Intrade Implies At Least 65% Odds Of Major Fiscal Contraction Post-Election

Tyler Durden's picture

While certainly not always correct; the InTrade markets trading on the various outcomes of the Presidential have become increasingly liquid and active in recent weeks. As Morgan Stanley's Vince Reinhart cleverly notes, by analyzing the odds for control of the Senate, the House, and the Presidential winner, one can arrive at some rather useful insights into the conditional probabilities of various tax-and-spending-related outcomes.



Critically, he notes that while Obama is a 75%-25% favorite to win the vote, control of the House and Senate appears most likely to remain split.

There is a joint 50% probability of an Obama victory and split government - which inevitably means more gridlock and a likely charge over the fiscal cliff.

On the other hand, conditioned on a Romney win, there is a 15% probability that the Republicans end up with control of the House and the Senate - which almost inevitably means the 'new' government will enact the front-laoded spending cuts they have been putting forward.

This leaves us with at least the combined 65% probability of drastic cuts to spending or rises in taxes which will weigh heavily on the aggregate economy early in 2013.



Source: Morgan Stanley

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nope-1004's picture

Bernanke and Geithner engaging in the same stupid policy going forward as the one that has failed in the past, I put those odds at 90%.


knukles's picture

Who gonna be dah nex predident wid dah big grin prezidig obah da big imploshun?

Surly Bear's picture

'I put those odds at 90%...' or more.


FL_Conservative's picture

That's because the Obama Admin and Bernanke can only hold the curtain back for so long.....before....well, you know.....

Breaker's picture

Split government will produce no fiscal cutbacks. The republicans always cave. Every time they have tried to toe the line, they get smashed by the media. Gingrich tried it. Reagan tried it. Boehner kinda sorta tried it. All failed. The fourth branch of government is ALWAYS in favor of more spending. Any attempt to even slow the growth of spending produces a vicious piling on by the media.

DosZap's picture

Critically, he notes that while Obama is a 75%-25% favorite to win the vote


He is on crack, and reading MSM ,and watching it if he thinks that.

They are taking '08 data and using it for their(data) polls,and demographic calling is at an all time high, of not being random.

O will lose a major portion of the young vote,the elderly Jewish sector, and women with families,and most independents,and nearly 100% of causacasion males.

55% of ALL business's asked if they would GO into business if Obama were elected now,(or had to do it over again) and they said NO way.

Undecideds always go for the challenger.

This race is skewed all to hell. THE MSM is trying to make people stay at home,by lying as usual.The newness of a Black POTUS, and the results he has given America,has put a major dent in his chances.

duncecap rack's picture

Why does it only add up to 96%?

knukles's picture

4% 'rainbow colored unicorn skittle shits rain from the sky" as per Paul Krugman

jeff montanye's picture

it's not even rounding error.  the percentages are truncated and some are ignored.  for instance the dem pres with current split congress is really 50.9%.  and the 1.4% chance of a dem pres and dem house with rep senate isn't even added in.  sloppy work (and understates the likelihood of the stalemate the story touts).  put in "congress" in the search box to see for yourself.

AldousHuxley's picture

bad public schools in America



Bastiat's picture

Bad public schools? Look at the shit that comes out of Harvard, Princeton and Yale.

knukles's picture

"Watch your mouth!" says Paul Krugman

AldousHuxley's picture

At HPY, you learn truth, and then to keep it away from the masses to make yourself more valuable. However even the smartest HPY grads end up working for the interests of the likes of PAris Hilton....born rich.


Go to wall st, give young bankers a million before they get sucked into NYC hyper status consumerism, and most will quit.


Difference between bullshitters and liars is that liars know the truth.

jekyll island's picture

What's wrong about govt spending cuts? Spare me the Keynesian arguments, that's a "recession" I could tolerate.

jekyll island's picture

Sorry double post. Damn fat fingers.

Colonel Klink's picture

Because even the shysters take their cut of that too.

Squid Vicious's picture

Gold above $2500 in 2013, odds: 95%

seek's picture

It'll be interesting to see how much more contraction we can get. It's pretty obvious 3Q sucks badly based on earnings warnings -- and 4Q will be the same.

Contraction on top of already sucking... welcome to the second half of the 1930s, I guess.

XitSam's picture

I predict Ben will approach the problem two ways. First he will accelerate the printers, because a deflationary slowdown is bad for the banks. Second, he will blame Congress, for which he has already prepared the ground, "Monetary policy is not a panacea."

kalum's picture

Bernanke is a fool. He has ruined my life among many millions of others, and many more millions to come both in US and globally. May he RIH

Clueless Economist's picture

no Goyim you are the fool

Sorry Sucka

--Benny and the Jews

(Apologies to that poof Elton John)

tickhound's picture

packed my bags last night pre-flight,

ZeroHedge, 9 am.

a growing concern's picture

and I'll be hiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiigh........................




as a kite by then

hidingfromhelis's picture

I'll miss the Euro so much

I'll miss my life (savings, that is...)

Jlmadyson's picture

Not even the great economists of history can get us out of this fix;


Timmy G better run for that door as fast as possible.

Bunga Bunga's picture

Economists just create models in ivory towers which have been turning out to be wrong all the time. How can anyone ever expect that they can fix something real?



Bastiat's picture

Duplicate post deleted.

Snakeeyes's picture

Add to the fun. Despite The Fed's attempts to drive down mortgage rates, the spread between 30 yr FRM and Fannie CC is at an ALL-TIME HIGH! That is, the GSEs are blocking recovery.

Central planning at its worst.

Jlmadyson's picture

Well Im waiting out until next year. The banks better stop the skimming because these rates should be considerably lower.

XitSam's picture


You mean they cooperate on spending Federal Reserve Notes as fast as possible, just not on what to spend it on?

Bunga Bunga's picture

If the odds are so clear what the market is waiting for?

Papasmurf's picture

The market has to negotiate the wall of worry.  Or was it a cliff?

davidsmith's picture

Never mind the fiscal contraction!  It's the economic contraction which will sink the society.  That's why Romney continues to have the support he has--because everyone knows another Obama administration will bring a HORRIFIC recession.


Why doesn't Romney commit to an individually enforceable right to employment?  The Republicans have to make the break to increased rights or they will disappear as a party.  They're right that the Dems simply want a nation of Demoserfs, but if it's between that and starvation, people will choose to be Demoserfs.  Republicans have to offer people something other than starvation by looting to supply golf course Republicans, but they're SO out of touch they can't IMAGINE what they could offer.


There's no problem offering a right to employment (made by proclaiming an economic emergency) since Romney is going to more than double defense spending in the next two years.  I don't know why they don't emphasize that--it's what got Reagan elected.


Romney must be a genuinely stupid person.  As I recall, so was his moron father.  Remember Governor Brainwash?  What a farting dog that guy was!!!!

Beam Me Up Scotty's picture

A right to employment?  What kinda pipe are u smoking?  So if I own a business, I've got to hire everyone who wants to work for me?  And can I fire them for poor performance? or not showing up for work?

O wait, I've got this "right to employment" you see, you can't fire me.  If I decide to show up for work at all, I might just stand around and do nothing.  Maybe it would be easier if you just let me stay home and sent me the check, while YOU work.

Oh wait, we already have that, its called WELFARE.

Turin Turambar's picture

Everyone has a right to self-employment already. However, if you choose to forgo that and instead work for somebody else because you think that that would be more beneficial than being self-employed then that is a voluntary decision of your own choosing.

jeff montanye's picture

why argue?  he thinks romney will double defense spending in two years.  not even with a war with iran.

did you see george's pictures of iran?  worth a look.

zorba THE GREEK's picture

The reason it adds up to only 96% is because there is a 4% chance the public will

come to their senses before election day and elect Ron Paul President.

Beam Me Up Scotty's picture

More like .0000000000000000000000000000000000000000000000000000000000000000000000000000000004% that the public will wake up, let alone elect Ron Paul.

Rusty Trombone's picture

Fucking Scumbag beats Fucking Scumbag in landslide ! - Declares new "Scumbag Mandate".

divide_by_zero's picture

By the way the odds stack up, these guys don't get out of the echo chamber much.

you enjoy myself's picture

yeah, the odds of the House going D is virtually nil.  and O has a 75% chance?  that's insane once you realize that any poll showing him ahead is outrageously oversampled for Dems - Romney is way ahead with independants, in every poll.  but those same polls show O at +1 or whatever because they're using turnout models that assume Dems are more enthusiastic than in 2008, and Repubs less.  good luck with that bet. 

andrewp111's picture

The chance of a Dem house is not nil (though it is low), and turnout models are very uncertain.  I expect both White and Black turnout to be up from 2008, with all other groups down, so the final turnout pattern is anyone's guess. Obama is the favorite to win simply because Romney has to win all three of VA, OH, and FL to win, and Obama seems to have gained a lot of traction in OH and VA. There are lots of reasons the polls could be in error, but we don't know they are wrong, and no one will know till election day. However, the MSM is taking no chances and they are driving a narrative that Romney has no chance in order to make that narrative self-fulfilling.

lakecity55's picture

When I have had a chance to look at the technicals, most polls show a breakdown similar to this:

60% D

20% R

20% I

overmedicatedundersexed's picture

if you think we elect these picked compramised tools of the power elite..keep dreaming. diebold and syctyl will still give them the close election they need ..if only one or two more voted why my side would win...LOL

the polls are always close to make it seem that the people of both colors have a chance to put my guy in..LOL

you have one choice that can kick them in the nuts.. do not vote..although with computer voting your vote may be cast to give the voting system credibility. syctyl will inflate the numbers to keep the american voters thinking see we all vote and support this system.

do you vote for those who promise to end corruption and never ever do? get a clue.

IMA5U's picture

Most people that would use intrade are traders


Most traders are right winged


Funny how the majority of intrade votes think there will a contraction

disabledvet's picture

based on politics? hehehehe. okay. "takes even more money to order retreat." this is looking more and more like a naked POWER grab to me. Wall Street looks friggin' destitute. "water, water everywhere and nothing here to drink." long as you're not a politician of course....looks like it's in heaven. ObamaCare, the Endless War We now Love, free money, weakened if not hapless Planet Earth. Hell if Tesla can't make an electric car how will they launch their rockets? a wave of bankruptcies at the State level only makes DC stronger. Certainly not Wall Street which has no consumer and now will get knee capped by State Governments that can't afford to borrow. Looks Grimm, actually. Boy's from Langley running wild, no rule of law to speak of. Andrew Jackson would be laughing his balls off right about now..."Louisiana Purchase 2.0."

elementary's picture

Since when does a shitspeak from Morgan Stanley have any credibility? MS is the next sacrificial lamb for the hocus pocus diversion.  Believing MS is  like betting the whole house on what Goldman says.