EP12 - Alternative Data

How quants use alternative data sources. Learn about satellite imagery, shadow indexing, oil tank tracking, AIS shipping data, and how hedge funds fund data infrastructure.

Tweet coming soon

Look at the stars, Kurumi. And the satellites!

I love the "New Space" age. Entrepreneurs like Elon Musk launching rockets! Taking risks!

While you quants are busy with online casinos, another satellite just got launched to space! We're getting closer to Mars!

That satellite isn't going to Mars. It's looking at a parking lot in Ohio.

Why? Is Ohio interesting?

No. But **Walmart's Q3 Earnings** are.

By looking at the parking lots, we can count the cars and predict the revenue.

We trade the stock *before* the CEO announces the numbers.

You spy on shoppers?

That data is too complicated to parse. We just do **Shadow Indexing** to get the volume.

What are those?

Oil tanks in Cushing, Oklahoma. The hub of US oil.

Whats so interesting about that?

See the shadow inside the rim?

These are **Floating Roof** tanks. The roof sits on top of the liquid.

Short Shadow = Tank Full. Long Shadow = Tank Empty.

You use trigonometry to measure the world's oil supply?

We calculate the global inventory daily.

The government releases data once a week. We are **7 days faster**.

So... the satellite companies...

Some of them exist because **Hedge Funds** wrote them a check.

Farmers can't afford $10M for a satellite launch to check their corn.

Climate Scientists typically don't have the budget for a daily-scan constellation.

But a Commodities Trader?

If knowing the corn yield of Iowa 2 days early makes me $50 Million. I will fund your satellite.

The public calls you **degen gamblers**.

We are **Information Venture Capitalists**.

We subsidize the infrastructure of truth.

Isn't it just... spying?

It's **Observability**.

Before Alt Data, the economy was a black box.

"How much stuff is China making?" "Is the recession starting?"

We relied on government reports. Governments lie. Or they are slow.

This ship is leaving Brazil full of Iron Ore.

I know Chinese steel production will go up in 3 weeks.

I don't need to trust the official GDP number.

How?

I can **weigh the boats**.

You see, by checking how deep the ship is in the water, we can predict how much iron ore it is carrying.

Quants do that?!

If it helps us make money, sure.

Wait. This app... it uses satellite data.

And it's free.

**Alpha Decay**.

Going back to the ice sculpture analogy?

In 2015, counting cars was a secret edge. Cost: $1M/year.

In 2025, it's a commodity. Cost: Cheap.

Once the Quants have squeezed the alpha out... the data becomes cheap enough for farmers, apps, and eventually normal people.

Quants take risks building information infrastructure and pays the premium that builds the data pipe. The public eventually enjoys the cheap information downstream.

So you aren't shy nerds.

You are **Data Entrepreneurs**.

A politician wants credit. An influencer wants clout. An entrepreneur wants customers. A Quant just wants the spread.

We don't hold press conferences to announce we found a way to measure copper smelting using infrared sensors.

We just buy Copper Futures.

Can I buy a satellite?

You can buy the **Data Stream**.

I want to track... Pizza consumption.

There's a cheaper way to do that: credit card transaction data. Ticker: `DPZ` (Domino's).

The truth is visible, if you can afford the view.