The Big Short | Putting Economic Data to the Test
Hello Traders,
I have been fiddling with the idea of applying the same model used to predict Financial Markets to Economic Data.This is my first attempt at applying the model to such data publicly. Consider this post an experiment.
Taking into consideration some fundamentals (and a little bit of rationalizing); Since the auto industry bail outs of 2008-2009 interest rates have been at a record lows(0%). Car sales reacted accordingly making a full recovery into pre 2008 levels. Now that QE and 0% interest is over (interest rates are likely to rise in the next few years), there is a bit of stagnation in the car industry as a whole. Once attractive lease offers and 0% financing is off the table a decline in sales should occur. Overall, when interest rates are high people buy less as a whole.
Questionable Lending Practices: The use of Sub Prime loans in the auto industry and selling those loans as bonds has an all too familiar ring to it. Granted, it is not as rampant as it was in the mortgage industry, but the same practices of junk loans being sold as junk bonds is occurring. One does not need to be a prophet to know what the end result of that is. Take a look at this satirical piece by John Oliver for more detail: https://www.youtube.com/watch?v=4U2eDJnwz_s
Self Driving Cars: It is imminent, self driving cars are the future and can reach the everyday consumer as soon as 2020.
http://www.nissanusa.com/blog/autonomous-drive-car
Why is this important? The idea of self driving cars also brings up the idea of not having to own a car to get around in one. Cars being able to move around without a driver + (UBER + Car Manufacturer Collaboration) = Less consumers having to own cars to get around in one. https://www.wired.com/2016/09/heres-like-ride-ubers-self-driving-car/
The Model: The most important aspect here is the model. Time and time again it has proven to predict and forecast financial markets with pin point precision. Here, the model points to 5.26 as the highest probability target.
So...what does this all mean? If the model is successful in predicting the outcome of auto sales, it means that there will be a massive decline in auto sales. It also means that there is a great recession looming over us like a dark cloud.
The ideas discussed in this thread are purely conversation topics that help "aid" the rationale behind the targets defined by the model. I do not consider myself an economist, nor do I think I have the full range of ideas listed in this thread. If you feel like you have a different outlook or if I missed something please feel free to discuss it in the comment section(with sources to back up your view).
Best,
Chartistry
I have been fiddling with the idea of applying the same model used to predict Financial Markets to Economic Data.This is my first attempt at applying the model to such data publicly. Consider this post an experiment.
Taking into consideration some fundamentals (and a little bit of rationalizing); Since the auto industry bail outs of 2008-2009 interest rates have been at a record lows(0%). Car sales reacted accordingly making a full recovery into pre 2008 levels. Now that QE and 0% interest is over (interest rates are likely to rise in the next few years), there is a bit of stagnation in the car industry as a whole. Once attractive lease offers and 0% financing is off the table a decline in sales should occur. Overall, when interest rates are high people buy less as a whole.
Questionable Lending Practices: The use of Sub Prime loans in the auto industry and selling those loans as bonds has an all too familiar ring to it. Granted, it is not as rampant as it was in the mortgage industry, but the same practices of junk loans being sold as junk bonds is occurring. One does not need to be a prophet to know what the end result of that is. Take a look at this satirical piece by John Oliver for more detail: https://www.youtube.com/watch?v=4U2eDJnwz_s
Self Driving Cars: It is imminent, self driving cars are the future and can reach the everyday consumer as soon as 2020.
http://www.nissanusa.com/blog/autonomous-drive-car
Why is this important? The idea of self driving cars also brings up the idea of not having to own a car to get around in one. Cars being able to move around without a driver + (UBER + Car Manufacturer Collaboration) = Less consumers having to own cars to get around in one. https://www.wired.com/2016/09/heres-like-ride-ubers-self-driving-car/
The Model: The most important aspect here is the model. Time and time again it has proven to predict and forecast financial markets with pin point precision. Here, the model points to 5.26 as the highest probability target.
So...what does this all mean? If the model is successful in predicting the outcome of auto sales, it means that there will be a massive decline in auto sales. It also means that there is a great recession looming over us like a dark cloud.
The ideas discussed in this thread are purely conversation topics that help "aid" the rationale behind the targets defined by the model. I do not consider myself an economist, nor do I think I have the full range of ideas listed in this thread. If you feel like you have a different outlook or if I missed something please feel free to discuss it in the comment section(with sources to back up your view).
Best,
Chartistry
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