The Schrodinger Election Futures Market And Fiscal Gridlock

Tyler Durden's picture

As the US Presidential and Congressional election campaigns move into their frenetic final stages ahead of the November 6th polling date, we thought it would be good to see what the futures markets think about the outcome. As UBS notes, the Iowa Electronic Markets (IEM) are futures markets allow traders to take positions, with real money, on a variety of economic and political events, the best known of which are US elections. Since inception, the IEM has had an impressive track record of forecasting elections, consistently better than conventional polls months in advance. The current data, however, highly contradictory - or Schrodinger-like - as the gap in the popular vote has narrowed significantly, yet the gap in the winner-take-all election result market has widened dramatically in favor of Obama. Furthermore, there is a 70% chance the Republicans wrest control of the Senate and the probability of the democrats gaining a House of Representatives majority is a mere 10%. It would seem gridlock will persist with a divided government - not good news for the fiscal cliff.

The popular vote is close and getting closer...

In the vote-share market, the payoff is determined by the final percentage of the popular vote received by the Democratic and Republican nominees on election day

but the winner-take-all election (where the payoff is binary on the outcome), Obama is a heavily favored...


It should be noted that the payoff in the IEM Presidential winner-takes-all futures market is based on the popular vote, not the Electoral College outcome.


What about the races for the US Senate and House?

Without belaboring the reader with the details (which are available on the IEM website), the futures markets are giving the following indications about the races for Capitol Hill:

  • US Senate: Futures markets suggest there is only a one-in-ten chance that the Democrats will build on their small majority (51 seats) in the Senate. Their chances of holding the Senate, albeit with a smaller majority, are tipped at about 20% (a ‘majority’ of 50 is possible in the 100-seat Senate if an independent holds a seat or as a result of the tie-breaking vote of the Vice President—assuming in this case that President Obama is re-elected). Conversely, the chances that the Republicans wrest control of the Senate have risen to about 70% (from closer to 55% in the spring of this year).
  • House of Representatives: The futures markets assign long odds to the probability of the Democrats taking control of the House of Representatives. According to the latest figures, the probability that the Democratic Party will lift its members from 193 today to a majority of 218 is about 10%.


The outcome for the Presidential election remains too close to call. To be sure, Governor Romney has ground to make up. It seems that if he is going to do so, the economy, markets, or the geo-political environment will have to deal President Obama a blow. Alternatively, President Obama will have to commit a significant political blunder.

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Nothing To See Here's picture

<-  I don't

<- I do

Who really believes that a GOP senate will not cave in to raise the debt ceiling?

metastar's picture

Gridlock is our only hope!

But the republicans need it and they want it bad. It's kind of like like, Spitzer bunga bunga, DSK, ...

No means yes.

dugorama's picture

"I don't really believe... will NOT cave in to...".... I'm lost. 

We won't not avoid the fiscal crisis if we don't work to avert negative outcomes.  I think.

vote_libertarian_party's picture



(sorry, had to say it)

JPM Hater001's picture

I was resolved to do so but Schiff and others have made a great point.  Romney is still a disaster while Obama is 1984.

Nothing To See Here's picture

I disagree. Romney is also 1984, but merely leads there more slowly than Obama. Both are war-mongers, big spending pro-State guys. The so-called radical Ryan plan doesnt even cut a penny, only slows the growth of the spending increases. Imo, the faster process to the debacle with Obama is a good thing. Let's get over it sooner, there is no way to avoid the cliff now that Ron Paul has been eliminated by TPTB.

john39's picture

Ryan and Romney want more military spending...  by cutting from the underclass....   i agree that big government is horrible...  but, ignorning the beast that is military spending is a total joke....  the United States spends more on war than anything else, this simply must end.  It benefits the ruling class, and enslaves the rest of us, and frankly is evil given what our military has been used to do in poor countries around the world.  I don't really blame the kids who get sucked into the military, but lets call it what it is, empire.... and a crumbling one at that.

Vincent Vega's picture

Agree with all you said. I believe the sheeple will elect O to a second term but I would like to see Romney in there just for the theatrics. Specifically, I'd like to see if the Republican's would propose a budget and if they would actually cut any spending. I think the answer to both is 'no'.  BTW, I will not be voting for either of them.

bank guy in Brussels's picture

"If voting changed anything, they'd make it illegal."

- Emma Goldman (1889-1940)

CPL's picture

I'm a conservative Canuck and I could even see it in slow motion. You could identify where he understood he said too much.  He committed career suicide because rich, pampered, blue blood fucks aren't built for the coming shit storm.


There is no reasonable explaination why he would directly start openly mocking the poor and middle class of the US.


Best any can hope for, including Obama because look at him, he looks worn out and beaten up, give the bastard break...job inheritance sucks, is a third option that can properly counter the thin viel of bipartisan democracy.  Not a dark horse, a leader.  Not in a suit, somewhere in 340 Million people there has to be an Angel.  

Working a soup kitchen for fuck all but the company of friends and the place is ship shape.

Helping their communities in meaningful ways that bind ties through community effort instead of government incentive.  In a world of less work, why not help your yourselves.  I can't believe I don't heard this story more often.  Guess what?  That's where leaders are as well.  


Looks for results that are appearent and stick.


Cannot believe that places like India and China haven't got a battalion of Angels in the area either.  3 billion people.  There has got to be a leader.  Same goes double for the Jewish and Muslim communities, all those theologians and no shining point of light?  Unpossible.

There have to be Angels somewhere.  People that inspire people to be better people.  A truth to counter the thousand lies. Sigh...


Rant off

Baldrick's picture

not an angel, just a human who exemplifies the better side of humanity.

john39's picture

boycott voting.  you only give the rigged system false legitimacy.   Boycott it.

Spastica Rex's picture

Uncomfortable, but right. +1

duo's picture

Now that Romney has made the election issue into the "47% vs the 53%", perhaps the media will realize that our "Rome" moment is at hand.

Romney essentially said that when the 47% becomes the 51+%, why even bother having elections anymore.

redpill's picture

All those that live off the public trough love to hear you say that.  They'll gladly go to the polls and continue to vote for increasingly larger helpings of slop on your dime.

Spastica Rex's picture

You mean just like all the proles who "voted" year after year in the old CCCP?

john39's picture

the outcome is rigged, and no vote you cast will change the course of where we are heading.  The issue is that too many people still believe that the system can work... that "the people" have some say in things...  how many more rigged elections will it take before people realize that fixing this mess requires a lot more than voting for the red or blue puppet for phoney positions of power controlled by THE PARTY.  have to see the illusion for what it is...  part of the matrix.

Spastica Rex's picture

The problem is you're asking people to confront at least two possibilities that engender fear and hate:

1) that our beloved system is broken beyond repair and is utter bullshit and 2) that something harder and scarier than just "voting" every few years will be required to change anything.

Boycotting is only a start.

john39's picture

true.  a lot of hard work lies ahead.  but you can't start to fix anything until you know what (or who) the problem is...   

FL_Conservative's picture

That's all we need: another 4 years of Hopey the Clown .

KidHorn's picture

As if the alternative is any better.

FL_Conservative's picture

....he says, as Obama signs off on another Executive fiat....

MillionDollarBonus_'s picture

It's ironic that on the one hand, libertarians are opposed to communism and totalitarian states, and on the other hand they support the empowerment of corporate overlords with the ability to exercies unlimited, unregulated, uncontrolled property rights. As many of the commenters here have repeatedly pointed out, capitalists buying and selling goods and services is just as much a violation of ethical principles as taxation, imprisonment and war.

LawsofPhysics's picture

Chart #2 seems inaccurate.  I see no evidence the bank puppet #2 will devalue any less than bank puppet #1.  Nor have I heard anything about prosecuting fraud and restoring real consequences for bad behavior from either bank puppet.  

bigdumbnugly's picture

schrodinger would open the box and then immediately slam it shut as the stench from it is the same whether dead or alive.

JPM Hater001's picture

<----The Cat in the box is dead

<---The cat in the box is a zombie


Pretty much the choice.

JPM Hater001's picture

What are the odds war or a collapse negate the whole thing?


schatzi's picture

Honestly don't see it. International politics is mostly posturing and fluster. Be it Middle East/Iran or China/Japan. Collapse may come in some form one day, but we have masters of can kicking at the helms. They'll drag this farce on for quite a while yet.

Cognitive Dissonance's picture

The cat is neither alive nor dead.......just in a semi conscious state of putrid fixation.

<Don't touch the damn thing. You'll just stir up the flies and maggots.>

pazmaker's picture

Gridlock is not necessarily a bad thing. It can mean less spending.

Cognitive Dissonance's picture

They'll just make up for lost time on the back end with more volume.

<Tape those damn Ctrl-P buttons down. It's $20 Trillion or bust.>

fuu's picture

I'm not so sure about that. With the automatic spending increases built into the mix doing nothing still results in more spending.

Desert Irish's picture

The outcome for the Presidential election remains too close to call.

This article is a little outdated after yesterday's fiasco - Romney's finished.


overmedicatedundersexed's picture

d irish, what fiasco? and how does that negate diebold and soros's hold on the election data? vote and it's gone.

absentee voting at least has a paper trail.  diebold vote and it's gone.

thatthingcanfly's picture

I believe Irish is referencing a media reaction to a video clip of Romney speaking to a dinner party, wherein he said (and I'm paraphrasing a bit), "There are 47% of people who will vote for this president no matter what. They've been hearing for the last three years that the government will take care of you. These people pay no income taxes, they believe they are victims, and so they believe they are entitled to health care, food, housing, to you name it - and that's an entitlement, and the government give it to them. Those people will vote for [Obama] no matter what. I can't change their minds 2 months before the election that they should take responsibility for their own lives. I'm not going to worry about them, I'm going to worry about the 5-10% in the middle - the independents, the thoughtful..."

This speech is being spun by MSM to make it look like Romney was "calling Obama voters victims," who are "reliant on government handouts." That's not what the man said. Romney was talking about how these Obama voters view themselves, not how he personally views them.

I think this will actually help Romney. It appears his campaign strategists do too, as when confronted with this yesterday, Romney did not try to distance himself from the comments, but stood his ground.

overmedicatedundersexed's picture

another cigar for thatthing, hold on folks I am running out of them..not that I like either of these ass hats, modern day mafia in our one party system.. vote blue or red give me the shits either way.

thatthingcanfly's picture

I don't like the guy either. 1) He's a Salt Lake City heretic. 2) Bain let's-destroy-businesses-and-call-ourselves-businessmen Capital. 3) Marginilization of Ron Paul.

But let's at least give him credit when he actually DOES say something that's right. And let's at least quote him correctly.

LawsofPhysics's picture

So Romney, never voted for or took a bailout, ever.  Seems to me that the record at Bain Capital is otherwise.

Lots of people, corporations, and owners seem to feel "entitled" to a lot of things.  FUCK THEM ALL.

overmedicatedundersexed's picture

ok its rants on..well heres' mine: in a country/world run by criminals what place does an honest person have?

must a honest man be run over and sodomized by the political and wealthy criminals?

does a honest man by definition become a criminal in the most dis honest ,captured, legal structure in history?

now who do i vote for again?

Desert Irish's picture

I agree re; the diabold comment but when you embark on a swing-state strategy it's unwise to alianate a large voter base including retirees whom happen to be among the 47% receiving federal assistance and whom also happen to make up a large percentage of Florida's voting base which he needs to secure. 

overmedicatedundersexed's picture

Irish you are still sure he is not in the same party as obuma? like it's dems vs GOP? sorry but that concept has long ago been's one crime family vs another, both agree that the crimes must go on. the power elite just like the voters to see the big kabuki as real. many here on ZH do not want that scam taken at face value.

Yardfarmer's picture

EITHER/O(bama)R(omney)=endless Debt+endless War. 

Dr Benway's picture

Kleptocrones. Cephalodopes. Polieticians.

Nobody For President's picture

Captain Haddock is alive and well on Zero Hedge.

Dr. Engali's picture

Obummer will be the next president, there is no doubt about that. TPTB made sure the two official choices would do little to shake up the unfolding chain of events.

Spastica Rex's picture

I'm still watching petrol prices.

edit: Team BO still controls the media apparatus and they'll naturally do whatever they can to make their desired outcome appear inevitable.

Spaceman Spiff's picture

A term limited Obama with executive orders as royal decrees scares the shit out of me.

Rainman's picture

yeah, megalomaniacs and power scare the shit out of me too. First royal decree will be pronouncing term limits unconstitutional.