Long The Big Short

"It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so."

-Mark Twain

Anyone see The Big Short? If so, you may recognize this quote. What brilliant timing to release a movie about the seers of 2008 during these choppy markets of 2016. Inspires you to step out on a limb and make a bold prediction.

I’m bullish on this new genre of non-preachy, drama-comedy storytelling. So this will be a 2 part email. First, using our numeric search engine, a prediction on next week’s box office for The Big Short. Then back to the S&P.

The Big Short Prediction based on similar movie conditions:

We have 5 weeks of data in domestic sales since release. We loaded data for comparable movies from the last ten years into our platform, and found 7 movie matches that had similar patterns in weekly gross sales and number of theaters. Netflix, if you’re looking for your next recommendation algorithm, come talk to us. Here’s the match list and % change in sales, which we later use to forecast.

1. Moneyball (-49.2%)
2. ZeroDarkThirty (-43%)
3. Michael Clayton (-26.3%)
4. Syriana (-20.3%)
5. Thirteen Days (-18.3%)
6. The Insider (-11.5%)
7. The Imitation Game (-4.7%)

The data for The Big Short used to find these matches have the following pattern:

Week 1: $0.9M (8 theaters)
Week 2: $4.5M (1,585 theaters)
Week 3: $18.5M (1,585 theaters)
Week 4: $12.5M (1,586 theaters)
Week 5: $8.7M (2,529 theaters)
Week 6 Prediction: $6.6M (down -24.8% from last week’s $8.7M) with a 70% chance of falling between $7.1M and $5.0M.

Bold prediction? I’ll sleep comfortably a night either way, so probably not. But at least we don’t make the mistake of speaking with absolute certainty as do most of the doomsayer market headlines this year.

The S&P Forecast based on similar market conditions:

Did you ever notice that the degree of our uncertainty changes from week to week? That’s important information and a good gut check for anyone making forecasts. There’s no such thing as a universal constant in markets, including degrees of uncertainty. This week there is a wider range of possibilities as compared to last week’s forecast.

The chart below is the distribution of 5 day outcomes for the S&P based on similar conditions in the S&P. The average return is positive 0.6% with a 70% chance of landing within the range of up 3.3% and down -1.9%. The most negative instance is down -7.0% which occurred in Sept 2001. The most positive instance is up 12.3% which occurred in October 1987.

Have a great week, and enjoy the dramedy.