Ron Insana is well-known in the industry as a financial journalist and CNBC contributor. His latest venture is as the CEO of iFi AI, a platform that uses artificial intelligence to generate short-term price forecasts for both stocks and ETFs. With so many factors impacting the markets today and drawing from decades of experience in the financial services space, he joins the ETF Think Tank to discuss his new market forecasting tool and more.
Insana explains that iFi is looking to accomplish a few things. At a fundamental level, it’s creating short-term price forecasts, currently on a 1-day and 1-month basis, that retail and institutional investors can use for short-term trading. From there, it also creates asset allocation models and portfolios with the goal of creating S&P 500 “plus” returns with about half of the market’s volatility. The long-term goal is to produce 80% accuracy on directional forecasts, but they are already at 70% success currently. With iFi, subscribers will get news flow and sentiment readings as well as fundamental & technical analysis.
In June, the company will roll out an advisor version of the product. Its core aim is to provide the same services as the retail/institutional product, but the real goal is to assist advisors in focusing on the advisor role. Insana explains that iFi should allow advisors to worry less about the investment process and worry more about developing relationships with clients and building their book of business.
Insana acknowledges that using AI to forecast the future based on the past comes with challenges. He says it will never be perfect and shouldn’t be considered foolproof because human behavior is so unpredictable. The question he’s trying to answer is how can iFi assist, not how it can replace. How can he enhance or improve probabilities? There are always going to be situations where the tool can’t capture all information or something unpredictable happens, but the goal is always to help tip the scales in an investor’s favor.
In order to determine which signals are adding the most value, iFi focuses on taking in as much information as possible, but filtering to get the highest quality data available, trying to account for bias and drift. They try to be as transparent as possible about the outputs, offering price ranges, sentiment readings, etc. so that subscribers can see what’s going into generating results. Insana acknowledges that this will be a work in progress and there’s a continual learning component, but the process will always be designed to be more dynamic than static.
In terms of macro observations, Insana thinks it’s still a reasonable assumption that rates will still come down this year. He does say that he’s had to do some soul searching about how he feels about rate hikes relative to inflation since a lot of it was driven by supply chain issues. Today, people aren’t necessarily complaining about the inflation rate, they’re complaining about high prices. The level of interest rates has become the inflation due to the cost of credit for consumers and how it’s pricing many of them out of buying homes & cars. He does think that the Fed has gone too far.
Insana also says that the next big wave will be companies implementing AI into their business models in order to enhance productivity. There will, however, be disruptors along the way. From 1995 to 2000, we had the Orange County bankruptcy, the Mexican peso crisis, the Russian debt default and the collapse of Long Term Capital Management. Technical transformations can be disrupted at times and the AI revolution could experience similar disruptions.
Other key takeaways:
- Insana doesn’t think that AI will eventually become smarter than humans. The complexity of human thought still escapes most data scientists.
- With respect to the tool, institutions want asset allocations and portfolio strategies. Retail investors want to do more trading. If you’re an active trader, he’d like to lend a hand.
- The Trump trial reached its verdict as Think Tank was recording. Insana says that an event like this is unprecedented. This is in many ways larger than Watergate and is such a multi-layered event.
- What are some of Insana’s favorite interviews? He lists former President Clinton, Warren Buffett (who he says is a remarkably normal person), Mikhail Gorbachev, Ozzy Osbourne, Sarah Jessica Parker, Dom DeLuise, George Bush, George Soros, Hillary Clinton and Jack Welch. All were insanely curious people.
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