Tag Archive for: market analysis

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Announcing The Hypernomics YouTube Channel

It is the obvious which is so difficult to see most of the time.
Isaac Asimov, I, Robot

Here’s a question with a seemingly obvious answer:  How many stocks are part of the S&P 500?  If you guessed 500, you’d be close, as there are 504 companies listed there today.

You likely know that not all S&P companies have issued the same number of shares, nor do all share price match.  Too obvious?  Not really.

Consider what you were undoubtedly told if you ever took an economics class.  According to Paul Samuelson (Economics, 9th Ed., p. 63), “the equilibrium price, i.e., the only price that can last…must be at the intersection point of supply and demand curves.”  Samuelson would have you believe markets have but one equilibrium point.

But we know that is nonsense:  504 stocks in the S&P 500 form 504 quantity and price pairs.  While they are viable, all, in the language of Hypernomics, enjoy sustainable disequilibrium as their stock prices exceed their costs.

What’s really going on?  It turns out the value of products goes up as producers add features customers like.  At the same time, as prices go up, quantities sold fall.  To see this phenomenon, one must employ Hypernomics.

To find out how this works with as many as 8 dimensions, go to our new Hypernomics YouTube channel here:

https://www.youtube.com/channel/UCYsso5Yf0OFY3k78u5c30LQ

#hypernomics #marketanalysis #prices #demand

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Market And Demand Formation

Tesla is here to stay and keep fighting for the electric car revolution.
Elon Musk

How do markets form?  What happens when they do?  Let’s look.

The modern mass-produced electric car market began in 2009.  As Figure A displays, there was a sole entrant then, the Mitsubishi i-MiEV.  By 2012, in Figure B, many more entrants came into play.  Three years later, with Figure C, prices for most models fell, and they attracted more customers.  Producers were able to drop prices because their production lines displayed learning curve effects.  They benefited from lower costs from more efficient workers, standardization, economies of scale, and other factors.

Figure D shows us that by 2018, many new models moved into the market.  Several models (all Teslas, marked with the yellow dots) combined to form the market’s Demand Frontier.  That line is highly correlated (adjusted R2 95.4%, P-value 5.04E-04) and relatively flat, with a slope of -0.36.

In 2019, electric car sales fell about 10% from 2018, despite Tesla’s Model 3 success.  Given the flattish Demand Curve, that suggests buyers would be eager for a high-range vehicle with a price lower than the Model 3.  All competitors priced less than the cheapest Model 3 have less range than it does.

#demand #marketanalysis #marketformation #demandformation #demandplanning #curve

Life’s Easier With Enhanced Vision

The good thing about science is that it’s true whether or not you believe in it – Neil deGrasse Tyson

What would it be like to do astronomy without a telescope, biology sans a microscope, or defend air raids without radar?  We don’t have to live without these visualization aids in the modern world.  We needn’t rely on Stone Age tech in the Age of Information.

But you are very likely working from a like disadvantage in market analysis.  While we proved 4D data science works in fields as varied as beef production, package delivery, and spaceships, up till 2020, we had not taken a run at the stock market.

Then we did.

As shown below, the principles of Hypernomics have been applied successfully for picking securities, as it has for us for the last 26 months, with actual monies and stellar returns.  This fund is yet another story about how we applied the tool profitably.  We believe the fund will be to Hypernomics as books were to Amazon.  Eleven years after we started, we’re looking for partners.

Who wants to join us?

#datascience #hypernomics #innovation #marketanalysis

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Details Depict Markets

If you don’t understand the details of your business, you are going to fail – Jeff Bezos

You’ve heard about people getting lost in the details.  What if the opposite is true?

Hypernomics finds that diving into details is the only way to comprehend a market.

Paul Samuelson wrote, “the equilibrium price…the only price that can last, must be at the intersection point of supply and demand curves.” (Economics, 4th Edition, p. 63).  While he won the Nobel Memorial Prize in Economic Sciences, he never worked in aerospace.  If he had, he would have discovered that no solitary “equilibrium price” lives there.

But there is even more to it.  As A reveals, the new aircraft market splits into those for Civil and Military submarkets.  Within the former, there are five sub-submarkets, and all of those have their Demand Curves which combine to form a collective Aggregate Demand Curve, B.

Helicopters perform missions, and each of the eight has its Demand properties, C.  With 75 models, there are hundreds of sustainable prices, all held up by the Value of their models’ features (not shown), as limited by their available funds (Demand).

Dig deep into the data and pay attention to the details.

You’ll find they’ll pay off.

#hypernomics #innovation #marketanalysis #markets

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Hypernomics: 3rd in a Series

Perfect is the enemy of good – Voltaire

Suppose you have the task that fell to Cristina (C): Find the Demand Frontier slope for flat-screen TVs. Her sister, Sheila, charged with estimating their value, had it easier, as she found the features and prices for these devices on many sites (see the post three months ago).

In a perfect world, Cristina would have receipts for all models sold, forming a complete database. But no one has that. How can she discover a work-around? She gets an idea.

She finds a nearly perfect world for stocks. In studying the S&P 500, she sees all outstanding shares and prices (A, less Amazon and Google). When she charts their Demand Frontier in blue, she finds their slope is -0.413, a statistically significant result with a P-value of 7.9E-06. She hypothesizes that the Demand Frontier slope of the market’s daily volume will mimic all shares. She plots volume against price and finds its slope of -0.398 (P-Value 8.16E-04), which varies less than 4% from the total.

Excited, she maps the number of ratings for TVs against their prices and finds that they too form a viable Demand Frontier (B) at their limit (P-Value 1.99E-05).

It’s not perfect.

But it’s good.

#hypernomics #innovation #markets #marketanalysis

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Simplify Results For Management

“Simple can be harder than complex.” – Steve Jobs

Suppose you analyze a market and find four features that help describe a product’s value or sustainable price. Your power form equation reads Price = constant * feature 1^a * feature 2^b…feature 4^d. How can you simplify each expression so that more people can grasp its meaning?

Helicopters (A-C) come in many designs and sizes. You suspect their useful loads, cruise speeds, and the number of engines support their prices. Analysis confirms that, but the resulting equation is complicated. You want to know how noise, or its lack, contributes to prices too. You find data on cabin and sideline decibel levels, but it’s spotty.

You want to be both simpler and more thorough. What to do?

Poring over the data, you find that pound for useful load pound, helicopters with more main blades fetch more money. That’s because rotor systems with more and smaller blades disturb the air less and create less noise. In D, you can take that expression, Blades^d, and depict the projected Value increase as you add blades. Combining D (and like tables for features a-c) with Demand analysis (see the last post) permits fine-tuning against the market’s needs.

#hypernomics #markets #marketanalysis #innovation #future #futurism

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Don’t Leave Money On The Table

“The more you learn, the more you earn” – Warren Buffett

In this true story, we hide the names to protect the players and don’t tell you the venue, either.

In 2014 (A), we ran three market Y value equations (not shown).  All showed that Project X was under-priced.  We find validation of these projections in 2021, as used X versions sell for more than their original $1M price (also not shown).  X sold amply, with 300 units in the market by 2021, and if C’s assumptions were correct, it made a profit, too (D).  Joy in Mudville!  But wait a minute.

Had X’s producers studied Y’s Demand Frontier (B), they might have noticed its negative slope of -1.24.  That means that at the limiting slope, had X’s price been raised to $1.34M, it would have made more revenue, despite the sales drop.  Also, with fewer units, recurring costs fall (C).

The overall effect in D is that selling Project X too cheaply costs Y both revenue and profit.

Hypernomics notes it’s easy to think that if a project makes a profit, it is doing well. But if we learn about all the market forces at work, often we’ll find well isn’t well enough.  Don’t leave money on the table because you didn’t study your market thoroughly.

#hypernomics #innovation #markets #marketanalysis #pricing #analytics

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The Utility Case Vs. Value Analysis

Every time you spend money, you’re casting a vote for the kind of world you want – Anne Lappé

Recently, long-dead Jeremy Bentham took a cross-campus trip. Shunning a wooden cupboard he long occupied in the Wilkins Building at University College London, he moved, greatly aided, to a shiny new booth in UCL’s Student Centre (A). Famously, his penultimate journey was to a UCL council meeting, where they recorded him as “present, but not voting.”

Bentham’s ideas about utility theory still hold sway. Many firms used it to figure cell phone prices (B). Such studies queried participants’ willingness to pay for features, to which researchers assigned utils, a utility measure. Then analysts converted utils to dollars.

Hypernomics notes respondents gave hypothetical answers; they weren’t buying phones, that util value varies widely, and that this method ignored available relevant communication data at their peril.

We display our willingness to pay to connect when we put up cash to make towers (C), walkie-talkies (D), or car phones (E). Value Analysis considers past and present market states to predict the future.

Jeremy may not vote, but we do.

The best utility case holds its inventor.

#value #utility #hypernomics #innovation #marketanalysis

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A Sufficient Condition

For a successful technology, reality must take precedence over public relations, for Nature cannot be fooled
Richard P. Feynman

Feynman’s observation about truth is one that can move past physics, where he won the Nobel prize.

It happens that in all markets, we collectively form relationships about how we respond to product features and prices. It is our Nature.

As we build, say, a helicopter for the President of the United States (A), we might be inclined to keep adding to it: unprecedented speed, a larger cabin, extra defensive systems. After all, we might tell ourselves; there won’t be a more important thing in the sky. It is a necessary condition to protect it and everyone inside.

The bonus features drive an increase in Value – and Price.
But at a group-induced limit we call the Demand Frontier, sales stop. We do not have any more monies to buy more of the product in question past the points on that line. Trying to exceed the Demand Frontier is a sufficient condition to stop any program.

In the case of the VH-71, USG requirements creep let it become untenable. All of that could have been avoided by analyzing the market as in B.

Doing a market analysis is hard.

Losing $4.2 billion is harder.

#innovation #demand #marketanalysis #business

 

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DeLorean CSI

In October 1982, the US government charged John DeLorean with cocaine trafficking in a deal he thought would stave off bankruptcy for his self-named company.

How did it all go wrong?

His DeLorean Motor Company sports car (A) came with several sales features. It had a rear-mounted engine, brushed stainless steel body panels, and its iconic gull-wing doors. Its original designation was the DMC-12, the “12,” reflecting its price, in thousands. But, when it came time to start taking orders, DeLorean dropped the name and raised the price.

The renamed DeLorean entered the market with 130 horsepower, priced at $25,000. As we see in B, no car with that amount of power came close to its price. The 1981 Audi 5000 Turbo, with the same horsepower, sold for $7,000 less.
Statistics reveal the sustainable prices for 1981 cars were a function of their horsepower and units sold (both P-values < 0.01).

As shown in C, the DeLorean’s predicted sustainable price was $15,500; its posted price was nearly three standard deviations too high.

To sell all 7,500 units it produced for $25K, D shows us its installed horsepower should have doubled to 262. As 1981 ended, it only sold 3,000.

Moral of the story: do market math.

#innovation #marketanalysis #valueanalysis #pricing #cars