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>World economy skidding lower, led down by weak Chinese economy</li>
<li>Chinese monetary policy mysteriously ‘flat-lining’</li>
<li>Major policy ‘sea-change’ away from ‘growth’ towards ‘Yuan stability’</li>
<li>Unlikely, Chinese will embark on major policy stimulus</li>
<li>Bullish for Chinese government bonds… and growth stocks</li>
</ul>


World economy skidding lower, led down by weak Chinese economy
Chinese monetary policy mysteriously ‘flat-lining’
Major policy ‘sea-change’ away from ‘growth’ towards ‘Yuan stability’
Unlikely, Chinese will embark on major policy stimulus
Bullish for Chinese government bonds… and growth stocks


The World Economy Is Sinking … Will China Bail It Out Again?

<ul>
<li>Latest data evidence a <strong>slowing World economy</strong>, led down by <strong>Asia</strong>
</li>
<li>Falling <strong><em>Global Liquidity</em></strong> is a likely reason</li>
<li>Bonds have recently proved prescient. <strong>Yields fall with slowing economies</strong>
</li>
<li>Digging deeper inside the bond market points to a coming<strong> ‘W’-shaped rebound</strong>
</li>
<li>Conclusion: by mid-2022, economies re-establish their pre-COVID trends</li>
</ul>


Latest data evidence a slowing World economy, led down by Asia

Falling Global Liquidity is a likely reason
Bonds have recently proved prescient. Yields fall with slowing economies

Digging deeper inside the bond market points to a coming ‘W’-shaped rebound

Conclusion: by mid-2022, economies re-establish their pre-COVID trends


What Are The Bond Markets Really Saying About The Slowing World Economy?

<ul>
<li>World markets are facing a major policy error ahead</li>
<li>Taper-talk is a worry, but QE is not the real problem</li>
<li>Policy-makers want to end QE, but keep interest rates low</li>
<li>Too much debt is the bigger problem, and low interest rates encourage debt</li>
<li>World is falling towards a ‘Japan’-like debt trap</li>
</ul>


World markets are facing a major policy error ahead
Taper-talk is a worry, but QE is not the real problem
Policy-makers want to end QE, but keep interest rates low
Too much debt is the bigger problem, and low interest rates encourage debt
World is falling towards a ‘Japan’-like debt trap


<ul>
<li>Asian economic data show a sharp and accelerating decline</li>
<li>China is the main culprit</li>
<li>Slower Chinese economy has been correlated with lower bond yields</li>
<li>Could this warn of an upcoming policy error if QE tapering continues?</li>
</ul>


Asian economic data show a sharp and accelerating decline
China is the main culprit
Slower Chinese economy has been correlated with lower bond yields
Could this warn of an upcoming policy error if QE tapering continues?


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

<p>In last month's <a href="https://www.smartkarma.com/insights/tmi-snapshots-is-a-tight-labor-market-already-slowing-payrolls-growth" target="_blank" data-smartkarma-citation="insights:51144" rel="noopener">TMI Snapshots:  Is a Tight Labor Market Already Slowing Payrolls Growth?</a> published ahead of the April nonfarm payrolls release, we noted a +2.5x STDEV M/M jump in media reports of labor shortages in various iterations (i.e. "tight labor market", "struggling to hire", "hard to find workers" etc.) and a 2-year high in the absolute number of weekly mentions of shortages (roughly 110 unique articles per week at the end of April in US national publications.)  Back in 2018-19, such spikes in reports of labor shortages tended to precede a slowing in payrolls growth; thus we suspected April nonfarm payrolls would come in weaker than expected.</p><p>As we revisit the data ahead of the May payrolls release, we acknowledge the situation is more nuanced for a variety of reasons and alternative employment data points are mixed.  Our labor shortages indicator continued to surge in the first half of May, hitting a record high of +5x STDEVs on May 13 and correcting since to +3x by the end of the month; similarly, the absolute number of trailing 7-day mentions of labor shortages in national US news surged to a new record of &gt;300 unique articles as of May 13 and ended the month at ~150, still above April levels but well off the highs:</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/210/753/original/LABOR_SHORTAGE_REPORTS_MAY.PNG?1622640352" class="editor-image img-responsive" data-smartkarma-image-id="210753"></figure><div class="content-caption">Labor Shortage Reports &amp; General Employment Sentiment vs. Total Private Payrolls <section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/210/756/original/ABSOLUTE_NUMBER_MENTIONS.PNG?1622641122" class="editor-image img-responsive" data-smartkarma-image-id="210756"></figure><div class="content-caption">Absolute Number of Weekly Mentions of Labor Shortages in National US Publications</div></section>
</div>
<div class="content-highlight"><section class="figure">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. </section></div></section>

In last month's TMI Snapshots:  Is a Tight Labor Market Already Slowing Payrolls Growth? published ahead of the April nonfarm payrolls release, we noted a +2.5x STDEV M/M jump in media reports of labor shortages in various iterations (i.e. "tight labor market", "struggling to hire", "hard to find workers" etc.) and a 2-year high in the absolute number of weekly mentions of shortages (roughly 110 unique articles per week at the end of April in US national publications.)  Back in 2018-19, such spikes in reports of labor shortages tended to precede a slowing in payrolls growth; thus we suspected April nonfarm payrolls would come in weaker than expected.As we revisit the data ahead of the May payrolls release, we acknowledge the situation is more nuanced for a variety of reasons and alternative employment data points are mixed.  Our labor shortages indicator continued to surge in the first half of May, hitting a record high of +5x STDEVs on May 13 and correcting since to +3x by the end of the month; similarly, the absolute number of trailing 7-day mentions of labor shortages in national US news surged to a new record of &gt;300 unique articles as of May 13 and ended the month at ~150, still above April levels but well off the highs:Labor Shortage Reports &amp; General Employment Sentiment vs. Total Private Payrolls Absolute Number of Weekly Mentions of Labor Shortages in National US Publications

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:  Did Labor Shortages Continue to Hamper Payrolls Growth in May?

United States

iShares 20+ Year Treasury Bond ETF is an exchange-traded fund incorporated in the USA.  The ETF seeks to track the investment results of an index composed of U.S. Treasury bonds with remaining maturities greater than twenty years. 

iShares 20+ Year Treasury Bond ETF (TLT US)

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iShares 20+ Year Treasury Bond ETF (TLT US)

The World Economy Is Sinking … Will China Bail It Out Again?

World economy is sinking, led down by China. Unlike 2008, do not expect a major Chinese policy stimulus to bail out the Chinese and World...

Michael J. Howell

What Are The Bond Markets Really Saying About The Slowing World Economy?

Looking closely at the US term structure of interest rates strongly suggests an upcoming 'W'-shaped pattern in World economic activity. This may...

Michael J. Howell

‘Japanification’ Is Coming

Central Banks are trying to shift away from QE policies, while maintaining low interest rates. This is a dangerous policy that threatens a...

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Is China Cracking?

Latest daily economic momentum data from on-going official releases highlight a sudden dip in the Asian and specifically the Chinese economy from...

Michael J. Howell

TMI Snapshot: Did Labor Shortages Continue to Hamper Payrolls Growth in May?

We revisit our labor shortage and wage inflation indicators ahead of May non-farm payrolls; our data sees lingering labor tightness, while other...

Elan Gore

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