The Schrodinger Election Futures Market And Fiscal Gridlock - ZH

Discussion in 'Politics & Religion' started by Tsing Tao, Sep 18, 2012.

  1. Tsing Tao

    Tsing Tao


    An interesting take, and if accurate, we could be looking at the worst possible outcome fiscally, but the best alternative (for Conservatives) to Obama outright losing the election - one in which he can get absolutely nothing done.

    Begin article:

    As the US Presidential and Congressional election campaigns move into their frenetic final stages ahead of the November 6th polling date, we thought it would be good to see what the futures markets think about the outcome. As UBS notes, the Iowa Electronic Markets (IEM) are futures markets allow traders to take positions, with real money, on a variety of economic and political events, the best known of which are US elections. Since inception, the IEM has had an impressive track record of forecasting elections, consistently better than conventional polls months in advance. The current data, however, highly contradictory - or Schrodinger-like - as the gap in the popular vote has narrowed significantly, yet the gap in the winner-take-all election result market has widened dramatically in favor of Obama. Furthermore, there is a 70% chance the Republicans wrest control of the Senate and the probability of the democrats gaining a House of Representatives majority is a mere 10%. It would seem gridlock will persist with a divided government - not good news for the fiscal cliff.

    The popular vote is close and getting closer...


    In the vote-share market, the payoff is determined by the final percentage of the popular vote received by the Democratic and Republican nominees on election day

    but the winner-take-all election (where the payoff is binary on the outcome), Obama is a heavily favored...


    It should be noted that the payoff in the IEM Presidential winner-takes-all futures market is based on the popular vote, not the Electoral College outcome.

    What about the races for the US Senate and House?

    Without belaboring the reader with the details (which are available on the IEM website), the futures markets are giving the following indications about the races for Capitol Hill:

    US Senate: Futures markets suggest there is only a one-in-ten chance that the Democrats will build on their small majority (51 seats) in the Senate. Their chances of holding the Senate, albeit with a smaller majority, are tipped at about 20% (a ‘majority’ of 50 is possible in the 100-seat Senate if an independent holds a seat or as a result of the tie-breaking vote of the Vice President—assuming in this case that President Obama is re-elected). Conversely, the chances that the Republicans wrest control of the Senate have risen to about 70% (from closer to 55% in the spring of this year).
    House of Representatives: The futures markets assign long odds to the probability of the Democrats taking control of the House of Representatives. According to the latest figures, the probability that the Democratic Party will lift its members from 193 today to a majority of 218 is about 10%.

    The outcome for the Presidential election remains too close to call. To be sure, Governor Romney has ground to make up. It seems that if he is going to do so, the economy, markets, or the geo-political environment will have to deal President Obama a blow. Alternatively, President Obama will have to commit a significant political blunder.
  2. Yep, the new strat. The Presidency is conceded, so let's surround him with a hostile congress.....nice.
  3. Tsing Tao

    Tsing Tao

    Yes, I'm sure that's what it is. 50 some million voters got together last weekend and planned a strategy around how to isolate the President, and they're acting on it.
  4. :D
    No, not the voters directly. The folks who shape opinion. Come on now, Tsing. You know better.
  5. Tsing Tao

    Tsing Tao

    The opinion on what the data represents is just that - opinion. The data itself is what is interesting. Try to get past the editorial.
  6. no.. let's give him Congress too, cause that worked out so well just a few years ago. HE makes Congress hostile because of his policies. Since the media is so fucking in bed with him, he will get to lean on the reps anyway and blame them for things not getting done. They will need to do something about the debt/deficit, i doubt this lunacy can continue for the next 4 years.

    On the bright side the last time there was a dem pres and rep controlled Congress we got a balanced budget.. of course billy had the dot com boom and no new entitlement kicking in.
  7. Mav88


    ....and here are the democrats cheering their own hostile obstructionism during a Bush SOU address

    <iframe width="420" height="315" src="" frameborder="0" allowfullscreen></iframe>

    It is probabaly what annoys me the most about you lefties, your obnoxious sense of self righteousness that has a sanctimonious religious quality to it, and yet you are so damned stupid.
  8. Well, the editorial is all that matters now. We had this talk before. Traders were warning on technicals that 2008 was coming. We are traders, and while most of us personally will be alright, we are fukked in the aggregate.

    Schrodinger's cat was very appropriate here.

    If you are a Trekkie or know any Trekkies, ask the about the kobayashi maru. This is where we are.
  9. Tsing Tao

    Tsing Tao

    So we need President Kirk to reprogram the system?
  10. The Bernank will suffice, it is the only way out.
    #10     Sep 18, 2012