Unexpectedly Intriguing!
October 8, 2014

At the risk of prompting another investigation by the Financial Industry Regulatory Authority into our activities, was yesterday's market carnage the result of something we said as it propagated across the Internet?

Or was the market, once again, pretty much responding exactly as we might reasonably expect it to given other things we've observed? So much so that its reaction to news reinforcing the forward-looking focus of investors onto the second quarter of 2015 was almost perfectly predictible?

Really. The animated image below compares our vision of the likely alternative futures for the U.S. stock market with how it actually is playing out from the snapshot we shared on Monday, 5 October 2014 with the snapshot of where it actually closed on Wednesday, 7 October 2014.

Animation: Alternative Futures for S&P 500 Stock Prices, Fourth Quarter of 2014, Snapshots from 5 October 2014 and 7 October 2014

Why, it's almost as if stock prices are pretty much following the script based on the expectations associated with the future defined by 2015-Q2. If you don't like that or want a different result, either do something really noisy to temporarily distract investors, change their expectations for 2015-Q2 or shift their forward-looking attention to a different point of time in the future.

In truth, the only thing that we're really surprised by is that the trajectory of stock prices would appear to have closely followed the midpoints of our projected range. That it's thus far keeping pace with them is simply cool, though far from the most impressively impossible thing that we've ever done.

Speaking of which, we should take a moment to review the possibilities that might explain why we would seem to be able to do what we do:

  • We're very, very good at predicting where stock prices will go in the future.
  • We're very, very lucky in predicting where stock prices will go in the future.
  • We're very, very sneaky and have somehow managed to post hundreds of predictions in advance and to then delete almost all of the bad ones in advance of their appearing on our site, making it seem like we're either very, very good or very, very lucky at predicting where stock prices will go in the future.
  • We have the means and ability to manipulate the market to make it match our "predictions" of the future.
  • We have a time machine and are willing to use it for the sake of performing cheap tricks involving stock market predictions.

One or more of these things might be true, and given where we work, you shouldn't rule any of them out. For those who find the third option to be the most appealing explanation, we suggest that you try it out yourself for a week to see how easy it is to pull off convincingly.

The fourth option, well, we were cleared after a month-long investigation after we confirmed that it was all our April Fools' Day prank for 2014!

And if you're really desperate to track us down to find out the truth, you'll need to act somewhat quickly as we're strongly considering moving closer to the office as our current commute is becoming quite a hassle. Which is why we'll also need to revisit the fifth option:


Update 4:10 PM EDT: What did we say about doing something noisy? On the plus side, the insight into the Fed's likely future course of action revealed today helps resolve an issue we had between our standard and rebaselined models for projecting stock prices, where we were wondering how exactly stock prices would behave as we near the period in which we would be transitioning from our rebaselined model back to our standard model. More on that next week....

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