If you can predict the future better than other people, you will soon become rich.
If you can know better than other people what is happening right now, that is almost as good. After all, if no one else finds out the truth until a month after the fact, the present might as well be the future — nobody knows it.
For instance, many economic indicators move markets: reports about the unemployment rate, crude oil inventories, etc. All of these are lagging indicators. They report information well after the actual events have occurred. If you can predict the reports ahead of time (and you know how the markets are likely to react to the number in the indicator), you can front-run the market.
I’ve always thought that traffic delays might be a good predictor of current economic activity. If the roads are clogged at rush hour, that is a good sign for economic activity. Busier highways in late morning and early afternoon is probably a bad sign. I’ve never managed to track down the right data to test this hypothesis. It was just too much work.
As with so many other things, Google provides a better way to solve the problem. Hal Varian‘s excellent piece (summarized on the Google research blog, through which you can get the full report) explores how you can substantially improve the predictive ability of forecasting models by using information in Google Trends. It could hardly be easier — certainly much easier than trying to monitor traffic data from 200 different U.S. cities.
Of course, the fact that it is easy is bad news for anyone who wants to profit from it. If things are too easy, everyone can build it into their models, arbitraging away the value.
and 
. You can also watch it on 
Sure it’s bad news for people who want to profit if it’s easy, however it’s GREAT for society as a whole.
The process of making things provides many leading indicators: The purchase of land for production facilities, the filing of patents, testing prototypes, the design of tooling–all these actions lead the making of profits by months or years.
For those interested in predictions of any sort would do themselves a favor by finding a dog-eared copy of “the Book of Predictions: http://www.vanityfair.com/online/daily/2008/06/the-book-of-pre.html
This is one of the most valuable books I have. It says for example (In 1979-1980!), Andrew M. Greeley predicted: “Before 1990, the present communist government in the Soviet Union will be overthrown either by a violet internal revolution or more likely by a “social democratic” faction within the party. Some of the constituent republics (the Ukraine, for example) will obtain authentic separate status. The Soviet colonies in Eastern Europe will then go the same route.”
Amazing.The CIA was predicting communist world domination at the time. Ask this guy about the economy please.
Google is very canny for its decision to make so much of that information available to the public. But nobody has access to it like Google. Google can actually measure the demand curve as it fluctuates in real time. (Neoclassical economists who think the demand curve does not fluctuate in time should not bother replying.)
Is Google already trading on this information? I’d like to know. Would there be antitrust implications if it did? Is that why Google is making so much info available?
If it’s their data that they gather themselves there’s no reason it would be insider-trading.
Of course, front-running the market in this manner would require two separate assumptions, right?
(1) The data set being examined is approximately equivalent to the data set being released as an economic indicator.
(2) The data set/economic indicators have the desired effect on the market.
I think the first assumption speaks for itself. As for the second assumption, let’s look at housing starts. I remember a friend of mine in the housing industry telling me that when housing starts picked up to 5% for two consecutive months, we would know the housing crisis was over. Unless, of course, the market received the news of additional housing to be a sign of increasing the housing glut as opposed to catching up to increased demand.
OK, Huffpo says that men’s underwear (at least according to Greenspan) is a reliable predictor of economic activity
Google trends show men’s underwear searches trending down from 2005, but that the decline has stopped and perhaps an uptick is happening.
There you go, recession solved!
if you get a way to precisely predict, will you share with us,of course you won’t.
if you purposely present a way to predict,and you have power to make others to predict that way, then you get it
This is certainly an interesting topic, and here’s an interesting discussion of the extent to which searches help.
http://messymatters.com/2009/03/21/the-future-is-yesterday/