Monday, January 11, 2016

"Louisiana's" Probabilities For 2016 Prediction Contest

  • Ten year Treasuries trade at a yield below 1.5%.  - 10%
  • Ten year Treasuries trade at a yield above 3.5%. - 13%
  • At any time, the two year Treasury yields more than the ten year Treasury. - 15%
  • [I think US bonds will be seen as safe harbor still in 2016.  Default fears later. I don't understand this stuff like CP so no strong opinion.]
  • EURUSD trades at parity. - 55%
  • [So close this should happen based on stochastic motion.  Plus, Europe is more combustible in short term.]
  • The S&P 500 trades below the low of 1820.66 from October 15, 2014. - 30%
  • The S&P 500 trades above the high of 2134.72 from May 20, 2015. - 20%
  • [I am bearish, but we've seen this stuff in a trading range for too long to be overly confident.]
  • Gold trades below $1,000/oz. - 55%
  • Gold trades above $2,000/oz. - 5%
  • [Again, just assessing stochastic probabilities, but I'm a little more confident in a bearish commodity stance.]
  • Spot crude oil ($WTIC) trades below $30. - 60%
  • Spot crude oil ($WTIC) trades above the May 6, 2015 high of $62.58. - 10%
  • [Stochastic plus more confident bearishness, accounting on high end for Middle East black swans.]
  • Donald Trump is elected President. - 45%
  • [Would like to be higher, but I think there will be a third party run against him, assassination possibilities, etc.  I'm 75% confident now he will be nominee.]
  • Republicans retain the House of Representatives and Senate. - 65%
  • [I think the gerrymandering will work for them at least one more cycle, and their buffer is strong. Also, I'm assuming 50/50 split with GOP presidential win counts.]
  • Any of the following lose power (resign, deposed, defeated, killed): Kim Jong Un, Angela Merkel, Saudi royal family. - 5%
  • [Socionomically maybe too early for this, should happen later]
  • A nuclear weapon is used in warfare or terrorism. - 3%
  • [Again, just very unlikely by rational actors.]
  • Any of the following are indicted: Aubrey McClendon, Tom Ward, Hillary Clinton, J Michael Pearson. - 10%
  • [The system protects its own, and even outer party elites like McClendon sets a bad precedent for the inner party thieves being indicted themselves... Hillary is a lock for no indictment.]
  • Any of the following leave the asset management business (retirement, death, switching to family office): Bill Gross, Bill Ackman, Bill Miller, David Einhorn, John Hussman. - 10%
  • [I don't have a super informed opinion on this one, but my guess is these guys have been in the game so long they're not getting out willingly, and I think we're early in the bear market.]
  • John Hussman's HSGFX fund is positive for the year (including dividends) starting January 1. - 50%
  • [I'm going off CP's idea that Hussman is an excellent analyst but a poor investor, but this fund appears bearish and negatively correlated with S&P, but he's also long stuff, which mean he was correlated in a nasty bear market like 2008.  So a moderate bear market is good for Hussman, but he looks like an indexer when there's a big crash.  Even though I'm 60% confident of a bearish year overall, the tail risk of a nasty bear has me indifferent on this.]
  • Any of these four Carl Icahn holdings that are junk credits go bankrupt: CHK, NAV, RIG, SSE - 15%
  • [Icahn is not holding the most wounded antelopes in the herd, and I'd guess there will still be enough dumb money this year for these to avoid bankruptcy, for now.  There's a lot these companies can do avoid it as long as there are bottom fishers in energy looking for a quick turnaround in the oil price.]
  • Chipotle Mexican Grill share price revisits 2012 levels by trading below $300. - 25%
  • [This is the kind of momentum / glamour stock owned by retail idiots and the balloon is deflating. So I'll rate this higher than my overall bearishness (accounting for out of the money nature of the event).]
  • No street legal, fully autonomous (“self-driving” from A to B based on address input alone) car is available for sale in the United States in 2016. - 99%
  • [This is basically not going to happen this year.  Technology too primitive.  We will see more advanced assistive technologies (like GM Super Cruise) but nothing fully automated.  I think this will actually require some kind of tort reform to be viable, i.e. limited liability by state statute for manufacturers, as a societal compromise to make overall fatalities lower.  The self-driving phenomenon creates a weird situation where there might be fewer fatalities but overall more collectible damages, and addressing this politically will take time.]
  • A basket with one share each of Facebook, Apple, Netflix, and Alphabet (Google) has a negative return (including dividends). - 55%
  • [Slightly less bearish than I'd like to be because these stocks have been the momentum holding up the edifice for so long.  If we get slight gains in S&P, it will be because of these stocks making dramatic gains.]
  • The BofA Merrill Lynch US Corporate BBB Effective Yield© exceeds 5%. - 40%
  • [Overall economic conditions will continue to deteriorate, but this is an out of the money bet so deprecated a bit.]
  • A current venture capital “unicorn” (most recent financing round valued at >$1B as of Jan 1) liquidates or sells for less than $250 million (not counting Gilt Groupe). - 35%
  • [I think this is relatively likely, but none of the unicorns are going to be in a forced sale position in terms of cash flow in 2016, so it depends if investors panic and just want out.]
  • For the first time since 2005, a hurricane of Category 3 or greater (at time of landfall) makes landfall in the continental U.S. - 10%
  • [Not taking the gambler's fallacy here.  However, you're incorrect on your date, as Rita hit in 2008 and was a Cat 3.  I'll just take the odds on the last ten years (2006 onward), so 10%.]
Trump to win at 45% and believing he's 75% likely to be nominee means thinking that he's 60% likely to win if nominated.

As you'll see, I'm lower on Trump mainly because I think he's less likely that 60% to win if nominated.

1 comment:

James said...

Two people thought that Trump being elected had the same likelihood as a nuclear weapon being used.

Extraordinary popular delusions? Wisdom of crowds?

Trump and Hillary both have high unfavorability ratings, but Hillary gets to bribe voters with lots of free taxpayer-funded goodies and Trump doesn't. I'm not sure how Republicans can compete with free?