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.

Macroeconomics

<ul>
<li>This year's narrative from US treasuries suggests a short-lived inflation/overheating scare in Q1, which coincided with Winter Storm Uri and the Texas power crisis, along with an initial phase of tapering talk from regional Fed presidents which subsequently faded; since the March peak, 10yr yields are down -45bps or a whopping -26%, representing the view that inflationary pressures have been entirely transitory</li>
<li>The picture from 5yr TIPS breakevens and the 5yr5yr has been more closely attuned to commodities:  In the past 6 months, 5yr TIPS breakevens and 5yr5yr have been 74% and 70% correlated with copper prices vs. the 10yr yield's 46%, though correlations with oil have been low; breakevens peaked with copper in May and bottomed in June-July</li>
<li>While 10yr yields continued to grind lower in July, our text mining is picking up a new surge in reports of supply constraints, which have been strongly correlated with breakevens and reflect corporate commentary in the current earnings season</li>
<li>The inflation narrative from treasuries appears to be asynchronous with the Q2 earnings season narrative from cyclical corporates, who are uniformly reporting worsening raw materials inflation expected in Q3 and lingering supply constraints</li>
<li>Nonetheless, our text mining acknowledges that talk of tightening financial conditions last spiked in March and has not resurfaced since, and expectations of a massive US infrastructure package have faded</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>


This year's narrative from US treasuries suggests a short-lived inflation/overheating scare in Q1, which coincided with Winter Storm Uri and the Texas power crisis, along with an initial phase of tapering talk from regional Fed presidents which subsequently faded; since the March peak, 10yr yields are down -45bps or a whopping -26%, representing the view that inflationary pressures have been entirely transitory
The picture from 5yr TIPS breakevens and the 5yr5yr has been more closely attuned to commodities:  In the past 6 months, 5yr TIPS breakevens and 5yr5yr have been 74% and 70% correlated with copper prices vs. the 10yr yield's 46%, though correlations with oil have been low; breakevens peaked with copper in May and bottomed in June-July
While 10yr yields continued to grind lower in July, our text mining is picking up a new surge in reports of supply constraints, which have been strongly correlated with breakevens and reflect corporate commentary in the current earnings season
The inflation narrative from treasuries appears to be asynchronous with the Q2 earnings season narrative from cyclical corporates, who are uniformly reporting worsening raw materials inflation expected in Q3 and lingering supply constraints
Nonetheless, our text mining acknowledges that talk of tightening financial conditions last spiked in March and has not resurfaced since, and expectations of a massive US infrastructure package have faded
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 Snapshot:  Asynchronous Inflation Narratives

<ul>
<li>Despite the June rally in crude, our text-mined inflation indicators hit record momentum readings in May and decelerated notably since</li>
<li>Much like breakevens, our indicators have moved in greater sympathy/correlation with lumber than crude recently</li>
<li>Labor shortages remain an overhang and potential driver of wage inflation, but coverage of the topic has lost momentum in recent weeks</li>
<li>Text-mined inflation indicators (and breakevens) have been strongly correlated with our Cyclicals vs. Defensives Diffusion indicator; while relative cyclical sentiment has broken down, short-term data suggests the underperformance of cyclicals may be short-lived</li>
<li>Despite deceleration from extreme levels, sequential momentum in our inflation indicators remains positive; breakevens have already narrowed significantly to reflect "transitory" views, only to be challenged by the recent FOMC</li>
<li>While our text-mined indicators reflect the visible pullback in non-energy commodities in recent weeks, we acknowledge the high likelihood of sustained service inflation (in lodging and airfares, for example) in the coming months as well as first signs of acceleration in Owners' Equivalent Rent seen in the May CPI</li>
<li>Even as some supply chain disruptions have eased, imminent passing of an infrastructure bill and a -30bps narrowing in 5yr TIPS breakevens suggest inflation expectations are at risk of resurgence together with the cyclical/value factor following FOMC turmoil</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 tools text-mine 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>


Despite the June rally in crude, our text-mined inflation indicators hit record momentum readings in May and decelerated notably since
Much like breakevens, our indicators have moved in greater sympathy/correlation with lumber than crude recently
Labor shortages remain an overhang and potential driver of wage inflation, but coverage of the topic has lost momentum in recent weeks
Text-mined inflation indicators (and breakevens) have been strongly correlated with our Cyclicals vs. Defensives Diffusion indicator; while relative cyclical sentiment has broken down, short-term data suggests the underperformance of cyclicals may be short-lived
Despite deceleration from extreme levels, sequential momentum in our inflation indicators remains positive; breakevens have already narrowed significantly to reflect "transitory" views, only to be challenged by the recent FOMC
While our text-mined indicators reflect the visible pullback in non-energy commodities in recent weeks, we acknowledge the high likelihood of sustained service inflation (in lodging and airfares, for example) in the coming months as well as first signs of acceleration in Owners' Equivalent Rent seen in the May CPI
Even as some supply chain disruptions have eased, imminent passing of an infrastructure bill and a -30bps narrowing in 5yr TIPS breakevens suggest inflation expectations are at risk of resurgence together with the cyclical/value factor following FOMC turmoil
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 tools text-mine 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 Snapshot:  Text-Mined Inflation Indicators Peaked in May, But Odds of Resurgence Are High

<ul>
<li>While our US employment sentiment indicator continued to improve in April along with robust job openings, our text analytics now see a +2.5x STDEV increase in reports of labor shortages and companies struggling to hire new employees</li>
<li>Excluding reports of frontline worker shortages in March 2020, the last time we saw reports of labor shortages trending at this magnitude was May 2018</li>
<li>On an absolute basis, the number of media reports of labor shortages is back to the higher end of 2018-2019 ranges</li>
<li>In 2018-19, our data saw 3 incidences of &gt;2x STDEV increases in reports of labor shortages; in all cases, these preceded slower payroll growth in subsequent months</li>
<li>In the current episode, media reports focus primarily on labor shortages in the leisure &amp; hospitality sector whereas the previous episode was characterized by skilled labor shortages; nonetheless, Q1 earnings calls highlight widespread labor shortages across most sectors</li>
<li>Even as labor shortages affect nearly all industries, the single largest needle-mover for absolute payroll figures remains leisure and hospitality, which in March comprised 42% of the negative delta in total private payrolls relative to year-ago levels at -2.35M jobs or nearly -15% Y/Y; no other sector comes close in terms of COVID job losses or recovery potential in payroll terms</li>
<li>Given the heavy weighting of leisure and hospitality in private payroll growth at this time, the sector's significant hiring needs suggest that any slowdown in hiring would be followed by wage increases to incentivize unskilled labor to return to the workforce; labor shortages are likely to remain a key feature of the post-COVID recovery, but higher wage elasticity in leisure &amp; hospitality suggest these frictions may be resolved sooner in this key sector with a broadly inflationary outcome</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 tools text-mine 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>


While our US employment sentiment indicator continued to improve in April along with robust job openings, our text analytics now see a +2.5x STDEV increase in reports of labor shortages and companies struggling to hire new employees
Excluding reports of frontline worker shortages in March 2020, the last time we saw reports of labor shortages trending at this magnitude was May 2018
On an absolute basis, the number of media reports of labor shortages is back to the higher end of 2018-2019 ranges
In 2018-19, our data saw 3 incidences of &gt;2x STDEV increases in reports of labor shortages; in all cases, these preceded slower payroll growth in subsequent months
In the current episode, media reports focus primarily on labor shortages in the leisure &amp; hospitality sector whereas the previous episode was characterized by skilled labor shortages; nonetheless, Q1 earnings calls highlight widespread labor shortages across most sectors
Even as labor shortages affect nearly all industries, the single largest needle-mover for absolute payroll figures remains leisure and hospitality, which in March comprised 42% of the negative delta in total private payrolls relative to year-ago levels at -2.35M jobs or nearly -15% Y/Y; no other sector comes close in terms of COVID job losses or recovery potential in payroll terms
Given the heavy weighting of leisure and hospitality in private payroll growth at this time, the sector's significant hiring needs suggest that any slowdown in hiring would be followed by wage increases to incentivize unskilled labor to return to the workforce; labor shortages are likely to remain a key feature of the post-COVID recovery, but higher wage elasticity in leisure &amp; hospitality suggest these frictions may be resolved sooner in this key sector with a broadly inflationary outcome
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 tools text-mine 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:  Is a Tight Labor Market Already Slowing Payrolls Growth?

<ul>
<li>Our text-mined Inflationary-Deflationary Diffusion Index hit its highest reading since 9/2018 in late March at +3.4x STDEVs, but pulled back in April MTD on partial alleviation of extreme supply disruptions</li>
<li>The Diffusion Index has been 74%/65% correlated with 5yr5yr Fwd inflation rates in the T12/T24M, and measures the relative momentum of inflationary/reflationary expressions in online media relative to deflationary/disinflationary expressions</li>
<li>Tracking reports of supply constraints, disruptions and shortages, maximum pressure was clearly seen in February at &gt;2x STDEVs, leading the recent peak in the GSCI; while momentum is still positive, the situation has improved following the Texas freeze and Suez Canal blockage</li>
<li>Today's CPI report showed a second month of stability in Owners' Equivalent Rent (single largest CPI component at 24%) following relentless pressure averaging -11bps/month between February 2020-January 2021, reflecting improving sentiment among homeowners in the YTD; but the BLS report continues to see deceleration in primary rents, which is now notably diverging from private rent surveys</li>
<li>Our Rising Rents indicator, which measures the momentum of media reports of increasing US rents, broke out notably in March </li>
<li>Property management software provider RealPage reported a third consecutive month of sequential acceleration in national rents, with March rents up +0.7% M/M after +0.6% in February and +0.2% in January; Y/Y rent comps improved to -0.7% from February's -0.9% and 124 out of 150 metro areas seeing Y/Y increases in rent; other private surveys paint an even more optimistic picture of national recovery in rents and rent collection rates</li>
<li>While the Fed has repeatedly stated its objective of allowing inflation to "run hot", the recent pause in the GSCI, 5yr5yr and cyclical/value outperformance suggests inflationary pressures may be taking a breather from the breakneck pace seen in February-March</li>
<li>The underlying environment clearly remains reflationary, but evidence of a potential overshoot in market-based indicators (TIPS breakevens at 13-year highs, for example) may require further cooperation from the commodity complex to justify elevated expectations</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 tools text-mine 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>


Our text-mined Inflationary-Deflationary Diffusion Index hit its highest reading since 9/2018 in late March at +3.4x STDEVs, but pulled back in April MTD on partial alleviation of extreme supply disruptions
The Diffusion Index has been 74%/65% correlated with 5yr5yr Fwd inflation rates in the T12/T24M, and measures the relative momentum of inflationary/reflationary expressions in online media relative to deflationary/disinflationary expressions
Tracking reports of supply constraints, disruptions and shortages, maximum pressure was clearly seen in February at &gt;2x STDEVs, leading the recent peak in the GSCI; while momentum is still positive, the situation has improved following the Texas freeze and Suez Canal blockage
Today's CPI report showed a second month of stability in Owners' Equivalent Rent (single largest CPI component at 24%) following relentless pressure averaging -11bps/month between February 2020-January 2021, reflecting improving sentiment among homeowners in the YTD; but the BLS report continues to see deceleration in primary rents, which is now notably diverging from private rent surveys
Our Rising Rents indicator, which measures the momentum of media reports of increasing US rents, broke out notably in March 
Property management software provider RealPage reported a third consecutive month of sequential acceleration in national rents, with March rents up +0.7% M/M after +0.6% in February and +0.2% in January; Y/Y rent comps improved to -0.7% from February's -0.9% and 124 out of 150 metro areas seeing Y/Y increases in rent; other private surveys paint an even more optimistic picture of national recovery in rents and rent collection rates
While the Fed has repeatedly stated its objective of allowing inflation to "run hot", the recent pause in the GSCI, 5yr5yr and cyclical/value outperformance suggests inflationary pressures may be taking a breather from the breakneck pace seen in February-March
The underlying environment clearly remains reflationary, but evidence of a potential overshoot in market-based indicators (TIPS breakevens at 13-year highs, for example) may require further cooperation from the commodity complex to justify elevated expectations
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 tools text-mine 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 Snapshot:  Text-Mined Inflation Indicators Take a Breather After February-March Breakout

Cross-Asset Strategist & Quantitative Analyst, Pennock Idea Hub

Cam Hui

Cross-Asset Strategist & Quantitative Analyst

Pennock Idea Hub

We are creators of independent equity research. The Pennock Idea Hub team are veterans of the investment industry. Much of our team has spent their careers at Merrill Lynch, Deutsche Bank, RBC Capital Markets and Wood Gundy. We have taken every aspect of research back to the studs and returned to first principles. The Pennock Idea Hub marries the interests of the sell and buy side. 

We offer the best research for institutional investors by:

-Only publishing research from veteran analysts
-Eliminate the inherent conflicts of the traditional sell and buy side relationship
-Ensure our team is always accessible; collaboration with clients nurtures our collective success

Cross-Asset & Quantitative Research

Cross Asset Strategy

<p>The fiscal and monetary authorities of the developed world are engaged in a great macroeconomic experiment. Governments are spending enormous sums to combat the recessionary effects of the pandemic and central banks are allowing monetary policy to stay loose in order to accommodate the fiscal stimulus. Eventually, inflation and inflation expectations are bound to rise.</p><p>Here is what that means for investor portfolios. We recently highlighted a relationship from a Credit Suisse chart indicating that 50/50 balanced fund drawdowns rise during periods when stock-bond correlations are high (see <em><a href="https://www.smartkarma.com/insights/are-you-prepared-for-the-post-great-rotation-era" target="_blank" rel="noopener">Are You Positioned for the Post-Great Rotation Era?</a></em>). How can balanced fund investors build resilient portfolios to control risk and enhance returns during such periods?</p><p>We conducted an asset return study and analyzed the returns of different asset classes when inflation expectations were rising and falling. While the data is somewhat limited and the conclusions only represent an inexact roadmap, we conclude that a 60% stock, 30% inflation-index bond and 10% commodity allocation is a reasonable starting point in thinking about a replacement for the conventional 60/40 portfolio during a period of rising inflation expectations.</p>

The fiscal and monetary authorities of the developed world are engaged in a great macroeconomic experiment. Governments are spending enormous sums to combat the recessionary effects of the pandemic and central banks are allowing monetary policy to stay loose in order to accommodate the fiscal stimulus. Eventually, inflation and inflation expectations are bound to rise.Here is what that means for investor portfolios. We recently highlighted a relationship from a Credit Suisse chart indicating that 50/50 balanced fund drawdowns rise during periods when stock-bond correlations are high (see Are You Positioned for the Post-Great Rotation Era?). How can balanced fund investors build resilient portfolios to control risk and enhance returns during such periods?We conducted an asset return study and analyzed the returns of different asset classes when inflation expectations were rising and falling. While the data is somewhat limited and the conclusions only represent an inexact roadmap, we conclude that a 60% stock, 30% inflation-index bond and 10% commodity allocation is a reasonable starting point in thinking about a replacement for the conventional 60/40 portfolio during a period of rising inflation expectations.

United States

iShares TIPS ETF is an exchange-traded fund incorporated in the USA. The ETF will track the Bloomberg Barclays Capital US Treasury Inflation Notes Index. The Index measures the performance  of inflation protected public obligation of the US Treasury, also known as "TIPS". 

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IShares TIPS ETF (TIP US)

TMI Snapshot: Asynchronous Inflation Narratives

While the bond market continues to dismiss inflationary pressures, our text mining picked up a recent spike in mentions of supply constraints as...

Elan Gore

TMI Snapshot: Text-Mined Inflation Indicators Peaked in May, But Odds of Resurgence Are High

Our text-mined inflation indicators pulled back on early signs of supply chain normalization along with BEs, but we see scope for resurgence in...

Elan Gore

TMI Snapshots: Is a Tight Labor Market Already Slowing Payrolls Growth?

While our US employment sentiment indicators continued to improve in April, an outlier +2.5x increase in reports of labor shortages may temporarily...

Elan Gore

TMI Snapshot: Text-Mined Inflation Indicators Take a Breather After February-March Breakout

Our text-mined inflation indicators broke out to the tune of >3x STDEVs in March, but have pulled back in the MTD as some of the more dramatic...

Elan Gore

60/40 Resilience in An Inflation Age

As inflation expectations rise, the fixed-income portion of the 60/40 balanced fund model is under threat. How should balanced fund investors react...

Cam Hui

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