The Betting Markets Do Not Like Joe Biden

Let’s start with everything from the beginning of the year until, say, March 29th at 4pm:

Joe Biden is leading in the polls.  (Which polls?  All of them, Mr. Cohen).  He has the highest head-to-head numbers versus Trump in the general (better than Bernie’s!).  Several sources have indicated he’s almost certain to run, announcing in April some time.

The PredictIt markets are keeping him near the lead or in it, and yet it’s sort of reluctant.  No one there likes Joe Biden.  They’re all BernieBros or YangGangers or Buttigeeks or what have you.  (Some of us dabble in Kamala shares but no one talks about it).  He’s the “establishment” candidate, which means he’s the one standing in the way of their preferred candidate from winning.

But there are also substantive reasons to mistrust his poll position.  Can he really sustain a donor base that can compete?  Will his record withstand the scrutiny of the campaign?  And what about all those “off” montages of him being a bit too familiar with women?

And that brings us to 4pm on March 29th, when The Cut published Lucy Flores’ account of a non-consensual Biden sniff-and-smooch encounter she had in 2014:

Slide31.PNG
The resolution for the chart on the right is hourly; data for the entire 4-pm hour is presented at 4pm.  In reality the reaction took place slowly, not starting in earnest for about half an hour.

Soft Support Means Big Moves

Yikes!  He fell 15c in his odds of running on this one story alone and lost a quarter of his equity in the overall horserace.  What are the lessons here?

  • When the traders in the market are already cautious about a candidacy, a story that plays directly to a major negative narrative surrounding that candidacy is going to do some damage.

 

  • This effect is amplified when the candidate in question has a history of waffling on Presidential runs.

 

  • The timing (shortly before the month of announcement) adds to fears.  “Oh god, what if he realizes this just isn’t worth it to him.”  This creates good conditions for panics (the “will he run” market saw low 50s, at one point).

 

  • There are plenty of other women who have been photographed in similar situations.  Everyone knows reporters have to be working on that story.  These kinds of stories are known for having multiple shoes dropping, and that history also plays into traders’ decision-making.

What happens next?

The month of April will be quite consequential in the DNOM market.  Last week, I wrote about trading strategies for that market.  I would urge you to be particularly cautious over the next few weeks!

If Biden does drop out, reasonably unexpectedly, the whole table gets flipped.  Bernie probably goes to 28c, and might see 30c+ amid the chaos.  Kamala, Buttigieg, Beto, Warren… honestly everyone will get a bite out of the slice of pie that Biden has on his plate right now.  You do not want to be caught holding expensive NO shares in this scenario.

Of course, that scenario is (according to the wisdom of the crowds) not as likely as the one where Biden does announce as expected.  Here, he’ll regain some of his equity (and maybe even re-take the lead?) although I suspect the Flores story will create a lingering fear that will weigh his price down for a few weeks at least.

And what about the Biden contract itself?  Should you play it?  Well, I dunno.  Do you feel lucky, kid?  I’m treating it like a hot potato for the time being, but that doesn’t mean I won’t trade a few shares back and forth either.  Good luck out there, traders!

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