Today's Hallowe'en countdown post concerns the American election. This is a politically neutral blog, so I will not express preferences for parties or candidates, although I have referred to Trump (here and here) and the Clintons (here, here, here and here).
This year, the Hallowe'en countdown practically wrote itself, because the news and this election have been crazy, the headlines stressful and surreal. There is a political action committee (PAC) called 'Americans against Insecure Billionaires with Tiny Hands,' or 'Donald Trump has Tiny Hands,' for short. It actually made the news that the sale of Hallowe'en masks of candidates has predicted the winner of the American election for the past 36 years, and Donald Trump masks are outselling Hillary masks. The Internet reports a viral nationwide pumpkin-carving trend: the Trumpkin.
Images Source: NBC.
Masks and wigs on sale 27 September 2016, at the Chicago Costume store in the Wrightwood Neighbors neighborhood. Image Source: Chicago Tribune.
Today's post deals with another aspect of the election: predicting the future. It concerns people who make money speculating on who will win. It is illegal in the United States to bet on elections, although people find ways around that in the name of research. Brits, Canadians and Australians are among the non-Americans betting on the American election. This post considers how much money you can make if you suspend all values and opinions and coldly and correctly assess mechanistic outcomes in a system - and this post further considers whether that assessment can actually create the future, rather than predicting it.
In the case of Brexit, pro-EU George Soros accurately anticipated Brexit's effect on the pound and claimed that the "catastrophic" break-up of the European Union is now "practically irreversible." Elsewhere in London, others were less glum. A young hedge fund manager, James Hanbury, personally made £110 million speculating that Britain would leave the European Union. Hanbury works for Odey Asset Management, headed by Crispin Odey, who bet about £7.5 billion of his firm's funds that a majority of Brits would vote for Brexit. Correctly anticipating the drop in the pound, the firm invested in mining in gold, diamonds, and in post-Brexit firms expected to prosper, particularly those in the tech sector; the firm also bet against economic sectors expected to lose value because of Brexit. Odey reportedly personally made £220 million betting on Brexit. Bloomberg observed that the firm's fund gained 15% on its investments on the 23 June 2016 vote. The correct assessment that Brexit would occur was based on a "private poll." According to The Independent:
"[Odey] is one of the richest men in the UK, with a personal fortune of [over] £900m. In 2014 it was reported Mr Odey built a Romanesque stone temple to house his chickens."Brexit commentators in the MSM fixate on class, age, and educational differences between pro-Brexit and anti-Brexit voters; they speak of stresses in the European Union as liberal globalists contend with alt-right or far-right populists. Brexit's critics concluded that the vote was about racism and xenophobia, backward thinking, a retreat to the dark ages, away from a progressive future. Those talking points obscure an underlying trend. While pro-EU supporters argued that Brexit spelt economic cataclysm, the investors who profited from Brexit told a different story. Investors' huge gains involved positive bets on technology; moreover, those betting capabilities were curiously enhanced by that same technology. This result signaled that Brexit was partly about the evolution of the UK economy: Brexit showed that Euro-Britain is morphing into Silicon Britain.
Crispin Odey's £150,000 chicken coop Neoclassical temple, with ancient Sumerian Ziggurats. The coop houses 20 chickens on the grounds of his home in Gloucestershire, UK. Image Source: Daily Mail.
The Odey chicken coop, with its 13-step Ziggurat pyramids missing their etheric one-eyed capstones, betrays a common Masonic or so-called Illuminati motif. These motifs imply that architectural styles create occult spaces where the economic and the political confront the magical. Image Source: Beyond Beautiful JLo from the Jennifer Lopez video, I'm Into You (2011).
On 22 September 2016, Hassle co-founder Alex Depledge told the BBC that British institutions teach, support and follow an outdated model in relation to the real global economy. Tech engineering placements are difficult to fill in the UK due to labour shortages and all companies, not just tech companies, must now hire foreign workers to fill IT positions. Depledge chairs the UK's Coalition for a Digital Economy (COADEC). She visited a UK school and asked the students what professions they wanted to enter. They all wanted to become teachers, bankers, doctors, or barristers; these are the old liberal professions of the old economy. None of the students knew about careers in Information Technology. Depledge argued that for these middle class children to be competitive in the real world, they had to learn about IT alternatives. She implied that globalization required a shift in attitudes in Britain, to reflect where Britain's economy is going. Oddly, from the 'Silicon Britain' angle, Depledge's remarks make Brexit more globalist, not less globalist, possibly with a different class of people at the helm of globalization.
Given the Brexit example, I researched this post on the American election by checking projected economic impacts of victories of either Clinton or Trump. There were many articles on the economic changes which will occur if Trump becomes president, presumably because of his many inflammatory economic remarks. Articles of the economic impact of a Clinton presidency, on the other hand, were sparse. Here is a sample of the search results, as related to the economy:
- Oil Pro (January 2016): If Trump Becomes The US President, How Would The Global Oil & Gas Industry React?
- Salon (22 January 2016): This is how Hillary Clinton loses: How a market slowdown could become a recession — and put Donald Trump in the White House: Economists remain divided on whether current market turbulence could get worse. If it does, brace yourselves...
- The Federalist (2 March 2016): How A Trump Presidency Would Hurt American Incomes
- Los Angeles Times (7 March 2016): How would a Donald Trump presidency affect the stock market?
- U.S. News (2 May 2016): Hillary Clinton vs. Donald Trump: Here's How Wall Street Sees It
- The Street (4 May 2016): 6 Stocks to Buy for When Donald Trump Is President: Donald Trump in the White House would likely be huge for stocks such as Apple, Exxon Mobil, and Smith & Wesson
- Governors' Biofuels Coalition (5 May 2016): Industry, greens assessing expected Trump-Clinton smackdown
- Market Watch (11 May 2016): Difference between Trump and Clinton as president: One million barrels of oil a day
- Motif (30 June 2016): Themes and stocks to watch if Donald Trump is elected
- CNBC (20 July 2016): Here's what a Trump win would really mean for the stock market
- Yahoo Finance (20 July 2016): Best Stocks for a Donald Trump Presidency
- CBS (20 July 2016): Stocks to buy (or sell) if Donald Trump wins
- Bloomberg Markets (27 September 2016): This ‘Trump Trade’ Marries Mexican Peso With Putin’s Ruble
- Business Insider (30 September 2016): Here's why Janet Yellen might quit if Donald Trump wins
- Yahoo Finance (3 October 2016): These Are the Stocks to Own If Trump Wins
- Ars Technica (10 October 2016): Hillary Clinton vs. Donald Trump on US broadband: She has a plan, he doesn’t
- Zero Hedge (11 October 2016): Ron Paul Says Gold "Going Up" Whether Trump Or Clinton Elected
- Ag Wired (26 October 2016): How Will Election Impact Trade?
Liberal film director Michael Moore on the destruction of the middle classes. Moore pleaded to voters in his anti-Trump film, Michael Moore in TrumpLand (released 21 October 2016). He warned liberals of the threat Trump presents to the Clinton campaign. Nevertheless, his warning rant (above) went viral online among the alt-right on 25-26 October 2016. In the remaining part of the speech not included in this video, Moore explained that an angry anti-establishment vote for Trump would be a disaster for America. He is counter-appealing to the very dispossessed members of the middle classes who are considering Trump. Video Source: Youtube.
This election may not involve a simple story of globalists and anti-globalists - of progressive, well-traveled liberals versus backward, conservative and populist protectionists; of the enlightened, well-heeled, socially compassionate and well-educated against the ignorant, the poor, and the backwoods racists. This election could reveal a class- and generational battle inside developed countries over which parts of society will control and define globalization.
If Trump has any chance of winning the American election, it will depend on the reaction of the dispossessed. This blog has covered the gutting of the middle classes and working classes through the post-recession years. There is a delayed backlash against the recession-era destruction of those classes, in America and elsewhere. My main 2016 posts on the subject were Quid Pro Quo and Abandoned Buildings, Left to Rot. The middle classes form the glue of society between top and bottom; they cannot be ruined, as they were during the recession, without serious consequences. A two-tiered society of haves and have-nots, plutocracy and precariat, cannot arise without profound social and political destabilization. That means that bankrupting the middle classes to pay for plunder led not to a solid two-tiered system, with the super-rich dominating the old establishment. Rather, contrary to that current picture, the super-rich are presently the new precariat. With the middle classes ruined, the old establishment will be up-ended and transformed. There is a game of musical chairs now on to see who will dominate the future system.
We do not yet know where that destabilization will lead and what kind of future system will emerge. This process is compounded by the impact of technology on society (see a man-in-his-bedroom video on how social media changed this election) and on corresponding economic evolution; generation wars, anger at the dominant Baby Boomers and alienation of younger generations; the impact of the recession and ongoing devasting homelessness (see one of many I-live-in-my-car videos here). These compounding factors indicate that the outcome is fluid. A new establishment is being established. And control of that future establishment is not the assured domain of the super-rich. There are leveling factors at work, particularly technological ones, which could change the whole landscape of western authority. Saxo Bank's chief economist claims that the true issue of the American election is "how America will deal with the broken social contract" and argues that the same theme will dominate Germany's 2017 federal election.
The polls and mainstream media are almost universally predicting a 90-to-95 per cent certainty of a Clinton victory. As with Brexit, these declared odds vastly improve returns on betting or investment for those who speculate on a Trump victory, if Clinton loses after all. Betting markets show a different expected electoral outcome from political polls. The MSM preference for Clinton's dominance of predictive polls has created a speculative environment in which those betting on Trump could make a lot more money than they otherwise would have. The British newspaper, The Independent, has discussed the polls (often politically slanted) versus the odds, here. Here are some related sites:
- Five Thirty Eight
- Five Thirty Eight 2016 Election Forecast
- Five Thirty Eight 2016 Election Who Would Win Today?
- Oddschecker US Presidential Election Betting Odds
- Predict Wise 2016 President Winner
- New York Times Presidential Polls Forecast
- Iowa Election Markets: 2016 U.S. Presidential Election Market
- Talking Points Memo
- Real Clear Politics Election 2016 Presidential Polls
- Real Clear Politics Electoral Map
- Real Clear Politics State Polls
- Real Clear Politics Battleground States: Arizona
- Real Clear Politics Battleground States: Colorado
- Real Clear Politics Battleground States: Florida
- Real Clear Politics Battleground States: Georgia
- Real Clear Politics Battleground States: Iowa
- Real Clear Politics Battleground States: Maine
- Real Clear Politics Battleground States: Michigan
- Real Clear Politics Battleground States: Minnesota
- Real Clear Politics Battleground States: Missouri
- Real Clear Politics Battleground States: Nevada
- Real Clear Politics Battleground States: New Hampshire
- Real Clear Politics Battleground States: North Carolina
- Real Clear Politics Battleground States: Ohio
- Real Clear Politics Battleground States: Pennsylvania
- Real Clear Politics Battleground States: Virginia
- Real Clear Politics Battleground States: Wisconsin
- Monmouth University Polling Institute
- FX Street Lucrative Trades around US Elections Vote (Livestream 3 November 2016 on gold, silver, sugar, grain, oil)
- Financial Times page on the US election
- Los Angeles Times Poll Dashboard
- Telegraph Polls and Odds 2016 election tracker
- 270 to Win 2016 Battleground Map
- Rasmussen Reports Election 2016
- CNN 2016 Electoral Map
- CNN Political Prediction Market
- Reuters Polling Explorer Elections
- Reuters/IPSOS Indicator of Turnout
- BBC US Election Poll Tracker
Odey's focus is not so much on the electoral candidates and their stated policies, as the conditions surrounding them. Odey did not feel that his firm had or has to predict the outcome of the Brexit vote or the American election. Rather, speculators and investors must accurately anticipate how the common people - who see themselves as arbiters of real reality, the buck stops with them - will react to the media electoral stories when comparing them to their own experiences. If they feel media reports diverge from their experiences, they will get angry. Value Walk obtained a copy of the call Odey made to his clients in June 2016. Odey's assessment of the American election resembled Michael Moore's October warning. As one of the super-rich, Odey was worried. He was aware that the entire system could be overturned by angry, dispossessed formerly middle class populations, no longer served by disconnected élites. The Value Walk report is quoted in full:
Trump is a slippery, self-contradicting blowhard when it comes to economic promises, but it seems, as Odey stated, Trump would reduce the power of the Fed. That means Odey's remarks also chime with what I stated above, namely, that the super-rich are the new precariat, because the QE bubble is going to burst. The London hedge fund leader is aware that the plundering of the middle classes could blow up in the faces of those who have profited from quantitative easing, because the real economy is inhabited by the majority of popular voters. Artificially inflated assets (and those who who profited from them) are divergent from, but still connected to, the real economy through the election. This implies that if there is any correction to be made between Wall Street's inflated stocks and Main Street's real economy, it may appear in the election results."As markets have been bouncing quite heavily recently, 'we’ve had a pretty good time,' hedge fund manager Crispin Odey told clients in a conference call June 30,  a recording of which was obtained by ValueWalk. The London born and bred hedge fund manager’s world view is not limited to Brexit, an event he accurately modeled and reportedly made double digit profits in its wake.One of Britian’s wealthiest men sees a significant global trend that extends across the European Union experiment and into the US. This trend will impact investors but mostly central banks, shaking them to their foundation. Most meaningful, traditionally private economic discussions are becoming public despite certain words being repressed from even being used in elite company, Odey says. [']There are ugly topics that the economic establishment does not want to address. Donald Trump, populist parties across Europe and Brexit are not the start of the societal trend and they won’t be the end. If the real issues remain un-addressed the problem will only grow.'The economic discussions censored from public view are most importantIt doesn’t matter if an investor has a terminal or multiple subscriptions to high cali[b]er research, there are certain words, topics and economic discussions that are effectively censored from 'public' view.Crispin Odey’s client conference call might be one of them. In fact, in it he addressed 'censored words' that were not allowed in the polite economic public square.The nature of Odey’s comments are perhaps a similar vein to recent commentary from JP Morgan’s Marko Kolanovic. Kolanovic’s accusation that central banks are actively manipulating markets, much like Paul Singer’s earlier pronouncement, went generally unreported. Like evidence regarding the blocking of investigations into MF Global and the whisper topic behind big bank derivatives, certain issues, it can be argued, are forbidden from seeing the light of day.Brexit was at one point among these heavily controlled economic discussions.Brexit scare called out for what it wasThe 'Brexit scare' was well documented at the time, as one-sided reports generally pointed to racism and bigotry as only reasons Britain might want to leave the European Union. Such censorship of the logical economic reasons behind Brexit led to certain unemotional analysts, led by CIBC, that recognized the Brexit vote had a chance for an immediate mean reversion trade. It wasn't about getting the outcome of the vote right as much as it was recognizing the scare tactics and what it meant for investment success.Odey, with his elite establishment pedigree firmly in tow, points out the economics of why people throughout Europe – and the US – and nails causation to why they are dissatisfied.What is the cause of dissatisfaction? The establishment meme is that it has to do with racism or anti-intellectualism. Odey, for his part, points clearly to the core performance driver for societal dissatisfaction: elite outcomes are disconnected from the masses.At its core, the economic fortunes of society’s economic fortunate have decoupled from that of the mainstream, he says. It is an obvious decoupling that can be documented on several levels but is generally being ignored. If 'the establishment' doesn't fix the problem, it is likely to get worse – much worse.Trump has tapped into legitimate economic concerns that should not be ignored even if he losesOdey isn't advocating in favor of Trump or the gaggle of anti-immigration parties throughout Europe who are tapping into core dissatisfaction and turning anger into their racist end. In fact, the opposite is the case. He is advocating something be done other than the established economic order ignoring the problem.What Odey is addressing is a long term trend. In the one-hour investor call, the man who was once married to Prudence Murdoch looked at his privileged upbringing and clearly stated elites are enjoying separate economic outcomes than the masses and the results of this societal split is becoming clearly apparent.'If one is Spanish they should be very scared by Podemos,' Odey said, pointing to the left-wing political party. 'They are a revolutionary force' despite the party losing support in the recent election in Brexit’s wake.But it’s not just in Spain. 'The risks have been rising all around and (corporate) earnings have been falling.' Political and valuation risk is in the air and a very real narrative is upon us.'The story of this year will be Trump, not just Brexit' he said, pointing not just the man, but a global sentiment. Even if Trump loses, he has tapped into a core systemic issue that won’t go away.Odey views with amazement the US political race. Trump was essentially able to dispatch credible Republican rivals with nothing more than school yard name calling 'Lying Ted,' 'Little Marco' and now Trump has his claws into 'Crooked Clinton,' as Odey describes it. Trump, Bernie Sanders and the lot illustrates the core anger underneath the electorate that their concerns are ignored and that elite success has decoupled from the 'average person.'The popular narrative that Trump is stupid, incompetent, insane or all three is another dangerous delusion. 'Where Trump is so [clever]' is that he has now baited Hillary Clinton 'to claim that she is the "outsider" when she probably isn’t.' If the election comes down to a battle of elite versus common interests – and the decoupling of elite and common interests is accurately reported – Clinton could find more difficulty than is currently the case.Elections in Europe and the US are sending a message that is generally being overlooked by elites as 'central banks are doing the government's bidding'Regardless of the outcome, the US election, like politics throughout the economically developed world, should be a wake-up call. In the unwritten social compact, the fortunes of political and economic elites were historically correlated to those of the mainstream, but this is no longer [the case], Odey said. Central bank monetary stimulus, which is breaking into new all-time historic levels, has exacerbated inequality, creating a troubling trend.'The problem is they can control asset prices by printing money, but they can’t control the economy,' he said. 'Now we have a world in which "the have nots" are rising in number. But thanks to the workings of the central banks, "the haves" are still seemingly enjoying themselves because asset prices remain ever stronger.'A change in discernible if little noticed central bank policy has taken place. Financial repression – forcing market actions rather than motivating – is the name of the new game. 'Central banks do their government’s bidding and governments tell them to stop recession at any price.'In the 1970s the concept that a war against full employment was taking place was generally plastered over has given way to the current environment where 'the word "recession" is censored in polite economic discussions that determine policy outcomes,['] Odey says.Odey points to the problem as central bankers and the core concept of globalization they advocate, which has resulted in fundamental change for average people.'Average people' who could formerly live a 'happy life' in Spain, Italy and France have lost their lifestyleWhere today’s society were once relatively isolated cultures and could live 'a happy life' and yet still compete on the world stage with marginal productivity, that is no longer the case. The Spanish, French and Italians could take entire summer vacations and enjoy life. From an economic standpoint, Odey points out they could rely on a devalued currency and slightly higher than average inflation to keep their economic boats afloat. With the advent of the common euro currency the economic benefits tilted towards the economies with the greatest productivity, namely Germany. No longer could the Spanish, French and Italians, for instance, rely on a devalued currency to encourage capital to flow into their economy when currency values were low and goods were relatively cheap. Numerous studies have shown the rise of the German economy at the expense of other regions under the European Union, a fact that was lightly covered if at all during the Brexit debate.At one point in history living in Europe was about 'having a way of life that was saved by the devaluation of the currency,' Odey said. But that changed under the EU. 'If you were a Spaniard or an Italian that had a happy life, suddenly you were told' that due to a higher cost of manufacturing in the region they needed to 'take a cut in your income and work three times as fast.''It’s no wonder that in that environment politics are moving to the extremes. This explains the rise of Brexit, Podemus and explains the strength of Trump.'Then Odey makes a significant leap ...'The politicians and central bankers are serving each other but not the common purpose. Actually the common purpose would be better severed if we were all suffering together,' he said, pointing to a comment that can easily be taken out of context. When elites and common people both benefit together the elites who essentially dominate the economic and political system are motivated to make sure all boats rise simultaneously.To understand the context Odey harkens back to the 1970s when unions were basically busted in 1979 after being thought invincible in 1973. During this period of time an underground battle was fought with US President Ronald Reagan and UK Prime Minister Margret Thatcher leading the charge. The real argument, the one generally left out of public discussion, was about full employment. Reagan and Thatcher were changing the core social compact and favoring free markets to determine outcomes, the goal was no longer full employment. The effects of this long-term trend are now materializing in clearer view.'We are about to harvest something very unpleasant,' he said. The financial structure is about to be questioned as never before and when it breaks, as manipulated markets often do, 'suddenly capitalism will be accused of having created this.'Odey asks: When politicians will move against central banks?While unrestrained capitalism 'has been a part' of the problem from day one, 'it has been enshrined by having a euro, having a fixed exchange rate.' He says it has also been enshrined by central bankers doing the government’s bidding, which have 'become the equivalent of the unions in the 1970s' in terms of their power.'The question is when politicians will move against central bankers to pick up the voice of the people,' Odey wondered. His life as perhaps the most elite in England is being threatened and he wants elites to help fix it.Destroying the economic system as we know it might not be the answer he points out, but look at the reality. Donald Trump, who advocated at one point eliminating central bankers and has indicated he would [rein] in their power, is an outcropping of this issue. 'It is no surprise Trump wants to get rid of the Fed.'The issue, Odey said, is 'all about re-prioritizing' and aligning economic outcomes throughout society to the point where they once were. Aligning core economic interests is the real message that should be interpreted through 'make America Great again' even though that may not be the current interpretation and the messenger may be inappropriate."
On 14 October 2016, Odey promoted hedge fund manager Dip Shewaram, who promised that Odey's investors would profit from that burst bubble:
Regardless of the election's outcome, these hedge fund managers expect there to be a stock market shock following the election. Others wonder why the shock has not happened yet. They will speculate against areas of the economy which will collapse if quantitative easing fails and invest in areas of the economy that have suffered under quantitative easing. On 3 October 2016, Yahoo Finance quoted Credit Suisse on a related anticipated fiscal policy, with increased spending on infrastructure and defense:"Loose monetary policy has created valuation distortions in all asset classes which will lead to good opportunities for our clients."
Finally, among the many dynamics at play in this American election, I noticed that the popularity of the two main candidates travels on opposing semi-sine curves, rising and falling over time; the two curves nearly intersect, intersect, or overlap approximately every six to eight weeks (on: 15 September 2015; 2 December 2015; 28 January 2016; 1 March 2016; 23 May 2016; 27 July 2016; and 17 September 2016). This is psychologically, socially and mathematically interesting. Following that pattern of fluctuations yields a surprising possible outcome on 8 November 2016."As faith in monetary stimulus crumbles in favor of fiscal measures, Credit Suisse predicts that any steps in the direction of fiscal easing on either side of the Atlantic could deliver another boost to the [defense] sector. 'We think it is quite possible that such policies will eventually be focused on physical and social infrastructure, i.e. where there is a payback and a potential benefit to society,' they write."
-Thanks to -M. for inspiring this post.
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