Cross-Asset Liquidity Strategist, CrossBorder Capital

Michael J. Howell

Cross-Asset Liquidity Strategist

Implementing Research Using Alt Data & AI

CrossBorder Capital

CrossBorder Capital is a London-based independent investment advisory firm. Founded in 1996, it exploits a gap in the investment arena by focusing on Central bank liquidity. 

It specialises in the monitoring and analysis of global liquidity flows - an important determinant of asset prices, from currencies through to bonds, equities and real estate.

CrossBorder Capital implements its investment strategy and currently manages over US$ 350m.


Cross Asset Strategy

<ul>
<li>Bitcoin target US$25,000, given gold ‘fair value’ of US$2,500/oz</li>
<li>Bitcoin and gold respond to future monetary inflation unleashed by potential CBDC</li>
<li>CBDC will drive Central Bank balance sheets far higher</li>
<li>Future monetary policy levers will focus on credit growth and competitive devaluations</li>
</ul>


Bitcoin target US$25,000, given gold ‘fair value’ of US$2,500/oz
Bitcoin and gold respond to future monetary inflation unleashed by potential CBDC
CBDC will drive Central Bank balance sheets far higher
Future monetary policy levers will focus on credit growth and competitive devaluations


Coming Currency Wars Or Why The Price Of Bitcoin Could Double

Managing Director

Elan Gore

TMI Data Science

TMI Data Science utilizes Natural Language Processing to build custom leading indicators using unstructured data sourced from the global financial, trade & traditional media.  Our proprietary software, TMI Machine, is a text-mining platform designed with the buy-side & capital markets professional in mind, text-mining the global media to discern and quantify nuanced qualitative shifts in press coverage as they apply to macroeconomics, equity indexes/ETFs, commodities, currencies, fixed income & individual equities.  TMI provides custom leading indicators and systematic trading strategies, operating at the nexus of linguistics & statistics drawing on vast experience in investment banking and hedge fund settings in senior quantitative and fundamental roles.  

TMI Data Science was founded by Elan Gore, an award-winning Senior Global Basic Materials Equity Analyst & China Economist with 15 years of experience in North American hedge funds & institutional managers; and Alessandro Porrino, Ph.D., an Algorithmic Trading Analyst and Programmer with 10 years of front-office experience ranging from complex FX option pricing to auto-hedging strategies at Bank of America Merrill Lynch and Standard Chartered.  Mr. Gore holds an MBA in Finance from New York University Stern School of Business, and Mr. Porrino holds a Ph.D. in Systems Engineering from Brunel University London.

<ul>
<li>As the street warms up to a potential Biden victory, arguments for improving equity breadth and cyclical rotation are starting to emerge again</li>
<li>Financial media references to a cyclical rotation saw a multi-STDEV spike in June, which coincided with a significant and notably enduring lift in the ratios of US industrials-to-staples and transports-to-staples </li>
<li>Our testing highlights the US transports-to-staples ratio as the most correlated with the cyclical rotation theme, but we see similar action in the copper/gold ratio and EM currencies</li>
<li>In the past 10 days, our text-mined data shows an incipient pro-cyclical move, but its momentum has yet to fully turn net-positive</li>
<li>Calls for a cyclical rotation softened through the September correction, COVID-19 second wave fears and more recent fiscal stimulus uncertainty; but the cyclical/defensive sector ratios endured as the structural reframing of a Biden presidency as an inflation-positive outcome went mainstream</li>
<li>While historically "cyclical rotation" and "value rotation" were strongly correlated, we have seen a decoupling in these themes due to the heavy burden of the COVID-19 crisis on financials and energy</li>
<li>Economists have pointed to the increased likelihood of a vaccine in H1 as a driver of recent bullishness and inflationary optimism, but observations from text mining and from the Superforecaster survey (Good Judgement Project) do not suggest new positives here</li>
<li>Predictably, at this stage of post-pandemic recovery the focus of cyclical rotation is on industrials and materials (particularly mining &amp; construction materials), with a Biden win implying elevated infrastructure spend</li>
</ul><div class="content-highlight"><p>TMI Data Science utilizes Natural Language Processing to build custom leading indicators using unstructured data sourced from the global financial, trade &amp; traditional media. Our proprietary software text-mines the global media to discern and quantify nuanced qualitative shifts in press coverage as they apply to macroeconomics, equity indexes/ETFs, commodities, currencies, fixed income &amp; individual equities. </p></div>


As the street warms up to a potential Biden victory, arguments for improving equity breadth and cyclical rotation are starting to emerge again
Financial media references to a cyclical rotation saw a multi-STDEV spike in June, which coincided with a significant and notably enduring lift in the ratios of US industrials-to-staples and transports-to-staples 
Our testing highlights the US transports-to-staples ratio as the most correlated with the cyclical rotation theme, but we see similar action in the copper/gold ratio and EM currencies
In the past 10 days, our text-mined data shows an incipient pro-cyclical move, but its momentum has yet to fully turn net-positive
Calls for a cyclical rotation softened through the September correction, COVID-19 second wave fears and more recent fiscal stimulus uncertainty; but the cyclical/defensive sector ratios endured as the structural reframing of a Biden presidency as an inflation-positive outcome went mainstream
While historically "cyclical rotation" and "value rotation" were strongly correlated, we have seen a decoupling in these themes due to the heavy burden of the COVID-19 crisis on financials and energy
Economists have pointed to the increased likelihood of a vaccine in H1 as a driver of recent bullishness and inflationary optimism, but observations from text mining and from the Superforecaster survey (Good Judgement Project) do not suggest new positives here
Predictably, at this stage of post-pandemic recovery the focus of cyclical rotation is on industrials and materials (particularly mining &amp; construction materials), with a Biden win implying elevated infrastructure spend
TMI Data Science utilizes Natural Language Processing to build custom leading indicators using unstructured data sourced from the global financial, trade &amp; traditional media. Our proprietary software text-mines the global media to discern and quantify nuanced qualitative shifts in press coverage as they apply to macroeconomics, equity indexes/ETFs, commodities, currencies, fixed income &amp; individual equities. 

TMI Thematics: Cyclical Rotation Through The Lens of Text Mining

Commodities

<ul>
<li>Last month our sentiment indicators pointed to potential over-exuberance in copper and platinum, early signs of improvement in corn, and an accelerating slide in crude</li>
<li>Copper sentiment has since pulled back to neutral territory, but the magnitude of the pullback was limited as momentum readings remained mildly positive throughout the month; other base metals saw sentiment pull back to a lesser extent, even as the nickel price underperformed on TSLA news flow</li>
<li>Corn has seen improvement in sentiment driven by news of better ethanol margins and potential crop damage in Northeast China driving greater US export demand</li>
<li>Precious metals sentiment collapsed, with silver sentiment dipping below -2x STDEVs to the downside and gold hitting -1.3x STDEVs this week</li>
<li>Crude sentiment attempted to stabilize in the past 2 weeks, but renewed fears of mobility restrictions are surfacing in recent days as negative catalysts in our news attribution; we also identify a very high correlation between crude sentiment and our global foot traffic indicator</li>
<li>From a broader macro perspective, we continue to see pressure on inflation expectations in our text-mined diffusion indices; but since the DXY hit a short-term high of 94.8 on 9/25, we have seen a slight lift in 5-yr TIPS breakevens which is providing some relief to the complex</li>
<li>Our main takeaway this month is the resilience of palladium an copper to recent swings in sentiment, unexpected USD strength and elevated vol in the complex; both commodities have behaved well in the face of considerable headwinds and potentially reflect a steadier underlying recovery in manufacturing, construction and autos</li>
<li>Overall, less than half of our commodity sentiment indicators are in positive territory, compared with the vast majority last month</li>
</ul><div class="content-highlight"><p>TMI Data Science utilizes Natural Language Processing to build custom leading indicators using unstructured data sourced from the global financial, trade &amp; traditional media. Our proprietary software text-mines the global media to discern and quantify nuanced qualitative shifts in press coverage as they apply to macroeconomics, equity indexes/ETFs, commodities, currencies, fixed income &amp; individual equities. </p></div>


Last month our sentiment indicators pointed to potential over-exuberance in copper and platinum, early signs of improvement in corn, and an accelerating slide in crude
Copper sentiment has since pulled back to neutral territory, but the magnitude of the pullback was limited as momentum readings remained mildly positive throughout the month; other base metals saw sentiment pull back to a lesser extent, even as the nickel price underperformed on TSLA news flow
Corn has seen improvement in sentiment driven by news of better ethanol margins and potential crop damage in Northeast China driving greater US export demand
Precious metals sentiment collapsed, with silver sentiment dipping below -2x STDEVs to the downside and gold hitting -1.3x STDEVs this week
Crude sentiment attempted to stabilize in the past 2 weeks, but renewed fears of mobility restrictions are surfacing in recent days as negative catalysts in our news attribution; we also identify a very high correlation between crude sentiment and our global foot traffic indicator
From a broader macro perspective, we continue to see pressure on inflation expectations in our text-mined diffusion indices; but since the DXY hit a short-term high of 94.8 on 9/25, we have seen a slight lift in 5-yr TIPS breakevens which is providing some relief to the complex
Our main takeaway this month is the resilience of palladium an copper to recent swings in sentiment, unexpected USD strength and elevated vol in the complex; both commodities have behaved well in the face of considerable headwinds and potentially reflect a steadier underlying recovery in manufacturing, construction and autos
Overall, less than half of our commodity sentiment indicators are in positive territory, compared with the vast majority last month
TMI Data Science utilizes Natural Language Processing to build custom leading indicators using unstructured data sourced from the global financial, trade &amp; traditional media. Our proprietary software text-mines the global media to discern and quantify nuanced qualitative shifts in press coverage as they apply to macroeconomics, equity indexes/ETFs, commodities, currencies, fixed income &amp; individual equities. 

TMI Indicators: October Commodity Sentiment - Base Neutral, Precious Weak, Palladium & Corn Positive

Chief Economist & Political Strategist, CrossASEAN Research

Prasenjit K. Basu

Chief Economist & Political Strategist

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

<p><em><strong>The presidential debates are usually totems of democracy's best features--as two (occasionally three) candidates lay out their arguments cordially before a national audience. The first debate of the Fall 2020 campaign was anything but a talismanic symbol of American democracy, doing little to change voters' minds. But it greatly heightened the risks of a chaotic November in the US, possibly the most chaotic post-election scenario since 1860-61. </strong></em></p><p>The first inter-party presidential debate of the 2020 election cycle was an ugly tie: there was no clear winner in an incoherent and undignified brawl that hardly aired any of the election's key issues. Trump's abrasive style likely strengthened the degree of support from his base. Biden's uneven performance (a few good lines, drowned in bouts of incoherence) did not enhance his appeal to the wider electorate, but he held his own (thus refuting Trump's suggestions that he is senile), and made no significant gaffes (apart from one false claim about the US-China trade deficit, and a brief defense of the Green New Deal, which he was soon obliged to repudiate). </p><p>President Trump appeared intent on questioning the legitimacy of the election process -- particularly mail-in ballots. Asked by moderator Chris Wallace (from the conservative Fox News channel) to reassure voters of the integrity of the voting process, Biden complied--and made a strong, direct pitch to voters to go out and vote. Trump said the voting process is "a disaster", a "fraud and a shame". When asked if each candidate would wait until a result/outcome had been certified before declaring victory, and would tell his supporters to stay calm in the intervening period, Trump declined to do so--especially if it was "a fraudulent process".</p><p>At this stage, President Trump appears to have decided he will lose the election, and is hence preparing his supporters to question the legitimacy of the election -- a dangerous and unprecedented situation that has not occurred in any election since the 19th century.  November 2020 was already looking like a terrible month for the US, but it has just become much more dangerous, as the sitting president has begun questioning the legitimacy of the entire electoral process. In the 1860 election, the refusal of many states to accept the outcome (a victory for Lincoln) led to a Civil War, as southern states unhappy with the outcome chose to secede. November 2020 will not necessarily signal a Civil War, but is likely to result in an ugly and chaotic month or two in US politics -- uncertainty that will be very negative for global equities and risk assets. The US dollar is likely to gain strength this quarter, as will gold prices.  </p>

The presidential debates are usually totems of democracy's best features--as two (occasionally three) candidates lay out their arguments cordially before a national audience. The first debate of the Fall 2020 campaign was anything but a talismanic symbol of American democracy, doing little to change voters' minds. But it greatly heightened the risks of a chaotic November in the US, possibly the most chaotic post-election scenario since 1860-61. The first inter-party presidential debate of the 2020 election cycle was an ugly tie: there was no clear winner in an incoherent and undignified brawl that hardly aired any of the election's key issues. Trump's abrasive style likely strengthened the degree of support from his base. Biden's uneven performance (a few good lines, drowned in bouts of incoherence) did not enhance his appeal to the wider electorate, but he held his own (thus refuting Trump's suggestions that he is senile), and made no significant gaffes (apart from one false claim about the US-China trade deficit, and a brief defense of the Green New Deal, which he was soon obliged to repudiate). President Trump appeared intent on questioning the legitimacy of the election process -- particularly mail-in ballots. Asked by moderator Chris Wallace (from the conservative Fox News channel) to reassure voters of the integrity of the voting process, Biden complied--and made a strong, direct pitch to voters to go out and vote. Trump said the voting process is "a disaster", a "fraud and a shame". When asked if each candidate would wait until a result/outcome had been certified before declaring victory, and would tell his supporters to stay calm in the intervening period, Trump declined to do so--especially if it was "a fraudulent process".At this stage, President Trump appears to have decided he will lose the election, and is hence preparing his supporters to question the legitimacy of the election -- a dangerous and unprecedented situation that has not occurred in any election since the 19th century.  November 2020 was already looking like a terrible month for the US, but it has just become much more dangerous, as the sitting president has begun questioning the legitimacy of the entire electoral process. In the 1860 election, the refusal of many states to accept the outcome (a victory for Lincoln) led to a Civil War, as southern states unhappy with the outcome chose to secede. November 2020 will not necessarily signal a Civil War, but is likely to result in an ugly and chaotic month or two in US politics -- uncertainty that will be very negative for global equities and risk assets. The US dollar is likely to gain strength this quarter, as will gold prices.  

Ugly, Disorderly Debate Raises the Spectre of 1824, if Not 1860

<ul>
<li>Last week we highlighted a downward shift in US inflation expectations, and our diffusion index of inflationary vs. deflationary expressions continues to soften (see <a href="https://www.smartkarma.com/insights/tmi-snapshot-cross-currents-in-the-us-rental-market-hint-at-pausing-inflation-expectations" target="_blank" data-smartkarma-citation="insights:43259" rel="noopener">TMI Snapshot:  Cross-Currents In The US Rental Market Hint At Pausing Inflation Expectations)</a>
</li>
<li>We believe this shift is largely responsible for unwelcome USD strength and recent pressures on precious metals as well as the overall commodity complex (as noted in <a href="https://www.smartkarma.com/insights/tmi-indicators-gold-sentiment-seeking-catalysts-following-latest-leg-up-on-us-benefit-expiration" target="_blank" data-smartkarma-citation="insights:43356" rel="noopener">TMI Indicators: Gold Sentiment Seeking Catalysts Following Latest Leg Up On US Benefit Expiration</a>)</li>
<li>While our inflation expectations note focused on emerging pressures in the US rental market and their impact on TIPS inflation breakevens, we must acknowledge that the psychology behind the emerging consensus inflationary mindset went into overdrive when extraordinary open-ended QE was perceived to be augmented by continued massive fiscal support and accelerated COVID-19 vaccine news flow</li>
<li>Our text mining sees an unprecedented spike in US political divisions coinciding with a sharp step down in fiscal stimulus expectations, as well as lowered expectations on the near-term availability of a COVID-19 vaccine</li>
<li>With two pillars of the emerging inflationary mindset now broken, the underlying narrative is seeing significant near-term challenges</li>
<li>As a potential post-election silver lining, our text mining sees a shift in perceptions of a Biden win from potentially disinflationary to inflationary (as Biden tax implications are now seen as less onerous and infrastructure investment potentially larger)</li>
<li>As long as uncertainty on post-election outcomes lingers, we suspect disinflationary pressures drive elevated vol, a stronger USD, continued pullback in precious metals &amp; the broader commodities complex, and a near-term shift away from the incipient cyclical/value rotations</li>
</ul><div class="content-highlight"><p>TMI Data Science utilizes Natural Language Processing to build custom leading indicators using unstructured data sourced from the global financial, trade &amp; traditional media. Our proprietary software text-mines the global media to discern and quantify nuanced qualitative shifts in press coverage as they apply to macroeconomics, equity indexes/ETFs, commodities, currencies, fixed income &amp; individual equities. </p></div>


Last week we highlighted a downward shift in US inflation expectations, and our diffusion index of inflationary vs. deflationary expressions continues to soften (see TMI Snapshot:  Cross-Currents In The US Rental Market Hint At Pausing Inflation Expectations)

We believe this shift is largely responsible for unwelcome USD strength and recent pressures on precious metals as well as the overall commodity complex (as noted in TMI Indicators: Gold Sentiment Seeking Catalysts Following Latest Leg Up On US Benefit Expiration)
While our inflation expectations note focused on emerging pressures in the US rental market and their impact on TIPS inflation breakevens, we must acknowledge that the psychology behind the emerging consensus inflationary mindset went into overdrive when extraordinary open-ended QE was perceived to be augmented by continued massive fiscal support and accelerated COVID-19 vaccine news flow
Our text mining sees an unprecedented spike in US political divisions coinciding with a sharp step down in fiscal stimulus expectations, as well as lowered expectations on the near-term availability of a COVID-19 vaccine
With two pillars of the emerging inflationary mindset now broken, the underlying narrative is seeing significant near-term challenges
As a potential post-election silver lining, our text mining sees a shift in perceptions of a Biden win from potentially disinflationary to inflationary (as Biden tax implications are now seen as less onerous and infrastructure investment potentially larger)
As long as uncertainty on post-election outcomes lingers, we suspect disinflationary pressures drive elevated vol, a stronger USD, continued pullback in precious metals &amp; the broader commodities complex, and a near-term shift away from the incipient cyclical/value rotations
TMI Data Science utilizes Natural Language Processing to build custom leading indicators using unstructured data sourced from the global financial, trade &amp; traditional media. Our proprietary software text-mines the global media to discern and quantify nuanced qualitative shifts in press coverage as they apply to macroeconomics, equity indexes/ETFs, commodities, currencies, fixed income &amp; individual equities. 

TMI Snapshots:  More Signs Of Pressure on Inflation Expectations, USD Upside, And A Silver Lining

United States

Gold is a chemical element with the symbol Au (from Latin: aurum) and the atomic number 79. In its purest form, it is a bright, slightly reddish yellow, dense, soft, malleable and ductile metal. Chemically, gold is a transition metal and a group 11 element. It is one of the least reactive chemical elements, and is solid under standard conditions. The metal therefore occurs often in free elemental (native) form, as nuggets or grains, in rocks, in veins and in alluvial deposits. It occurs in a solid solution series with the native element silver (as electrum) and also naturally alloyed with copper and palladium. Less commonly, it occurs in minerals as gold compounds, often with tellurium (gold tellurides).

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Coming Currency Wars Or Why The Price Of Bitcoin Could Double

New popularity of Central Bank Digital Currency with policy-makers combined with MMT is a dangerous cocktail. Gold and Bitcoin are alternatives,...

Michael J. Howell

TMI Thematics: Cyclical Rotation Through The Lens of Text Mining

As the equity melt-up sees renewed "cyclical rotation" calls, we text-mine the global financial media to find early signs of recovery in the theme...

Elan Gore

TMI Indicators: October Commodity Sentiment - Base Neutral, Precious Weak, Palladium & Corn Positive

Last month our sentiment indicators pointed to potential over-exu

Elan Gore

Ugly, Disorderly Debate Raises the Spectre of 1824, if Not 1860

The first president

Prasenjit K. Basu

TMI Snapshots: More Signs Of Pressure on Inflation Expectations, USD Upside, And A Silver Lining

Last week we highlighted

Elan Gore

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