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Good odds for odd goods
By Nixonomics | November 3, 2008
If we’re wrong, it’s an inauspicious start for Nixonomics, especially as we will be providing advisories for contracts in political prediction markets. But, against the odds, against the polls and against the better judgment of many, we call for a McCain-Palin victory tomorrow.
Within 48 hours we’ll know if we’re right. Or wrong. Within 48 hours we’ll know if the polls missed something or had it right all along. Our sense throughout this presidential campaign was that the polls represented an echo chamber to the media. The media at some point became a strong, sustained and persistent voice for the Obama campaign. A unpaid war room for Obama that answered any criticism levelled by Hilary Clinton in the Democratic primary and has played the same role with more vigor and viciousness in the presidential campaign to anything smelling remotely of attack by McCain.
The question for anyone looking at the polls as a predictive indicator or the Intrade presidential contracts is this: has the media affected the polls by their campaign for Obama?
In finance and economics, both social sciences in our eyes, it is well understood that the act of making an observation affects the observation itself, representing a feedback loop that is self-confirming until the event occurs revealing the faulty assumption underlying logic of the presumed outcome.
Our call for a McCain-Palin victory is based on a number of behavioral no-nos that we have observed through the presidential campaign.
There has been little or no skepticism associated with what are some dramatic assumptions underlying the sudden shift in the electorate anticipated to occur tomorrow.
If the press is to be believed, every state, including hard red Republican states Montana and Nebraska, are in play. Equally, the media and prediction markets suggest that all the swing states and many medium red Republican states like North Carolina, Virginia and Missouri will all turn blue. Voters certainly can change their minds dramatically but rarely by that much in such a short period of time, without a truly transormative event, like the Great Depression or World War II.
To suggest that Montana, Nebraska or Georgia will vote Democratic tomorrow is to suggest that something extraordinary has occurred in the country. An event whose significance is orders of magnitude greater than a poorly executed Iraq war which is not a major issue in the campaign and a economic crisis the impact of which is still unknown. Dramatic shifts in the electorate are understood after the fact, rather than in the process of a presidential campaign. Nixon’s so called Southern strategy was clearly understood as such largely after Karl Rove claimed to explicity to use it to get George W. Bush elected. However, everyone from Reagan to Clinton understood that one could build a winning coalition through the groups that Nixon put together when he was elected in 1968 and 1972.
We suspect the media has gotten itself caught in a terrible trap. A groupthink tsunami. The mother of self-feeding feedback loops. They have extrapolated their excitement for Obama into a irresistible narrative that wraps up the exit of an unpopular president, associated with a once unpopular war and the end of a long housing/credit bubble that has spawned an economic crisis along with the old, fusty, out of touch, warmonger McCain storyline. The timing of the financial crisis has given the media’s narrative a kind of certainty that makes the election seem a cinch for Obama.
Logically, who in the world would like to argue with the storyline? The US is going through one of the worst economic crises in its history. The incumbent is very unpopular, but for a very different reason than when the presidential campaign began. The incumbent’s party is very unpopular. The Democratic party has chosen an exciting young candidate, with the thinnest of resumes which has been an blessing and a curse. The Republicans have chosen a man who is older, very experienced and perceived by the media as past his best years.
Yet, if we strip away the storyline to its component parts we think readers can see a different storyline. The US is still a center-right majority electorate. The underlying conditions for that center-right electorate to be dramatically reconfigured have not yet changed. The current financial crisis has not gone on long enough to affect that many people yet, that would suddenly change allegiances because of it. From our perspective, the electorate then is fundamentally the same one that voted Bush into power.
In terms of familiarity, McCain is a very well known quantity. Only the most partisan would claim that he lacks the experience to be president. The most persistent issue that voters have with Obama is his readiness to be president. This is an issue that Obama that is substantively unadressable for him. The best he could do was to avoid the topic and run ads, that make him seem more presidential.
Electorates tend to stay static for long periods of time. Big events tend to break things up and new electorates form and stay that away till the next big event. If Obama is elected, it would mean that one of the components of Nixon’s southern strategy coalition have change, without a big event. While that’s possible it’s not a high likelihood and one we are willing to bet against.
As of this writing the McCain contract on Intrade is a mere $9.90. We venture that it’ll trade even lower tomorrow as voting starts.
Ultimately, even if we’re wrong on our call for McCain-Palin to win, there is little to gain by owning the Obama contract and much to gain by owning the McCain contract. As of this writing, the Obama contract trades $91.50 and is a bet that even if correct is not worth taking.
As we are won’t to say, only the future can determine the veracity of our prognostications. However, it’s not long between now and the future.
Topics: Politics |
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