Is it wrong to invest on space hardware? Will satellites put the ONS out of a job?

Two things last week that made me go “hmmm”.  Firstly: having written a blog on the impact of El Nino on global inflation (here), Anthony was contacted by a company who then came in to see us to discuss their business.  Using data from NASA and EU satellites, they produce earnings estimates for retailers, and forecast economic data.  By counting cars in Big Box parking lots from space, they generate estimates for the number of shoppers (footfall), and numbers outside of typical ranges usually point to a forthcoming revenue surprise.  They can estimate output from car manufacturers, and judge the speed of infrastructure and building construction versus plans.  They also monitor magnetic and electric fields around, for example, power generation plants, and take CO2 readings by region (we were given a teaser that recent Chinese CO2 data are pretty interesting – but we don’t subscribe, so…).   This is all fascinating – but raises lots of ethical and legal questions, as well as making me think about the future of traditional statistics (and fund management).

So ethically, is it fine to examine somebody’s shopping habits from space?  Legally, do we have privacy rights, and if somebody is counting your trucks from orbit to get an edge in buying or selling shares in your company, is this insider trading?  And how do traditional statistical agencies respond to the development of “new” statistics which may be able to give an accurate GDP number in real time rather than waiting months to release a number that is not believed, and then revised many times.  We’ve written about the Billion Prices Project, an internet-pricing derived real time CPI number several times, and I suppose the Li Keqiang index is an example of even government officials using alternative data to “nowcast” GDP numbers.  It feels though that technology is going to have a significant impact on our ability to understand (or at least measure) the economy, even though its impact on the economy itself remains confusing (“You see computers everywhere except in the productivity statistics” – Robert Solow).

Secondly, and still on the theme of technology and its impact on investment management, I got an email from another company offering me the following service.  How would I like a live link into the ECB Draghi press conference on Thursday?  This link would likely be 8 seconds quicker than the Bloomberg and CNBC feeds, and 20 seconds faster than if I watched via the ECB’s own website.  It’s not quite Flash Boys, but it could be that the investment industry is about to get a lot more techy.  Subscription to Wired anyone?

And for those who don’t know where the blog title (sort of) comes from, you’re in for a treat.

The value of investments will fluctuate, which will cause prices to fall as well as rise and you may not get back the original amount you invested. Past performance is not a guide to future performance.

Jim Leaviss

Job Title: CIO Public Fixed Income

Specialist Subjects: Macro economics and fixed interest asset allocation

Likes: Cycling, factory records, dim sum

Heroes: Brian Clough, Morrissey, Neil Armstrong

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