Tools

This election offers many tools

Before we start, please respond to this one question survey. The idea is to get an idea of what the maximum and minimum extremes might be in various products after the election. How much of a move is too much, regardless of the election.

Please complete the survey here. It will take you less than 1.5 minutes.

One salient feature of the 2020 election was the ability to track market pricing of the outcome in real time via the FTX token. At that time, FTX was a new and exciting platform where everything would be tokenized and SBF was known mostly in crypto circles as some kind of crypto wunderkind that found a way to arbitrage global crypto markets and turn $10 million into $10 billion. Here’s a screenshot I published the day after the 2020 election.

A few things have happened since that night. Sometimes, when I dig up old back issues of am/FX, I get a jolt seeing either how different or similar things were in prior years. While my memory tells me that the Summer of 2020 was the big, scary time for riots and protests and all that, my fact of the day from November 2020 reminds me that the US was prepared for the worst that night.

Here’s my fact of the day on Thursday, November 5, 2020:

So, I guess you could say we have come a long way?

Anyhoo, in ye olden days of 2020 we were tracking the BIDEN token on FTX and watching the New York Times needle fly all over the place, but now we have more sophisticated methods as US courts have overruled the CFTC and those who do not find US election psychodrama stressful enough can now add risk of personal financial ruin to the list of post-election impacts. While potentially bad for society, the “let’s gamble on everything” world provides great tools for real-time election analysis. Let me go through a few that I find useful.

First, pre-election we might want to know what is priced for the timing of the outcome. There’s a bet for that! You can see here that the immediate to 07NOV range captures about 80% of the distribution with dates after 11NOV tailing off towards zero.

As a reminder, here are the prior settlements.

When was the US election result confirmed / final?
2020       4 days later
2016       2:30 AM
2012       11:20 PM
2008       11:00 PM
2004       The next day around 2:00 PM
2000       December 12
1996       9:30 PM

The next tool that will likely be useful on election night is the specific state election odds. There are only seven states that matter.

Here are the gambling odds for each of those states, via Kalshi.

Needless to say, the polls are much, much closer than the gambling odds as people are assuming that the pollsters will make the same mistakes as they made in 2016 and 2020. I differ with that assessment as history shows that pollsters tend to overcorrect pretty quickly, usually after getting it wrong twice. Anyway, polling errors tend to be correlated and so as soon as we see which way one state is going, we will get a read on which way the entire race is going. The errors are not perfectly correlated, but they tend to lean the same way.

Source: https://centerforpolitics.org/crystalball/polling-error-in-2016-2020-look-out-for-wisconsin/

So, you can really argue it probably comes down to Michigan, Wisconsin, and Pennsylvania. If Harris wins all three, she probably wins. If not, she’s in trouble.

In 2020, Wisconsin was called at 2:16 p.m. Wednesday, Michigan was called at 5:56 p.m. on Wednesday, and Pennsylvania was not called until November 7 at 11:25 p.m. Here are all the times of the AP calls:

https://blog.ap.org/behind-the-news/calling-the-2020-presidential-race-state-by-state

and 2016:

https://blog.ap.org/behind-the-news/calling-the-presidential-race-state-by-state

OK. I hope you found this useful.

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If you’re looking for a good way to spend 35 minutes or so this weekend, check out Lesson 3 of our flagship course “Think Like a Market Professional” for free.

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Calendar

My view is that Harris will win by an extremely narrow margin and the result will take days as recounts and challenges are nearly guaranteed. Next week’s calendar features the election, obviously, along with a parade of central bank announcements. The FOMC meeting will be weird if the election hasn’t been decided yet, but I suppose they just go 25 and say, “data dependent!”

The US data remains muddied by hurricane, strike, and election uncertainty and so we will need to wait until early 2025 before we get a proper view of whether the soft landing continues, or we are going to reaccelerate or crash. Speaking of 2025: Don’t forget to buy your Spectra Markets 2025 Trader Handbook and Almanac. It’s great.

Buy the Trader Handbook and Almanac on Amazon now.

Final Thoughts

Two good links:

https://www.readtrung.com/p/the-dorito-fication-of-media

https://fasterplease.substack.com/p/will-the-anti-obesity-wonder-drugs

Due to a family obligation, I will be out Monday and the AMA for Spectra School will be rescheduled. Sorry for the hassle.

Have a humble and hungry weekend.

good luck ⇅ be nimble