Bubbles, crashes, rallies, and corrections
The Efficient Crashes Optimizer (ECO) asset price model identifies signatures in price data indicating potential crashes or rallies and estimates the magnitudes, the probabilities, and the timing of expected moves. Using a set of assets of interest in the current market, various predictions from the modelling process are highlighted in the table below.
We track the simulated performance of this list by using the ‘hedge’ column to weight each asset return.
ECO Bubble Predictions
- Gold – Stratospheric gold prices are a hot topic (e.g., John Authers blog of 2020-08-26). We show gold overpriced by 1.7% with a negative expected return. Gold has been a short for nearly a month now.
- JETS ETF – JETS is a buy because the expected return remains relatively high.
- Oil – After a strong rally we show its expected return going associated with a negative return if no correction. Neutral.
- USLargeCapGrowth – Currently 8% underpriced. The correction size is sizable when it does crash and the correction probability rose, so neutral.
- USSmallCapValue – Underpriced by 9% and the probability of a correction is nil, but the return without a correction has been dropping, hold.
- RealEstate ETF – Scores are pretty much neutral.
- TSLA – 99% overpriced with a large correction size and substantially negative return expectation. Sell.
- USUnvGradeBond – Slightly overpriced with a negative expected return. Maintain sell.
- Technology ETF – Tech is now underpriced and the return without a correction is good at 15%; it has a decent and growing probability of correcting (crashing) but hedge shows buy.
- HealthCare ETF – Currently a hold and the return will be small in either case of a correction or not.
For more details see ECO Explanatory Notes
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ECO scores are an important input in the AugurMax investment process. A powerful, cutting edge asset allocation engine is created when combining ECO scores with the RisKontroller optimizer.