While InTrade did not exactly 'nail' the Obamacare odds, the surge in the odds of Obama winning the election has been incredible since the announcement of QEternity. Admittedly it has coincided with some general 'foot-in-mouth'-edness by his opponent, but the record high levels over 70% are not behaving how one would expect given equity movements. In fact it appears that rather than 'the market' being the main factor in his re-election, it seems inflation expectations are more critical - especially given the huge volume rise. It seems implicitly that Meyer Rothschild's famous quote: "Let me control a peoples' currency and I care not who makes their laws" has never been more true...
It would seem stocks are not the driver of Obama's election odds...
(or perhaps there is a pairs trade here Short Obama, Long SPX?)
But the ability to debauch the currency - or implied inflation here - is much more highly correlated...
[4]
and Volume has exploded recently in this trade (perhaps as an inflation hedge?)
[5]
Of course the reflexive note here is that 'people'; watch the stock market and not inflation breakevens - so judging Obama's probability of #winning becomes an exercise in circular logic though we suspect inflation expectations will remain high (stock) as the 'flow' effect of QEternity is priced in to stocks and they are limited by stubborn things like valuations...
and just when you thought you had it figured out - given the volume surge it seems the same 'levitating algo-bots that play in out HFT-ridden equity market have taken over the InTrade market. We wonder aloud is the hope that the optics of higher odds of winning will become self-confirming - we should vote for him since everyone thinks he will win?
Data: Intrade [6] and Bloomberg