Tag Archive for: market

Hypernomics 1, Funny Math 0

“Everybody funny, now you funny too” – George Thorogood

This is sad.

In December, I showed how the Aerion AS2, A, had a 1 in 40 chance of making its sales goal of 300 supersonic business jets at $120M in 10 years.

They shut down Friday.

Crucially, all 55 aircraft over $80M that sold over the ten years in Figure C were specially modified “green” airliners, based on long-standing Boeing and Airbus models. Each one requires only a few million added dollars in design and modifications, a tiny fraction of the AS-2’s estimated $4 billion development cost.

Aerion said that “in the current financial environment, it has proven hugely challenging to close on …large new capital requirements to finalize the transition of the AS2 into production.” That hints they are pointing to the pandemic as their primary dilemma.

But the low sales for the Concorde (B) reveal a more pervasive problem. Yes, it was worth every penny spent on it, as its buyers confirmed when they bought them. The issue for the Concorde then and the AS2 now is that there are not enough pennies to go around to make the optimistic sales goals each company set.

Demand analysis lets you know that before you spend $1B and find out the hard way.

#hypernomics #demand #market #aerionAS2

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Two Trillion Dollars; One Hard Edge

If you inquire what the people are like here, I must answer, “The same as everywhere!”
Wolfgang Goethe

How did $2T in the 2018 new car market worldwide behave?

When it comes to market limits, it was in much the same way.

Figure A studies all 36 electric car models in 2018 for which there were sales quantities and prices, depicted by green dots. Added to them are 43 like figures for selected gasoline-powered models in the same year, shown by blue points. Note that while several models of each type do not sell well, those that make the most sales form a wall extending from the upper left to the lower right. The line described by the overlaid small red points is the 2018 Car Demand Frontier. Of all the similar curves we’ve studied, this one is the sharpest, with a minuscule Mean Absolute Percentage Error of 6.0%.

We see the differences between each sub-market in Figure B, where the prices paid for horsepower change between types and as sales grow.

Taking only 43 of the 100s of models of gas-powered cars, trucks, and SUVs offered represents a short cut. But, if we take the most popular (Toyota Corrolla) and expensive of them (Bugatti Chiron), it’s likely viable.

#innovation #market #future #economy #startups #management

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Cannabis Laffer Curve Expanded:
The Netherlands Sparked North American Interest

In an earlier post, we examined the recreational pot tax structure.  Using US-only data, we discovered that at its frontier, a Laffer Curve formed that described the maximum amount of tax revenues possible given specific tax rates.

Here we entertain other authorities taxing legal recreational pot.  Added to the blue points forming a limit is another describing the tax rate and revenue per user for The Netherlands (NL) in 2008 (adjusted for inflation).  Through these blue points, the Laffer Curve explains 90% of their variation and is highly negative (power exponent -1.61).

Also considered now but not part of the Laffer Curve is the recent experience of British Columbia (BL 2019).  Observe it registered minuscule tax revenues.

At least 3 factors influence cannabis tax receipts: 1) Ease of legal access: BC, OR, and CA lag far behind their better-organized counterparts in making legal recreational marijuana sufficiently available.  2) Tax rate: From 15.3% (NV 2019) to 108% (WA 2014), revenues go up as tax percentages go down.  3) The proximity of lower-cost options: some would-be CA or CA tourist receipts or go to NV or black markets.

#laffercurve #market #marketanalysis #price #taxpolicy #demand #tax

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Features Determine Value

In every market, buyers determine Value, the sustainable prices for products based on their features.  This phenomenon is never more evident than in stock markets.

Consider the S&P 500 from one day in July 2019, as shown below.  After filtering out those stocks with negative figures for book values, earnings per share, and returns on assets, we have 411 stocks left.

At left, the plane running through the data reveals how the market rewards market capitalization (showing larger companies draw larger prices) and book value per share (how the market rewards a measure of safety if the company were to dissolve), given earnings per share (EPS) of $2.  We could imagine stockholders consider EPS as part of their Value calculation as well, and if we increase it from $2 to $20, as shown at right, we see how the market rewards that feature.

Book value per share, market cap, and earnings per share (with P-values of 0.58%, 1.88E-67, and, 1.17E-11, respectively, where P-values measure the chance a variable contribution is due to chance) are parts of an equation with more contributors to Value as a part of it.

What else might add Value?  Check in to the next post for some answers.

#prices#stocks#value#sustainable#market