Deputy Chief Economist

Sharmila Whelan

Independent and original Asian investment research

Aletheia Capital

Aletheia Capital (HK) Ltd. (previously known as Asianomics) combines the extensive knowledge of its experienced team with technology and regulatory changes to disrupt Global Markets business in Asia. The firm is completely independent with no conflicts of interest either on Investment Banking advisory or Capital Markets execution.

Macroeconomics

<p>The pandemic maybe behind but the Japanese economy is not out of the woods. The post-first-Covid-19 wave rebound has been weaker than anticipated. Japanese policymakers are cautious. In this week’s Cabinet Office assessment of the economy, which remained unchanged for the fourth month, the government concluded conditions remain severe. Meanwhile the September Tankan showed companies continuing to cut sales, profit and investment forecasts. A tough winter lies ahead. A third emergency spending package cannot be ruled out. </p>

The pandemic maybe behind but the Japanese economy is not out of the woods. The post-first-Covid-19 wave rebound has been weaker than anticipated. Japanese policymakers are cautious. In this week’s Cabinet Office assessment of the economy, which remained unchanged for the fourth month, the government concluded conditions remain severe. Meanwhile the September Tankan showed companies continuing to cut sales, profit and investment forecasts. A tough winter lies ahead. A third emergency spending package cannot be ruled out. 

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.

Cross Asset Strategy

<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

<ul>
<li>Friday saw a notable spike in JPY vols on news of President Trump's positive COVID-19 test</li>
<li>Aside from traditional risk-off JPY reflex, this move followed weeks of "election hedge" discussions with multiple strategists pointing to cheap Yen-complex vols as screening most attractively in the event of prolonged US election turmoil</li>
<li>JPY has been gently trending higher for months, as CFTC data shows asset manager net speculative positioning at multi-year highs; while not egregious, JPY spec positioning now screens roughly +1x STDEV above normal</li>
<li>Last month our text mining saw fading bullishness on JPY, but our diffusion index has moved higher in the past month as we see a sharp decline in discussions of negative JPY drivers in the global financial media</li>
<li>On a short-term basis, there are many convenient excuses to be long JPY into the US elections, as the currency is persistently undervalued in real effective terms, historically outperforms during risk-off phases, JPY vols remain acceptably low (debatable after Friday), and optimism on Japan has lingered through the Suga transition thus far</li>
<li>Mid- and longer-term, Suga's pro-consumer reforms focused on price cuts in telecom &amp; pharma may require elevated fiscal stimulus to counter potentially accelerated deflationary optics, pressuring JPY; and the traditional USD/JPY risk function appears to be eroding as evidenced in JPY/equities correlations</li>
<li>We suspect continued JPY upside risks to year-end, but renewed equity-friendly pressure on JPY may resume in 2021</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>


Friday saw a notable spike in JPY vols on news of President Trump's positive COVID-19 test
Aside from traditional risk-off JPY reflex, this move followed weeks of "election hedge" discussions with multiple strategists pointing to cheap Yen-complex vols as screening most attractively in the event of prolonged US election turmoil
JPY has been gently trending higher for months, as CFTC data shows asset manager net speculative positioning at multi-year highs; while not egregious, JPY spec positioning now screens roughly +1x STDEV above normal
Last month our text mining saw fading bullishness on JPY, but our diffusion index has moved higher in the past month as we see a sharp decline in discussions of negative JPY drivers in the global financial media
On a short-term basis, there are many convenient excuses to be long JPY into the US elections, as the currency is persistently undervalued in real effective terms, historically outperforms during risk-off phases, JPY vols remain acceptably low (debatable after Friday), and optimism on Japan has lingered through the Suga transition thus far
Mid- and longer-term, Suga's pro-consumer reforms focused on price cuts in telecom &amp; pharma may require elevated fiscal stimulus to counter potentially accelerated deflationary optics, pressuring JPY; and the traditional USD/JPY risk function appears to be eroding as evidenced in JPY/equities correlations
We suspect continued JPY upside risks to year-end, but renewed equity-friendly pressure on JPY may resume in 2021
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: JPY Vols Jump On Trump News, Evidence A Convenient US Election Hedge Is Crowding Fast

<ul>
<li>We text-mined the global financial media for mentions of the top 30 MSCI Japan members to find that Japanese equities are back on the agenda in recent weeks, recently trending in strong correlation with MSCI Japan performance relative to the MSCI World</li>
<li>By comparison, news momentum for the top 30 SPX members has been fading since 8/28</li>
<li>Surprisingly, Japanese equity news momentum has been consistently a positive driver of MSCI Japan performance; back-testing suggests this is not the case with SPX, for example</li>
<li>Looking at a broader sample of MSCI Japan members at the sector level (top 15 for each sector), we find that most of the recent "trending" (i.e. news volume increase) has been in industrials and materials; this should be no surprise in light of the recent Japan value rotation and Berkshire Hathaway news</li>
<li>From a sentiment perspective, the recent risk-off phase is showing up in our data - particularly for Japanese industrials, which peaked on sentiment at +1.8x STDEVs just 2 weeks ago and have now turned neutral; though the equities are unfazed thus far</li>
<li>We note that sentiment on the Top 30 MSCI Japan members has been much more stable than the comparable metric on SPX, and has remained positive throughout the recent global correction</li>
<li>Although the resilience of Japanese equities can be attributed to risk-off, the significant drop in correlation in recent weeks is supportive of Japanese equities as a diversifier for global portfolios; we emphasize that the spike in Japanese equity news momentum is absolute - and thus a constructive signal of increasing interest levels</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>


We text-mined the global financial media for mentions of the top 30 MSCI Japan members to find that Japanese equities are back on the agenda in recent weeks, recently trending in strong correlation with MSCI Japan performance relative to the MSCI World
By comparison, news momentum for the top 30 SPX members has been fading since 8/28
Surprisingly, Japanese equity news momentum has been consistently a positive driver of MSCI Japan performance; back-testing suggests this is not the case with SPX, for example
Looking at a broader sample of MSCI Japan members at the sector level (top 15 for each sector), we find that most of the recent "trending" (i.e. news volume increase) has been in industrials and materials; this should be no surprise in light of the recent Japan value rotation and Berkshire Hathaway news
From a sentiment perspective, the recent risk-off phase is showing up in our data - particularly for Japanese industrials, which peaked on sentiment at +1.8x STDEVs just 2 weeks ago and have now turned neutral; though the equities are unfazed thus far
We note that sentiment on the Top 30 MSCI Japan members has been much more stable than the comparable metric on SPX, and has remained positive throughout the recent global correction
Although the resilience of Japanese equities can be attributed to risk-off, the significant drop in correlation in recent weeks is supportive of Japanese equities as a diversifier for global portfolios; we emphasize that the spike in Japanese equity news momentum is absolute - and thus a constructive signal of increasing interest levels
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: Text-Mining Says Japanese Equities Are Trending...Does This Drive Outperformance?

<p>Mr Yoshihide Suga won by a landslide the ruling Liberal Democratic Party’s 14 September, leadership election to succeed Mr Shinzo Abe as prime minister after the incumbent resigned on 28 August for health reasons. As far as policy direction goes the replacement of Mr Abe by Mr Suga is a non-event which explains why Japanese markets have barely blinked. So far Japan is faring better than its peers in the current health crisis. The economy is recovering gradually.</p>

Mr Yoshihide Suga won by a landslide the ruling Liberal Democratic Party’s 14 September, leadership election to succeed Mr Shinzo Abe as prime minister after the incumbent resigned on 28 August for health reasons. As far as policy direction goes the replacement of Mr Abe by Mr Suga is a non-event which explains why Japanese markets have barely blinked. So far Japan is faring better than its peers in the current health crisis. The economy is recovering gradually.

Japan

iShares MSCI Japan ETF is an exchange-traded fund incorporated in the USA. The ETF's objective seeks to provide investment results that correspond to the performance of the Japanese market, as measured by the MSCI Japan Index. The ETF invests in a representative sample of index stocks in a variety of sectors using a market cap weighted "portfolio sampling" technique.

iShares MSCI Japan ETF (EWJ US)

Japan - Recovering But...

The pandemic is behind, but Japan is not out of the woods. The economic recovery has been weaker than anticipated given that there was no lockdown...

Sharmila Whelan

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 Snapshots: JPY Vols Jump On Trump News, Evidence A Convenient US Election Hedge Is Crowding Fast

Friday saw a notable spike in JPY vols following widespread

Elan Gore

Japan's Mr Suga: Same, Same No Different

Mr Yoshihide Suga won by a landslide the ruling Liberal Democratic Party’s 14 September, leadership election to succeed Mr Shinzo Abe as prime...

Sharmila Whelan

Japan - Recovering But...

The pandemic is behind, but Japan is not out of the woods. The economic recovery has been weaker than anticipated given that there was no lockdown...

Sharmila Whelan

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 Snapshots: JPY Vols Jump On Trump News, Evidence A Convenient US Election Hedge Is Crowding Fast

Friday saw a notable spike in JPY vols following widespread

Elan Gore

TMI Indicators: Text-Mining Says Japanese Equities Are Trending...Does This Drive Outperformance?

We text-mined the global financial media for mentions of the top 30 MSCI Japan weights

Elan Gore

Japan's Mr Suga: Same, Same No Different

Mr Yoshihide Suga won by a landslide the ruling Liberal Democratic Party’s 14 September, leadership election to succeed Mr Shinzo Abe as prime...

Sharmila Whelan