The Onion: Our long national nightmare . . .
A pretty good Onion headline: Nation Finally Shitty Enough To Make Social Progress:
Although polls going into the final weeks of October showed Sen. Obama in the lead, it remained unclear whether the failing economy, dilapidated housing market, crumbling national infrastructure, health care crisis, energy crisis, and five-year-long disastrous war in Iraq had made the nation crappy enough to rise above 300 years of racial prejudice and make lasting change.
"Today the American people have made their voices heard, and they have said, 'Things are finally as terrible as we're willing to tolerate," said Obama, addressing a crowd of unemployed, uninsured, and debt-ridden supporters. "To elect a black man, in this country, and at this time—these last eight years must have really broken you."
Added Obama, "It's a great day for our nation."
Heh heh . . . That is, unfortunately, only a sleight exaggeration as to the landscape. Of course, for wit, prescience, and humor, nothing beats the Onion's 2001 pre-inauguration headline:
"My fellow Americans," Bush said, "at long last, we have reached the end of the dark period in American history that will come to be known as the Clinton Era, eight long years characterized by unprecedented economic expansion, a sharp decrease in crime, and sustained peace overseas. The time has come to put all of that behind us."
A classic: So witty, so foresighted . . .
Nation Finally Shitty Enough To Make Social Progress
NOVEMBER 5, 2008 | ISSUE 44•45
Bush: 'Our Long National Nightmare Of Peace And Prosperity Is Finally Over'
JANUARY 17, 2001 | ISSUE 37•01
Back to Work
Congratulations to President-elect Barack Obama on his decisive victory. And to John McCain -- a truly great American hero who delivered a gracious and patriotic speech.
Now that this historic election is over, we can return to the markets and the economy. We will closely watch and discuss Obama's appointments to key economic posts, starting with Treasury Secretary.
And, we still have an economic crisis to deal with, a housing mess to unravel, and a possible second stimulus program coming up. Up next: Non-Farm Payrolls on Friday, and I expect it to be a disaster.
Plus, the continued redesign of the site is going to get tweaked. I've heard your issues, and we will address them-- perhaps even to solicit your ideas for design changes. The Cafe continues to attract some very high quality contributors also.
Time to get back to work.
Very interesting party this evening -- an even split between traditional NYC Democrats, and former Reagan/Bush/Nixon aides and advisors. Lots of GOP members, and a few Obama advisors.
I spent a good portion of the evening chatting with Richard Whalen, a longstanding Washingon D.C. insider, and a fascinating character to boot.
The highlight of the evening: I met, and got to speak with, former FOMC Chairman, and current Obama economic advisor, Paul Volcker. (Paul Volcker!)
Even better, I got to tell him my favorite Bush joke (actually, a quote from Allan Mendelowitz):
“The Bush administration, which took office as social conservatives, is now leaving as conservative socialists.”
It really cracked him up!
Tall Paul. How frickin' cool is that . . . ?
Regulation after Bush
What does the future hold for regulating Wall Street?
Regardless of who wins today's election, both Barack Obama and John McCain have staked out different positions on issues involving economic regulation – and each is very different than the outgoing president.
The Economists' Voice looks at what we might expect in the post-Bush era:
While the presidential candidates have been diverted by critical issues ranging from Barack Obama’s taste in lettuce to John McCain’s condo, it’s hard to deny that, once elected, serious questions involving economic regulation—everything from housing finance to alternative energy mandates—will be front and center. And here, at least, the divisions are clear: Obama would use a heavy hand to push the economy back on track, while McCain would do his best to put the free back in free markets.
Or maybe not.
Ever since the New Deal, Democrats have largely accepted the label as the party of regulation—defenders of the weak from the vagaries of soulless capitalism. Republicans, for their part, position themselves as the nemeses of the social engineers and do-gooders who would sap the economy of vigor. But once in office, reality bites. Thus, with more than a little encouragement from Detroit, Ike committed the GOP to the biggest public works project in history— the Interstate Highway System. Richard Nixon imposed price controls to contain inflation, while Ronald Reagan protected the swooning steel industry from foreign competitors and the first President Bush championed market intervention in the name of cleaner air and accommodations for the disabled. The second Bush hasn’t stood on principle either, lavishing seniors with heavily subsidized prescription drugs and supporting bailouts for both investment bankers and the giant private mortgage insurers.
Democrats, of course, have been no better at sticking to their script. Carter deregulated airlines and trucking, while Clinton deregulated telecommunications and nuclear enrichment as well as opening the door to cheap Mexican imports.
Thus, while Obama and McCain may both lull true believers with the bromides of an earlier generation, a subtler mix of ideology and interest group muscle is bound to drive the regulatory agenda once elected. Consider just a few of the big choices ahead.
"Regulation after Bush"
Robert Hahn and Peter Passell
The Economists' Voice: Vol. 5 : Iss. 4, Article 5. (2008)
Has the Market Fully Discounted the Bush Presidency ?
What is it that the market is pricing in?
While partisans try to blame the crash on one or the other candidates, here's something I have yet to hear any of the TV pundits discuss: The George W. Bush presidency.
While partisans try to blame the crash on one or the other candidates, here's something I have yet to hear any of the TV pundits discuss: Blaming it on the presidency of George W. Bush.
Currency Markets are the world's vote on US monetary policies
S&P500 2001-08, weekly
Equities: Which Sell off do you hold the occupant of the White House Responsible for: The One that began prior to his arrival, or the one that began prior to his departure?
Chart courtesy of Fusion IQ, Bloomberg
I do not believe that the 2000-03 crash was a result the markets pricing in a Bush Presidency. However, one could certainly make the case that the past few years market action has been the result of his fiscal, tax, and spending policies.
Oil Prices Respond to Energy and Military Policies
Two oil men in the White House, two wars, no conservation efforts, and no attempts to develop alternatives to Crude Oil:
Gold, 2001-08 weekly
The Gold market is a store of value in uncertain times -- what is it saying about the Bush policies?
Chart courtesy of Fusion IQ, Bloomberg
Bonds: 10 Year Treasury, 1980-2008
Chart courtesy of Fusion IQ, Bloomberg
Longstanding downward trend in rates was in effect since the Volcker Fed broke inflation in 1980 -- recent Presidents (W, Clinton, Reagan) have all benefited from this trend
What are the markets really pricing in ? Might it be the W. presidency?
Pricing in a Bush Presidency (July 08, 2008)
Campaign Finance Map: Monies Raised by Candidates
Fascinating graph of the candidates money raising this campaign cycle. What is so astounding this election cycle is not that John McCain trails Barack Obama in fund raising, but that he also trails Hillary Clinton: Obama $659.7m, Clinton, $249m, McCain $238.1m.
I posted a bunch-o-election related graphs, polls, charts, tables, etc. over in digital media.
There is an interesting debate here amongst those who blame Bush for McCain's campaign woes: Was it the money raising, or was it Bush? I suggest an alternative view: Both. The negative effect of W. hampered the McCain campaign's ability to raise funds.
Regardless, the GOP nominee trailing BOTH the Democrat's nominee, and the 2nd place Democratic candidate in money raising -- that's simply amazing to me.
Map Graphs of all the candidates fund raising are here.
I voted at 6:00am, on an old-fangled, lever based, circa 1950 machine.
The lines were quick, and the little old ladies who were the poll watchers were simply adorable.
My contribution to the electoral process was that one of the old dears dropped her glasses, and the lens went skittering across the floor. I managed to pop it back into her frame.
Prediction Markets Election Contest
Over at the NYT's economics blog, Economix, David Leonhardt is running a prediction market contest, looking at odds of various Intrade contests. Pick any 3 of the 20 questions to answer, and the winner gets showered with untold glory and fame.
The contest has an interesting twist: Its based upon the odds at Intrade. That makes the choices less obvious and the strategies for winning the contest more intriguing. David asked me to submit a "guest" contest post for the Economix blog, which I did. You will find it below.
In addition to my post, David graciously invited all of you to participate, saying: "You have a lot of really smart readers. Let's see how well they can do in the contest." Challenge accepted. The contest runs til tomorrow morning at 6am. Go over to the prediction market contest and submit your best guesses.
Let me begin with this (weasely) caveat: While I have spent many years studying markets, I am not remotely a political analyst. In fact, I dislike politics, and I especially detest how it has polluted economics.
That said, be aware that my preferences in 2000 were the exact opposite of what actually occurred. My choices were McCain, Bradley, Gore, Bush – and that was pretty much the order they lost in.
And by way of full disclosure, I am probably best described as a Liberal Republican – low taxes, balanced budget, strong defense, no unnecessary overseas involvement, and no government involvement in personal matters (birth control, abortion, gay marriage, etc.) Liberal Republicans are now mythical creatures that no longer exist. I do not recognize the abomination that now calls itself the GOP. I guess that makes me an Independent.
OK, let’s move on to the contest, where whatever mathematical skill I may have could be of some small assistance in this contest.
My first thought: Picking the frontrunners and favorites appears to be a surefire path to the middle of the pack. To “win” this requires identifying which of the long shots really aren’t such long shots after all. In the markets, this is called variant perception – what the crowd (and the money they bet) betting thinks is an unlikely outcome, but is actually a higher probability result than most realize. (The best parallel company example is deep value stocks).
If this were actual money, I would most likely pick two favorites, and a single long shot. Something like:
9. North Carolina: Obama wins (1.9)
3. Obama’s electoral votes 379 or fewer (1.3)
11. Pennsylvania McCain wins (7.1)
[Tiebreaker] Winner popular vote share: 51.5%
That is the fiscally prudent thing to do, but that’s no fun. And since its not real cash, why not go for it?
What might be the variant outcome that most people think is very unlikely? I come up with 3: 1) A McCain victory; 2) A surprisingly tight race; 3) An Obama blowout. A McCain victory is (in my terrible political judgment) highly unlikely. The next variant perception scenario is either a very tight race, or an Obama blowout.
Looking at the questions, there are only a few that fit into this scenario. They are: Q2. Greater than 65%; 3. Obama’s electoral votes (out of 538) 380 or electoral votes more; 7. Obama wins Georgia; 10. Ohio McCain wins; 11. Pennsylvania McCain wins; 12. Virginia McCain wins; 13. Democrat-Republican breakdown 271 or more;
I don’t see McCain winning Ohio, Pennsylvania, or Virginia; He does have a good shot in Florida, but its not a great payoff (2.7 pts). Same with Obama winning Indiana (2.4 pts) and Georgia is a long shot.
That leaves the Obama blowout option the best odds (low possibility) relative to the points (highest points) So the picks I would make are:
2. Greater than 65% turnout;
3. Obama’s electoral votes (out of 538) 380 or electoral votes more
13. Democrat-Republican breakdown 271 or more.
[Tiebreaker] Winner popular vote share: 53.5%
While I give this a less than 20% chance of occurring, it’s the highest payout.
In an election where one of candidates ran many Hail Mary’s, it is only fitting.
One last caveat, so my clients don’t have a heart attack: This sort of low probability, high payoff is the exact opposite of how we run money in the office. It is why we’ve stayed out of trouble most of this year . . .
Prediction Markets and the Election: A Game
October 31, 2008, 6:42 pm
Measuring the 'Internet Election'
One of the things this election will be notable for is how well the Press is using digital media and interactive pages to dissect the issues and polls. I've gathered a slew of them and posted them in the Digital Media Tab.
Official website visits, YouTube, Facebook, Blogs, Polling: This election has had an enormous amount of internet generate content, much of which actually shed some light on the election campaign and issues.
Measuring the 'Internet Election'
Web Data Offer New Slant on Traditional Horse Race
WSJ, OCTOBER 18, 2008
Economics versus Politics
One of the things this election will be notable for is how well the Press used digital media and interactive internet to dissect the issues and polls. I've gathered a slew of them and posted them in the Digital Media Tab.
Here's a terrific example: Forget the polls for a moment, and consider instead what might be driving them.
The WSJ's Real Time Economics does just that, looking at a state-by-state polls compared to key economic indicators. These are changes in home prices, employment, and income:>
State-by-State Polls Compared to Economic Indicators
WSJ, November 1, 2008, 1:47 pm