THE POWER OF NOWCASTING

Weekly Insights from Sol Berkoff
Principal at Charleston Capital, Inc.

February 20th, 2019

Way back in 1971, one of the first Nobel Prizes in Economics was awarded to Simon Kuznets.  What did Dr. Kuznets do that was worthy of garnering a Nobel Prize?
 
Basically – he invented economic growth.
 
Not economic growth itself, of course, but the methodology we use to calculate it and to forecast it.
 
Today, with all of our incredible advances in technology, we are able to do more than forecast economic growth.
 
Today we can NOWCAST economic growth.

Evolution of Atlanta Fed GDPNow real GDP estimate for 2018 Q4.png

Nowcasting uses real time data to predict the very near-future.  The concept has existed in meteorology for some time.
 
The Federal Reserve is very interested in nowcasting.  Currently several regional Federal Reserve Banks nowcast GDP.  Above we have the Atlanta Fed’s GDP nowcast.
 
Right now, small business finance data exists outside of the Fed’s purview.  They would love to incorporate it into their models!
 
Edward Glaeser, arguably the world’s foremost expert in the economics of cities, recently tried to use Yelp to predict neighborhood level economic performance.  The results were mediocre.  But the point was to take a first step in the future of economic prediction.
 
One of the great advantages of small business finance is our contracts are generally daily or weekly pay.  That means we get a real time look into thousands of businesses in hundreds of towns in dozens of states.
 
At CCM, because we have separated origination and servicing, we not only get up-to-the-minute insight into the collateral performance and trends of small business finance, we get to see into both originators and small businesses.  Our vantage point is comprehensive.
 
We think our data war chest will not only help us to master small business finance but also empower the nowcasting revolution