The Knowledge – What’s Next for Janus

“Hey look kids, there’s Big Ben, and there’s Parliament….again.” – Clark W. Griswold, (European Vacation)

Becoming a London Taxicab Driver is an amazing feat of memorization.  They call it The Knowledge, and it’s considered equivalent to getting a University degree in London.  It takes in the range of 2 to 4 years for prospective drivers to learn the 25,000 streets and alleys that have been carved out over thousands of years.  They literally are taking “mental maps” of locations of the city through visualization, and are tested through multiple written, oral and driving tests to obtain a license.

Scientists have studied the brains of London taxicab drivers, and have found that the part of their brain dedicated to long term memory, the hippocampus, is much larger than that of the normal person.  They’ve shown that you can vastly expand your long term memory skills.  However, the effort to train the brain and achieve The Knowledge appears to come at a consequence.  When these same drivers “super memories” were tested for recalling new material or shorter term memory, they tested worse than us normal people.  There is a limit.

The advent of GPS and real time traffic and accident updates are now threatening the necessity of The Knowledge and potentially making it more of a novelty.  And now, with Uber and competitors taking Europe by storm, there’s even further pressure on the need to hail a black cab in London.  New and disruptive technologies are essentially allowing drivers to save the 2-4 years of memorization, avoid buying an expensive license and even save more of their brain functions for other tasks.

Professional investors have to have tremendous memories and recall.  They are inundated with hundreds of emails, calls and voice mails, IM’s and news all with data points that they utilize to form opinions.  Having built this experience in the markets over years, and having gone through different investment cycles and environments provides professional investors with valuable insights that impact their decision making on a daily basis.  Firms spend hours upon hours doing research finding analogs to current situations and finding comps for trade decisions, all in an effort to get a better handle on what is likely to happen next in the market or with holdings.  Most PM’s, Analysts and Traders, whether shorter term or longer term oriented, are constantly checking price charts during market hours.  It impacts how they feel about their positions, allows them to apply experience to their interpretation of these price moves and provides a gauge for what is likely going to happen next.

EidoSearch is providing disruptive technology to support this effort.  Our technology, through mathematics, provides an objective recall for similar environments and provides return probabilities to support investment and trade decisions.  We are able to enhance the application of an investors experience by providing them with an objective starting point.  We save time on research and recall, and provide a bias free projection to every investment on what is likely to happen next.

Bill Gross’ big news last week gave Janus’ stock (JNS) a 43% jump in one day on Friday.  Many investors are now asking the obvious question, “does the stock continue up or fall off?  How dramatic is that move usually?”.  This a unique situation, and for that reason many investors might not have a great feel for what typically occurs in situations like this.

We found 62 similar instances of a move like this dating as far back as 1982.  We typically look at the peer group (sector) finding similar instances, but this price trend was so rare we only found 3 similar instances of the price trend in Financial Services so we looked at all US Equities.  The stocks are down on average -8.5% over the next 1 month with more than 6x the downside to upside.

There are only 2 instances historically up more than 10% in the next one month after a similar one day jump like this:  Children’s Place Retail Stores in 2003 and Unisys in 1991.  There are 19 instances that are down more than 10%.

Have a great week!