2015

FAME
VII
David J. Moore,
Ph.D.
Technology in
investing
Mellon Capital
Resonate Capital
Thomson Reuters

2015 FAME VII

Conference notes

Charles Schwab

Global Markets
Salient partners
BlackRock
Cerebellum capital

David J. Moore, Ph.D.

Fixed income
Perspectives with
Kenneth deRogt
Alternative
investments

www.efficientminds.com

2015.11.14

2015
FAME
VII

Alpha

David J. Moore,
Ph.D.
Technology in
investing
Mellon Capital
Resonate Capital
Thomson Reuters
Charles Schwab

Global Markets
Salient partners
BlackRock

The winners will have more history of data rather than simply

more data.
Before big data was used and processed by hedge funds. In

5 to 10 years individuals will use and process big data.

Cerebellum capital

Fixed income

Divergence in monetary policy is a significant macro risk.

Perspectives with
Kenneth deRogt

We are in a policy-driven bull market. Organic growth is

Alternative
investments

driven by higher wage growth and labor force participation.

China is a big market but there is a lot of bad data behind it.

2015
FAME
VII
David J. Moore,
Ph.D.
Technology in
investing
Mellon Capital
Resonate Capital
Thomson Reuters
Charles Schwab

Outline
1 Technology in investing

Mellon Capital
Resonate Capital
Thomson Reuters
Charles Schwab

Global Markets
Salient partners
BlackRock
Cerebellum capital

Fixed income
Perspectives with
Kenneth deRogt

2 Global Markets

Salient partners
BlackRock
Cerebellum capital

Alternative
investments

3 Fixed income
4 Perspectives with Kenneth deRogt
5 Alternative investments

2015
FAME
VII
David J. Moore,
Ph.D.
Technology in
investing
Mellon Capital
Resonate Capital
Thomson Reuters
Charles Schwab

Global Markets
Salient partners
BlackRock
Cerebellum capital

Fixed income
Perspectives with
Kenneth deRogt
Alternative
investments

The panelists
John Aiken (JA)

Managing Partner
Resonate Capital
Tobin McDaniel (TM)

Vice President
Charles Schwab
Karsten Jeske (KJ)

Vice President
Mellon Capital
Adam Barun (AB)

Director
Thomson Reuters
Kyle Washington (KW)

CFO
Resonate Capital

2015
FAME
VII
David J. Moore,
Ph.D.
Technology in
investing
Mellon Capital
Resonate Capital
Thomson Reuters
Charles Schwab

Outline
1 Technology in investing

Mellon Capital
Resonate Capital
Thomson Reuters
Charles Schwab

Global Markets
Salient partners
BlackRock
Cerebellum capital

Fixed income
Perspectives with
Kenneth deRogt

2 Global Markets

Salient partners
BlackRock
Cerebellum capital

Alternative
investments

3 Fixed income
4 Perspectives with Kenneth deRogt
5 Alternative investments

2015
FAME
VII

Karsten Jeske

David J. Moore,
Ph.D.
Technology in
investing
Mellon Capital

Doesnt pick stocks. Rather, picks country equity vs. bond.

Resonate Capital
Thomson Reuters
Charles Schwab

Global Markets

A top-down approach called Global Asset Allocation.

Major clients are institutional investors.

Salient partners
BlackRock
Cerebellum capital

Fixed income
Perspectives with
Kenneth deRogt
Alternative
investments

Follows a systematic process-driven approach based on

fundamental signals.
Macro data Program Global Asset Allocation.
Some customization is embedded in processes. For

example, program can be told no Japanese stocks or

maximize euro denominated returns.

2015
FAME
VII
David J. Moore,
Ph.D.
Technology in
investing
Mellon Capital
Resonate Capital
Thomson Reuters
Charles Schwab

Outline
1 Technology in investing

Mellon Capital
Resonate Capital
Thomson Reuters
Charles Schwab

Global Markets
Salient partners
BlackRock
Cerebellum capital

Fixed income
Perspectives with
Kenneth deRogt

2 Global Markets

Salient partners
BlackRock
Cerebellum capital

Alternative
investments

3 Fixed income
4 Perspectives with Kenneth deRogt
5 Alternative investments

2015
FAME
VII

John Aiken
Original company, Majestic Research, sold research to

David J. Moore,
Ph.D.
Technology in
investing
Mellon Capital
Resonate Capital
Thomson Reuters
Charles Schwab

Global Markets
Salient partners
BlackRock

Cerebellum capital

Fixed income

Perspectives with
Kenneth deRogt
Alternative
investments

hedge funds.
DJM: If the research is so good, why not trade on it instead of
selling it?
Resonate clients are university endowments.
Follows a long/short strategy to obtain growth without
volatility (thats the goal at least).
Can get information from satellite images of cars in parking
lot at retailers (perhaps production facilities also).
Claims to see things a year in advance but does not trade
until they think the average market participant will see it.
DJM: The market can remain irrational longer than you can
remain solvent. -Keynes
E.g., they noticed Abercrombie was discounting more heavily
than last year. Simultaneously, retail stocks tend to rise after
an oil price drop.
The winner will have the most history of data.
Data collected by themselves via website scraping (e.g., price
escalation of airline tickets) and purchase of exhaust data.

2015
FAME
VII
David J. Moore,
Ph.D.
Technology in
investing
Mellon Capital
Resonate Capital
Thomson Reuters
Charles Schwab

Outline
1 Technology in investing

Mellon Capital
Resonate Capital
Thomson Reuters
Charles Schwab

Global Markets
Salient partners
BlackRock
Cerebellum capital

Fixed income
Perspectives with
Kenneth deRogt

2 Global Markets

Salient partners
BlackRock
Cerebellum capital

Alternative
investments

3 Fixed income
4 Perspectives with Kenneth deRogt
5 Alternative investments

2015
FAME
VII

Adam Barun

David J. Moore,
Ph.D.
Technology in
investing
Mellon Capital
Resonate Capital
Thomson Reuters

Data from social media Hadoop & Spark predict

defaults.

Charles Schwab

Global Markets
Salient partners
BlackRock
Cerebellum capital

Fixed income
Perspectives with
Kenneth deRogt
Alternative
investments

Next 5-10 years: data exhaust will be big (e.g., Uber knows

you want to go to Taco Bell).

Text mining + Altmann Z score + Option data Pr [default].
DJM: could this have greater efficacy: Text mining + Altmann
Z score Option data Pr [default].
Before big data was used and processed by hedge funds. In

5 to 10 years individuals will use and process big data.

2015
FAME
VII
David J. Moore,
Ph.D.
Technology in
investing
Mellon Capital
Resonate Capital
Thomson Reuters
Charles Schwab

Outline
1 Technology in investing

Mellon Capital
Resonate Capital
Thomson Reuters
Charles Schwab

Global Markets
Salient partners
BlackRock
Cerebellum capital

Fixed income
Perspectives with
Kenneth deRogt

2 Global Markets

Salient partners
BlackRock
Cerebellum capital

Alternative
investments

3 Fixed income
4 Perspectives with Kenneth deRogt
5 Alternative investments

2015
FAME
VII

Tobin McDaniel

David J. Moore,
Ph.D.
Technology in
investing
Mellon Capital
Resonate Capital
Thomson Reuters
Charles Schwab

Global Markets
Salient partners
BlackRock
Cerebellum capital

Fixed income
Perspectives with
Kenneth deRogt
Alternative
investments

Some choose robo-advising because they dont want to talk

to anyone.

2015
FAME
VII

The panelists

David J. Moore,
Ph.D.
Technology in
investing
Mellon Capital
Resonate Capital
Thomson Reuters
Charles Schwab

Global Markets
Salient partners
BlackRock
Cerebellum capital

Fixed income
Perspectives with
Kenneth deRogt
Alternative
investments

Ben Hunt

Chief Risk Officer (CRO)

Salient Partners
Nelli Oster

Director
BlackRock
Conrad Glenn

COO & CFO

Cerebellum capital

2015
FAME
VII
David J. Moore,
Ph.D.
Technology in
investing
Mellon Capital
Resonate Capital
Thomson Reuters
Charles Schwab

Outline
1 Technology in investing

Mellon Capital
Resonate Capital
Thomson Reuters
Charles Schwab

Global Markets
Salient partners
BlackRock
Cerebellum capital

Fixed income
Perspectives with
Kenneth deRogt

2 Global Markets

Salient partners
BlackRock
Cerebellum capital

Alternative
investments

3 Fixed income
4 Perspectives with Kenneth deRogt
5 Alternative investments

2015
FAME
VII

Ben Hunt 1/2

David J. Moore,
Ph.D.
Technology in
investing
Mellon Capital
Resonate Capital
Thomson Reuters
Charles Schwab

Global Markets
Salient partners
BlackRock
Cerebellum capital

Fixed income
Perspectives with
Kenneth deRogt
Alternative
investments

Not trying to predict when to overweight Europe (or any

country). No cyrstal ball.

Salient follows a reactive strategy known as risk parity.
The goal is to allocate on equal amounts of risk to stocks,

bonds, commodities, and currencies.

I.e., risk-based allocation as opposed to asset-class based

allocation.
Divergence in monetary policy is a significant macro risk.
A deflationary storm around the world is about to weigh on

U.S. shares.
The Fed will raise rates while the rest of the world

dobules-down on stimulus.

2015
FAME
VII

Ben Hunt 2/2

David J. Moore,
Ph.D.

Cant apply traditional statistics to politically-derived (pegged)

Technology in
investing
Mellon Capital
Resonate Capital
Thomson Reuters
Charles Schwab

Global Markets
Salient partners
BlackRock
Cerebellum capital

Fixed income
Perspectives with
Kenneth deRogt
Alternative
investments

rates.
China has the most to lose when U.S. rates rise because

their currency is tied to the USD.

We have more debt today than the 1930s leads to wealth
inequality political polarization (way left or way right
policies).
Models can not account for regime changes.

DJM: Or can they via Chaos theory?

Long oil in 2016.
Whack-a-mo (reactive approach) should continue to work

going forward.
We are in a policy-driven bull market.

2015
FAME
VII
David J. Moore,
Ph.D.
Technology in
investing
Mellon Capital
Resonate Capital
Thomson Reuters
Charles Schwab

Outline
1 Technology in investing

Mellon Capital
Resonate Capital
Thomson Reuters
Charles Schwab

Global Markets
Salient partners
BlackRock
Cerebellum capital

Fixed income
Perspectives with
Kenneth deRogt

2 Global Markets

Salient partners
BlackRock
Cerebellum capital

Alternative
investments

3 Fixed income
4 Perspectives with Kenneth deRogt
5 Alternative investments

2015
FAME
VII

Nelli Oster

David J. Moore,
Ph.D.
Technology in
investing
Mellon Capital
Resonate Capital
Thomson Reuters
Charles Schwab

Global Markets
Salient partners
BlackRock
Cerebellum capital

Fixed income
Perspectives with
Kenneth deRogt
Alternative
investments

Also follows a systematic top-down approach.

Investor sentiment is an input.
Divergence: we will move from zero to >0 rates. This differs

from the ECB today. ECB is lower rates. Japan also?

Divergence in rates, currencies, asset performance.
Wage growth and labor force participation is low. Organic

growth is driven by higher wage growth and labor force

participation.
S&P trading at 17X next years earnings expect sideways

next year.
England wants to exit the EU. They want less integration.
There is currently a lot of political risk in the [EU] system.

2015
FAME
VII
David J. Moore,
Ph.D.
Technology in
investing
Mellon Capital
Resonate Capital
Thomson Reuters
Charles Schwab

Outline
1 Technology in investing

Mellon Capital
Resonate Capital
Thomson Reuters
Charles Schwab

Global Markets
Salient partners
BlackRock
Cerebellum capital

Fixed income
Perspectives with
Kenneth deRogt

2 Global Markets

Salient partners
BlackRock
Cerebellum capital

Alternative
investments

3 Fixed income
4 Perspectives with Kenneth deRogt
5 Alternative investments

2015
FAME
VII
David J. Moore,
Ph.D.
Technology in
investing
Mellon Capital
Resonate Capital
Thomson Reuters
Charles Schwab

Global Markets
Salient partners
BlackRock
Cerebellum capital

Conrad Glenn
Follow a long-short equity strategy.
Attempt to neutralize macro risk by breaking risk into three

categories: (1) beta, (2) sector,and (3) Fama-French factors.

After macro risk is neutralized all that remains is idiosyncratic

risk.
Trade on VIX: many people are expecting an increase in

volatility.

Fixed income

China is a big market but there is a lot of bad data behind it.

Perspectives with
Kenneth deRogt

Dont go long gold, it is a non-income non-interest bearing

Alternative
investments

asset.
Generally skeptical of ability to time asset classes. Less

skeptical of timing individual assets.

P/E of 17 has existed in many different rate environments.
The decay in volatility following a spike is gradual and a

function of the type of shock.

2015
FAME
VII

Omega

David J. Moore,
Ph.D.
Technology in
investing
Mellon Capital
Resonate Capital
Thomson Reuters
Charles Schwab

Global Markets
Salient partners
BlackRock

The winners will have more history of data rather than simply

more data.
Before big data was used and processed by hedge funds. In

5 to 10 years individuals will use and process big data.

Cerebellum capital

Fixed income

Divergence in monetary policy is a significant macro risk.

Perspectives with
Kenneth deRogt

We are in a policy-driven bull market. Organic growth is

Alternative
investments

driven by higher wage growth and labor force participation.

China is a big market but there is a lot of bad data behind it.

2015
FAME
VII

The panelists

David J. Moore,
Ph.D.
Technology in
investing
Mellon Capital
Resonate Capital
Thomson Reuters
Charles Schwab

Global Markets
Salient partners
BlackRock

Jake Saliba (JS)

Vice President
J.P. Morgan

Cerebellum capital

Fixed income
Perspectives with
Kenneth deRogt
Alternative
investments

Heather Loomis Tigue (HT)

Managing Director
BlackRock

2015
FAME
VII

General comments

David J. Moore,
Ph.D.
Technology in
investing
Mellon Capital
Resonate Capital
Thomson Reuters
Charles Schwab

Global Markets
Salient partners
BlackRock
Cerebellum capital

JS: Fixed income is used for portfolio protection and income

HT: S&P 5500 dividend yield is 2.4% and the 10 year

treasury yield is 2.3%.

HT: Although jobs numbers were great, what about the

quality of jobs and average wage growth or decline? What

could be wrong?

Fixed income
Perspectives with
Kenneth deRogt
Alternative
investments

JS: Looking at preferred stock market to obtain higher

income and save a little on taxes.

DJM: I am unsure how taxes would be lower in the preferred
stock market. Perhaps the taxes on common stock capital
gains plus dividends are larger than taxes on preferred
dividend income.

2015
FAME
VII

General comments 1/2

David J. Moore,
Ph.D.
Technology in
investing
Mellon Capital
Resonate Capital
Thomson Reuters
Charles Schwab

Global Markets
Salient partners

Kenneth deRogt is a retired Chief Risk Officer of Morgan

Stanley.
He does not believe in efficient markets. Over the long term

things are at their fundamentals. In the short term, events like

Paris attacks could lead to a 10% drop on Monday.

BlackRock
Cerebellum capital

Fixed income
Perspectives with
Kenneth deRogt
Alternative
investments

Banks are capitalized at very high and safe levels. Case in

point: the 50% drop in oil prices has caused many oil
companies to become delinquent or default. However, banks
arent stressed.
Highly recommends reading Financial Times.
A lot of disruption going on fueled by technology. Example:

SoFi social financing.

2015
FAME
VII

General comments 2/2

David J. Moore,
Ph.D.
Technology in
investing
Mellon Capital
Resonate Capital
Thomson Reuters
Charles Schwab

Global Markets
Salient partners
BlackRock
Cerebellum capital

Fixed income
Perspectives with
Kenneth deRogt
Alternative
investments

People still do not manage money well. Drunkenmiller does.

Credit spreads are widening not a good thing.
Fewer and fewer stocks are driving market upward.
Markets have bottomed when everyone who must sell has

sold.
Low leverage and high transparency are needed for a stable

market.

2015
FAME
VII

The panelists

David J. Moore,
Ph.D.
Technology in
investing
Mellon Capital
Resonate Capital
Thomson Reuters

Michelle Domanico (MD)

Principal
KKR

Charles Schwab

Global Markets
Salient partners
BlackRock
Cerebellum capital

Fixed income
Perspectives with
Kenneth deRogt
Alternative
investments

Scott Gray (SG)

Senior Advisor
Founders Space
Peter Meyerdirk (PM)
Principal
Altamont Capital
John Murphy (JM)

Chief Operating Officer / Chief Financial Officer

Probias Partners

2015
FAME
VII

General comments 1/2

David J. Moore,
Ph.D.
Technology in
investing
Mellon Capital
Resonate Capital
Thomson Reuters
Charles Schwab

Global Markets
Salient partners
BlackRock
Cerebellum capital

Fixed income
Perspectives with
Kenneth deRogt
Alternative
investments

SG: Chinese are investing more in U.S. startups than others.

SG: VCs are not seeding startups these days. Lots of angel

investors.
MD: You cant eat relative performance.
PM: Hopes rate increases will bring valuations down.
SG: More difficult to receive seed money.

2015
FAME
VII

General comments 2/2

David J. Moore,
Ph.D.
Technology in
investing
Mellon Capital
Resonate Capital
Thomson Reuters
Charles Schwab

Global Markets
Salient partners
BlackRock
Cerebellum capital

Fixed income
Perspectives with
Kenneth deRogt
Alternative
investments

MD: Companies like KKR step in where banks can not.

Liquidity in the high yield credit market is a problem. Likely a

short opportunity.
SG: Expects growth in non-silicon valley startups.
SG: Find out what you are good at and be passionate about

that.
MD: For new job market entrants, consider starting in

investment banking. Consider New York.

MD: Consider worst case scenarios of investments.