Monday, September 29, 2008

A simple graphic explains why I am the man.

This is how one goes about making money on Intrade - spotting trends before they happen. I correctly predicted (4-5 days before the markets responded) that McCain's VP pick was a game changer. I unloaded all of my Obama stock on Aug 29.

Meanwhile, my prediction about the general election is unchanged since February. That is, the only way McCain stands a chance is if the economy is booming and Iraq is pacified. Once the financial crisis hit on September 16, everyone knew Obama's numbers would go up.

I sold all of my Obama stock at 61.6 tonight because I think thats pretty close to the natural equilibrium value. It won't go much higher or lower (max of 70, min of 55) unless something crazy happens between now and then. I'm interested to see how Palin performs in the VP debate on Thursday, or if Biden says something really stupid. Alternatively, many of the state electoral vote races are VERY close right now. The trades below represent the most hotly contested states right now. The numbers below represent the probability that the corresponding state goes for Obama. Obviously, subtract that number from 100 if you want to find the probability that the state goes for McCain. Look how close Indiana is!

Trade FLORIDA.DEM 48.5
Trade INDIANA.DEM 42.4
Trade IOWA.DEM 83.0
Trade MONTANA.DEM 15.0
Trade NEVADA.DEM 51.0
Trade OHIO.DEM 51.7

Wednesday, September 24, 2008

Playing Economist

Some reasons why I suspect that the bailout is a bad idea:

-We are giving the Bush Administration 700 billion dollars to use however they see fit. The Bush Administration. Am I the only one who sees a problem with this? When has Bush ever been prudent with our money? What crisis or problem has he ever successfully managed?

-Hank Paulson will have almost zero oversight. We're going to put the future of the US Economy in the hands of one Bush appointee? This reminds me of the FEMA director Michael Brown during Katrina. I can hear Bush now. "Hankie, you're doing a helluva job."

-Where is the 700 billion dollars going to come from? The US government certainly doesn't have it. Where are we going to get it? Borrow more from the Chinese? We already owe them 1 trillion; why not make it 2? Or perhaps we could go beg King Abdullah of Saudi Arabia? Then he could channel the interest from our loans directly into the accounts of extremists and terrorists who are trying to take over Pakistan or are killing our soldiers in Iraq and Afghanistan.

-What will the consequences of borrowing 700 billion dollars be? Inflation? A (further) collapse in the value of the US Dollar? If we're lucky, it will only be 15-20 years of economic stagnation, like in Japan.

Something can't come from nothing. This crisis is the result of a massive disequilibrium in the financial system trying to correct itself. A 700 billion dollar bail-out will only delay the inevitable. It allows us to avoid pain now for a lot more pain later. I wish Americans would for once not screw over future generations. We spent money we didn't have. We should pay for it. Not our children.

Saturday, September 20, 2008

Simple Question:

"Do we want to live in a system where profits are private, but losses are socialized?"

One economist thinks Paulson is wrong for bailing out all of these financial institutions. I am inclined to agree.

Thursday, September 18, 2008

Another conservative for Barack Obama

One can never quite read enough of these. My belief is that any conservative with foresight is supporting Obama. Such people have been demanding the heads of the current run of GOP leaders for their failures. They know that the best way to punish those leaders IS NOT to put them back in power for the next four years. It is to purge their asses from office until they get their act together.

Meanwhile, Obama has regained his lead over McCain on Intrade. Just a few days ago it was 47%-52% Obama-McCain; now its 51%-48% Obama-McCain. It will keep shifting back in Obama's favor. Historical precedent is very clear about this - economic disasters are bad for the incumbent party. It isn't helping McCain's case that he doesn't have a plan to deal with the economic crisis while Obama does. It also doesn't help McCain's case that he reportedly doesn't think the economy is in trouble, that he thinks the "rich" are people who make more than 5 million a year (making 2 million/year is middle class, I guess), or that he doesn't know how many houses he has.

The biggest thing that hurts me is to see John McCain become the very thing he stood against. He used to be a genuine maverick; he wasn't afraid to stand up to the GOP leadership or to "agents of intolerance". Now he panders to them. Instead of sticking with his centrist, independent-friendly credentials, he is sucking up to the evangelical base by picking an ignorant nobody to be his vice president. For Christ's sake, she didn't even know what the "Bush Doctrine" was. Has she been paying ANY attention over the last 5 years? It is absolutely outrageous. It is reckless. And the new biggest thing that annoys me is when a person tries to equate her experience with Obama's, to suggest there is no difference between Palin and Obama. It is painfully obvious that he is at least 10 times smarter than she is.

I would have been just as relentless had Obama picked such an ignoramus as a VP because there is a higher-than-usual possibility that he could be shot, whether we like to think it or not. So his VP pick was all the more important. McCain too has a higher risk of death than a typical president, due to his age and health. If I knew for sure he wouldn't die, that would be one thing. But we don't know that. And I don't want a Commander in Chief that apparently thinks going to war with Russia is not a big deal. Republican Senator Hagel seems to agree with me.

Sunday, September 14, 2008

That horserace I recently spoke of

McCain on Intrade has broken 50% for the first time over the last couple of weeks. Before the Palin pick, Obama was sitting at a comfortable 62% to McCain's 38%.

The significance of this event should not be overlooked. The second graph is the probability that the Republican Party will win the presidency in 2008. Its value roughly reflects the strength of the GOP, which has diminished with Bush's disastrous polices. And as it now mirrors the McCain contract, the Republican_President contract has broken 50% for the first time in almost two years. It averaged 35% for most of that time (obviously then, the Democrats had a 65% chance of taking the White House). This confluence either represents the strength of McCain (+Palin), or the weakness of Obama; perhaps a little of both.

It is interesting to note that McCain himself didn't particularly budge the GOP's chances in November. It was the pick of Palin as VP that really caused a spike in his numbers. It makes us wonder whether or not it will be a temporary or long-term gain. Incidentally, I do believe that McCain's winning of the GOP nomination had staved off what would otherwise been a complete massacre in the 2008 election by the Democrats. Under Romney or Guliani, the GOP would be under 30% right now in my opinion.

Something else that I just read on the BBC: Obama just gained record donations for the month of August ($66 million). Recent events have made many of his supporters very nervous. As well they should be. McCain/Palin is a formidable ticket, but it is beatable.

The day that John McCain picked Palin for VP, I sold all of my Obama stock on intrade at about 62. Now that contract is worth about 47% and so I emptied my bankroll this afternoon buying it back. I still think Obama is going to win this election, and here is why:

1. I stipulated long ago that McCain only has a chance at this election if the economy doesn't tank and the war in Iraq doesn't get worse. Has anyone been watching the news from Wall Street lately? It is good news for Obama, and bad news for McCain (a self-professed economics novice). Not to mention, a majority of Economists think Obama will be better for the economy in the long run.

2. Palin-fever will wear off. November is still a long way away, and her ignorance on important issues will become very apparent in the Debates. I believe people are going to underestimate the effect of the internet on this election. You simply can't hide ignorance like hers the GOP were able to hide Bush's in 2000. Don't get me wrong, I like the woman as a person. But people are going to be uncomfortable with a foreign policy novice taking the reins when McCain dies.

3. McCain is running a nasty campaign and it will catch up to him. Obama has stayed above it, for the most part. McCain is lying, he is being deceptive. It is Karl Rove and George Bush all over again. You can fool some of the people all of the time, and you can fool all of the people some of the time. But you can't fool all of the people all of the time.

So there it is, my prediction - Obama wins. But my margin of comfort isn't more than 5%. It will be a close one, and a major gaffe by any side or a major world event could tip things either way.

Thursday, September 04, 2008


It has been a while since I've seen so much of it.

All of the pro-Obama pundits have been discussing the Sarah Palin vice presidential pick with the underlying assumption that it is obviously going to blow up in McCain's face. All I've been reading for the last week is anti-Palin this, anti-Palin that. Many of these tidbits have a lot of truth to them; especially from an independent or left-wing point of view (95% of the internet). However, they don't undermine the fundamental reality that Sarah Palin has made McCain a more competitive presidential candidate.

The right is falling in love with Palin. Evangelicals are getting excited. Only a week ago, I thought Obama's own VP choice was perfect, but the situation has changed dramatically. Joe Biden is going to have to tread very, very carefully in the VP debates lest he be seen as a bully. His inability to filter what he says would have been funny against a Romney or a Guliani; it will look chauvinistic against a Palin. The last thing the Obama/Biden ticket can afford to do is lose more women to McCain.

It will be interesting to see how Obama himself responds to the Sarah Palin factor. Hopefully his response will be more effective than that of all of his intellectual backers on the internet, which has been terrible. Its time to stop wishing Palin didn't make McCain stronger, or hoping that she is going to have some disastrous secret that destroys McCain's campaign. People need to take her seriously and begin to think about how to counter her. Otherwise, a lot of people are going to wake up on a cold November day still wondering how they lost to such a "weak" ticket.