Do you think those have the most predictive value as to what happens next?
3:44 Speaker 03 Well, I think the employment report actually tells you the best of what's happening now. The GDP report tends to, you know, it's quarterly, it gets heavily revised. The unemployment rate is monthly, and so you know when the unemployment rate's at 3.9 that the economy's in pretty good shape. New home sales and housing starts do have some predictive value. Not always, but generally if if new home sales and housing starts are increasing, the economy is going to be fine for the next few years. If they if they decrease sharply, there's a potential for a recession.
4:21 Barry Ritholtz? Mm hmm.
4:22 Speaker 03 But it's not, you know, no model is perfect. We saw a number of of major economists get fooled by the inverted yield curve and and the the sharp drop in in housing starts and new home sales that were related to the pandemic. And that so you always have to take everything with a grain of salt. But I think those there is some predictive value in in housing starts.
4:44 Barry Ritholtz? I I like the concept of GDP, unemployment, and housing starts as past, present, and future. It really gives you the broad range of of what's going on. But let's talk about the flip side of that. What do you think people in both investors and economists pay too much attention to? And what data series perhaps should they be spending less time with?
5:08 Speaker 03 I think probably the one people should ignore the most is is anything doing with sentiment.
5:13 Barry Ritholtz? Mm hmm.
5:14 Speaker 03 It's more of an opinion, especially in the last decade or two, we've we've seen a real a political tinge to it. So especially especially on the conservative side, when there's a Democratic president, the the economy is terrible to to many Republicans. And and the Democrats is a little bit the same way. But but there are some surveys that that's all it does is really tell you who's president.
5:40 Barry Ritholtz? Right, right. Is it that's that's fascinating. I always find it amusing when you look at certain models that have a survey component. Owners equivalent rent, what do you think you can rent your house for always kind of cracks me up. And the one that really I I couldn't agree with you more about ignoring sentiment is the Federal Reserve asking, you know, ordinary people, where do you think inflation is going to be in five years? I can't imagine a more useless question than that.
6:10 Speaker 03 There's probably a little value to that. But I I understand what you're saying. Sentiment in general is hard to measure.
6:17 Barry Ritholtz? So let's talk a little bit about inflation. Are there things that you pay close attention to? Rent, food, fuel, mortgage rates? What are you looking at when you want to figure out what's happening in the world of inflation?
6:29 Speaker 03 You know, inflation is especially interesting topic right now, obviously, because it impacts what the Fed's going to do, which impacts interest rates. Part of the problem is, we had a huge surge in rent related to household formation, really mostly in 2021, but going into 2022. And now, asking rents are basically flat year over year and have been for some time now. But the measure of rents that go into CPI and PCE, they include renewals, which they should. You know, the people that are getting, and renewals are
7:07 Speaker 03 still catching up to the fact that the rent surged a year, two years ago. But this is a key point, is monetary policy cannot impact what happened to rents two years ago. It can only impact what's happening today. So, you know, there's a difference. Sometimes renters say to me, well, wait, my rent's still going up? Yeah, but that's because it's a renewal. And monetary policy doesn't impact that at all. So when you look at the CPI reports for the last few months, the government's reporting, one of the sentences in there has been, 50% is related to rents, or something close to that, of the CPI increase. So what
7:50 Speaker 03 I've been doing is I've been taking rents out of the inflation measures to see where we're at. And we're much closer, and for several months, we were at the Fed's target. So this is a little balancing act for the Fed, is how much should they look at rents? And how much should they exclude it from what they're doing?
8:12 Barry Ritholtz? Let's talk real estate. There's so many different elements that go into residential housing. It's people's incomes, what mortgage rates are at, local housing supply, and the aforementioned rentals. What do you watch most closely in this area? What do you think people should be watching that perhaps they're not?
8:32 Speaker 03 I think the key to watch is inventory. That's
8:37 Speaker 03 You know, it's a, there is supply and demand. We still have pretty good demographics. We have a large cohort in the home buying age group in their 30s. On the flip side, the inventory, of course, has been very low, but it's starting to increase. It's still pretty 30% below kind of a normal level. But, but since sales are down so much, I've been looking more at months of supply. And that is probably going to get back to 2019 levels later this year. And that says that, you know, house prices will basically be flat to only up slightly by the end of the year, I think.
9:16 Barry Ritholtz? So in 2022 and 2023, just about every economist out there was looking for recession. You were not, and you got it right. What were you seeing that told you recession was not imminent? When everybody else seemed to be stuck on the inverted yield curve?
9:35 Speaker 03 Yeah, well, you know, there were several, several economic analysts who didn't think there would be a recession. Claudia Sam, who you've interviewed recently, Jan Hotsuits, Goldman Sachs Chief Economist, who everybody should read if they get a chance. In 2022, I didn't see, there was no reason to expect a recession at all. In 2023, that, you started seeing some signs of a possibility. The Federal Reserve staff was even predicting a recession in 2023. So, but, I mean, the, the key things that people were looking at was the inverted yield curve, which is still inverted, and the fact that housing starts dropped off pretty sharply.
10:21 Speaker 03 But what they weren't looking at was other parts of pandemic economics, if you will. Auto sales had been really depressed because of supply issues. And so that meant auto sales were going to pick up in 2023, which they did. And there were other parts of the economy that had similar things, where the supply issues were going to start easing up from the pandemic. So if you factored in pandemic economics, I thought was saying, hey, we need to watch, but I don't think we're going to have a recession, and we didn't.
10:56 Barry Ritholtz? So given all of the above. If investors want to focus on one or two data series to give them some idea of where we are and where we're going, what two data series should they be paying attention to over the next few years?
11:13 Speaker 03 Unemployment rate and the payroll report is critical. What's important over time changes.
11:20 Barry Ritholtz? Yes.
11:21 Speaker 03 There's times when the weekly unemployment claims is very important. That's important when you really do think that there's a possibility of a recession, but that only matters in that particular situation. Probably the most important thing is the inflation reports and being able to look at them, look at them with taking the rents out to kind of get a feel for what's happening. So I would definitely be following both of the inflation reports, CPI and the PCE report.
11:54 Barry Ritholtz? So to wrap up, investors should realize they don't need to follow every data release, every news report, every economic announcement that comes out, but you should be aware of where we are in the cycle. When we're closer to a recession, when things are in danger of slowing down, the weekly new unemployment claims are worth tracking. But in the meantime, you should be watching unemployment rates, you should be watching housing starts, and lastly, you should be paying attention to both CPI and PCE reports to give you a sense of when the Fed or if the Fed is going to cut or stay pat.
12:37 Barry Ritholtz? I'm Barry Ritholtz and this is Bloomberg's At the Money.
12:58 Speaker 04 This message comes from Edward Jones, where they believe rich is about more than saving and investing. It's also taking care of what gives your life meaning. That's why your dedicated financial advisor meets you where you are, with personalized financial strategies that help protect what matters, so you can preserve your progress while creating a path forward. The key to being rich is knowing what counts. Edward Jones. Member SIPC.
13:22 Speaker 05 Congratulations, you've built a dashboard. But now comes the follow-up question, and the follow-up to the follow-up, and the dashboard for that. Meet Hex. Give everyone the power to ask their own questions, explore data, and build with AI, all in natural language. Because every answer should spark another question, limited only by your curiosity, not your data team's bandwidth. Go deeper than dashboards. Join over 2,000 leading data organizations. Visit hex.ai.
Previous How the World Ran on Empty with Peter Goodman Next Advancing Behavioral Economics with Colin Camerer Page updated November 6, 2026 · transcript and summary are machine-generated