Friday, December 12, 2014

Molycorp Bonds Keep Tumbling; Yield Curve Inverted $MCP

Molycorp secured notes are trading at 56, ytm is 25%.

Unsecured notes due 2016 (earliest) trading at 43, ytm is 70%. Notes due 2017 ytm 63%, notes due 2018 ytm 50%.

Yield curve is inverted. Wonder how long before another major restructuring?


Stagflationary Mark said...

Predictions for 2015 (With 80% Confidence)

The post includes a chart in Excel (brute force method) which shows the odds of getting X number of predictions right when asked to predict 5 things with 80% confidence.

We really want to be getting 3 to 5 things right or we're at serious risk of excessive confidence. That's true both individually, and more importantly, as a group.

As for individuals, it is possible to get none of them right and still reasonably have 80% confidence though. It's just extremely unlikely. It would require some very bad luck.

In any event, I suspect we'll look back when this is over and many of us will feel at least a bit unlucky. It doesn't take much to ruin an 80% confidence prediction. In theory, just 20%!

We are all a bit overconfident when playing this game, and perhaps that's a good thing.

There were ways to win it without taking any risk, and thankfully nobody went there (because it is only fun as a joke).

1. The sun does not go supernova.
2. The earth is not completely destroyed by invading extraterrestrials.
3. RadioShack's market cap does not exceed Apple's market cap.
4. I fail to teach my dog the complete English language.
5. All five of these predictions are wrong.

80%! Yes! Feeling good about it!

Note the "risky" economic prediction buried in the center! I just couldn't help myself apparently!

CP said...

17 predictions now

Some people did six and one person did only one. There should be close to 85 total that you would expect for 17 participants.

It will be interesting to see whether there are the expected 68 correct answers.

One wrinkle is going to be that so many of the predictions are similar that it will actually be hard for exactly 80% of them to be correct.

Of course, we could condense the 85 down into a core set of distinguishable predictions, and then see if 80% of those are correct.

All fun activities we should be having a year from now. Godspeed!

Stagflationary Mark said...


It's an interesting thought concerning answers being similar. It works within an individual's predictions as well.

If one has 80% confidence in the macro picture, then one might reasonably make 5 predictions based on that.

Therefore, even with 80% confidence, it wouldn't be shocking if one missed 5 out of 5. It could happen 20% of the time.

It wouldn't necessarily mean that the person was incredibly overconfident though. It could just mean that the predictions were highly correlated (bordering on all or nothing).

As a group, I would guess that we are a lot more similar than a random sampling of people. It therefore doesn't surprise me that our predictions tend to be similar.