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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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Tue, 09/18/2012 - 11:07 | 2807012 Nothing To See Here
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?

Tue, 09/18/2012 - 12:39 | 2807435 metastar
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.

Tue, 09/18/2012 - 13:06 | 2807533 dugorama
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.

Tue, 09/18/2012 - 11:06 | 2807014 vote_libertaria...
vote_libertarian_party's picture

VOTE LIBERTARIAN!!!!

 

(sorry, had to say it)

Tue, 09/18/2012 - 11:09 | 2807029 JPM Hater001
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.

Tue, 09/18/2012 - 11:15 | 2807054 Nothing To See Here
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.

Tue, 09/18/2012 - 11:50 | 2807188 john39
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.

Tue, 09/18/2012 - 11:51 | 2807191 Vincent Vega
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.

Tue, 09/18/2012 - 12:21 | 2807365 bank guy in Brussels
bank guy in Brussels's picture

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

- Emma Goldman (1889-1940)

Tue, 09/18/2012 - 12:00 | 2807238 CPL
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

Tue, 09/18/2012 - 16:44 | 2808446 Baldrick
Baldrick's picture

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

Tue, 09/18/2012 - 11:13 | 2807046 john39
john39's picture

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

Tue, 09/18/2012 - 11:25 | 2807089 Spastica Rex
Spastica Rex's picture

Uncomfortable, but right. +1

Tue, 09/18/2012 - 11:31 | 2807108 duo
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.

Tue, 09/18/2012 - 11:31 | 2807109 redpill
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.

Tue, 09/18/2012 - 11:38 | 2807139 Spastica Rex
Spastica Rex's picture

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

Tue, 09/18/2012 - 11:47 | 2807171 john39
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.

Tue, 09/18/2012 - 11:54 | 2807200 Spastica Rex
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.

Tue, 09/18/2012 - 12:21 | 2807361 john39
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...   

Tue, 09/18/2012 - 11:20 | 2807072 FL_Conservative
FL_Conservative's picture

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

Tue, 09/18/2012 - 11:37 | 2807137 KidHorn
KidHorn's picture

As if the alternative is any better.

Tue, 09/18/2012 - 13:53 | 2807738 FL_Conservative
FL_Conservative's picture

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

Tue, 09/18/2012 - 11:22 | 2807075 MillionDollarBonus_
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.

Tue, 09/18/2012 - 11:28 | 2807099 Spastica Rex
Spastica Rex's picture

OOC -1

Tue, 09/18/2012 - 11:06 | 2807015 LawsofPhysics
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.  

Tue, 09/18/2012 - 11:07 | 2807020 bigdumbnugly
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.

Tue, 09/18/2012 - 11:10 | 2807035 JPM Hater001
JPM Hater001's picture

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

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

 

Pretty much the choice.

Tue, 09/18/2012 - 11:07 | 2807023 JPM Hater001
JPM Hater001's picture

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

90%

Tue, 09/18/2012 - 11:34 | 2807124 schatzi
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.

Tue, 09/18/2012 - 11:14 | 2807031 Cognitive Dissonance
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.>

Tue, 09/18/2012 - 11:14 | 2807051 saturn
saturn's picture

+ ignore the barking :)

Tue, 09/18/2012 - 11:10 | 2807034 pazmaker
pazmaker's picture

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

Tue, 09/18/2012 - 11:12 | 2807038 Cognitive Dissonance
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.>

Tue, 09/18/2012 - 11:18 | 2807066 fuu
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.

Tue, 09/18/2012 - 11:12 | 2807039 Desert Irish
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.

 

Tue, 09/18/2012 - 11:29 | 2807105 overmedicatedun...
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.

Tue, 09/18/2012 - 11:48 | 2807179 thatthingcanfly
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.

Tue, 09/18/2012 - 11:56 | 2807212 overmedicatedun...
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.

Tue, 09/18/2012 - 12:03 | 2807257 thatthingcanfly
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.

Tue, 09/18/2012 - 12:05 | 2807269 LawsofPhysics
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.

Tue, 09/18/2012 - 12:11 | 2807303 overmedicatedun...
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?

Tue, 09/18/2012 - 12:08 | 2807279 Desert Irish
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. 

Tue, 09/18/2012 - 12:17 | 2807342 overmedicatedun...
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 debunked..it'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.

Tue, 09/18/2012 - 11:13 | 2807044 Yardfarmer
Yardfarmer's picture

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

Tue, 09/18/2012 - 11:22 | 2807078 Dr Benway
Dr Benway's picture

Kleptocrones. Cephalodopes. Polieticians.

Tue, 09/18/2012 - 11:34 | 2807122 Nobody For President
Nobody For President's picture

Captain Haddock is alive and well on Zero Hedge.

Tue, 09/18/2012 - 11:14 | 2807050 Dr. Engali
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.

Tue, 09/18/2012 - 11:42 | 2807148 Spastica Rex
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.

Tue, 09/18/2012 - 11:14 | 2807052 Spaceman Spiff
Spaceman Spiff's picture

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

Tue, 09/18/2012 - 11:41 | 2807151 Rainman
Rainman's picture

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

Tue, 09/18/2012 - 11:16 | 2807059 gwar5
gwar5's picture

The Freakshow media is grossly over-polling democrats to give illusion Obama is strong. 

 

Trend: Red team has highest registered voter affiliations ever, Blue team now has lowest registratered voters ever. Carter and Mondale got wiped out despite same fake pre-election polling. Bilderberg candidate still maintaining 100% lead in polls.

Tue, 09/18/2012 - 11:16 | 2807060 lesterbegood
lesterbegood's picture

It appears to me that the Council of Foreign Relations has selected Romney as the new puppet, oops, president of the FEDERAL CORP. As for the sheeple vote, LMAO!

Tue, 09/18/2012 - 11:24 | 2807087 SmoothCoolSmoke
SmoothCoolSmoke's picture

Romney, if he was not already toast, surely is after his "true colors" got caught via the hidden recorder. Obama could not have made a better case that Romney is out of touch with non-rich people if he tried.

Tue, 09/18/2012 - 11:31 | 2807110 overmedicatedun...
overmedicatedundersexed's picture

hey dirishand too smooth to be cool: what did he say that you find so bad?

Tue, 09/18/2012 - 11:35 | 2807128 KidHorn
KidHorn's picture

You mean that commercial where Romney says he wants to cut taxes to help the poor and middle class is a lie?

Tue, 09/18/2012 - 11:54 | 2807203 My Days Are Get...
My Days Are Getting Fewer's picture

Agreed.  And, the fact that his advisors, who were in attendance, were not given instructions to "secure the area" by making certain that nothing was recorded, demonstrates how poorly prepared Romney really is for leadership.  

I will vote for him anyway because BO ran as reform candidate 4 years ago and reformed nothing.  In fact, "M & M" (Money and Miliary) are still in the same hands.

Tue, 09/18/2012 - 11:58 | 2807224 thatthingcanfly
thatthingcanfly's picture

I commented on this earlier in the thread. Why not view the video and see for yourself? What Romney said was not at all unreasonable or offensive. This helps Romney, rather than hurts him. Further, it demonstrates just how obsequious the MSM are to Obama - I mean, really - how could it be offensive to suggest that people should not think of themselves as victims, that they should not rely on government handouts for their subsistence? The media-induced "outrage" over this ought to cause every American to turn off the MSM.

 

http://www.youtube.com/watch?v=dfwRyal5fVk

Tue, 09/18/2012 - 11:27 | 2807097 Inthemix96
Inthemix96's picture

If you lot thought voting made any difference you should be shot.

The big men at the top of the pyramid decide everything, all you get is two different shells with different colours to vote for.

As a wise man once said, 'if voting changed anything, they would make it illegal'.

Time for extreme predjudice Zhers.  They deserve nothing less, the country and world wreckers.

Tue, 09/18/2012 - 11:33 | 2807117 KidHorn
KidHorn's picture

Clearly, all those people who said Romney was only looking out for the rich we're wrong.

Tue, 09/18/2012 - 11:35 | 2807130 overmedicatedun...
overmedicatedundersexed's picture

hey kiddy another Romney is out for the rich, I guess obumas big bank bailouts and crony bundlers are just the working poor?? what say yee.

Tue, 09/18/2012 - 11:40 | 2807150 KidHorn
KidHorn's picture

Tarp was under Bush, not Obama.

Tue, 09/18/2012 - 11:48 | 2807176 overmedicatedun...
overmedicatedundersexed's picture

kiddy please stop it your killing me, never talk about stimulus tho all the billions to crony's wjhy U might think Obuma went to harvard and knows his place is to keep the elite comfy..or do you see it thru rose (well maybe brown/black) colored glasses?

Tue, 09/18/2012 - 11:36 | 2807133 marcusfenix
marcusfenix's picture

the political animal has seriously devolved in America as neither of these clowns can put two coherent sentences together that are not per-scripted and slapped on a teleprompter. even then what they read out loud is nothing more than tired rhetoric devoid of any substance, creativity or soul.

in other words we've heard it all before, ad nausem and anybody with even an ounce of common sense, a memory longer than 24hrs and a shred of individuality knows that they are both absolutely full of the same old bullshit these public trough feeding parasites have been spewing for a long, long time now. 

politics in America has become the mcdonalds, walmart, reality tv, jerry springer, made in China, idiocracy shadow of what it started out to be a little over 200 years ago and is no longer worth the time it takes the average American to pull a lever or push a button. 

Tue, 09/18/2012 - 11:38 | 2807141 overmedicatedun...
overmedicatedundersexed's picture

give marcus a cigar..any more pharagraphs tho and dirishandcoolly, would nod off.

Tue, 09/18/2012 - 11:39 | 2807140 Nobody For President
Nobody For President's picture

It appears that Obama is not gonna win so much as Mitts is gonna lose with his 'inelegant' statements. There is no longer a cat in the box or the bag.

 

As before, my candidate remains the best choice...

Tue, 09/18/2012 - 11:50 | 2807152 Monedas
Monedas's picture

Obama is much worse than Carter .... and Romney isn't near as good as Reagan .... where's the fix .... game over .... hoard and head for the hills !  Withdraw from most social contact .... then wait to see who seeks you out .... be wary of those who didn't like you in good times and now decide to come visiting ?  Open a Norman Bates "Roach Motel" for humans .... a "Motel Deep 6" ?

Tue, 09/18/2012 - 11:49 | 2807184 death_to_fed_tyranny
death_to_fed_tyranny's picture

"It would seem gridlock will persist with a divided government - not good news for the fiscal cliff."


Sounds like good news to me. I welcome the coming collapse!~

Tue, 09/18/2012 - 11:50 | 2807186 helping_friendl...
helping_friendly_book's picture

Diebold has already programmed the results into the voting machines. Why bother since both candidates represent the same thing?

Tue, 09/18/2012 - 12:29 | 2807404 daxtonbrown
daxtonbrown's picture

We are well into Civil War II. The only twist is that we are fighting over welfare state indentured debt slavery. Territory has changed so there won't be as much blood (the Internet is territory). But the economic devastation will still be huge. http://www.futurnamics.com/civilwar.php

Tue, 09/18/2012 - 16:20 | 2808366 EscapingProgress
EscapingProgress's picture

Fuck the vote!

Do NOT follow this link or you will be banned from the site!