It's The Economy, Stupid.

A strategist in Bill Clinton's successful 1992 presidential campaign against incumbent George H. W. Bush; the title of this post was coined by James Carville as a missive to campaign workers.  I've written about the subject several times over the years.

Last week the Federal Reserve cut interest rates by fifty basis points (half of a percentage point).  Mortgage rates are down.  Inflation has basically been beaten into submission having settled at historically normal levels.  Gasoline is below $3 a gallon in many locations.  Our nation is a net-exporter of petroleum and natural gas.  Unemployment remains low.  The financial markets are out-performing.  I look at the economic landscape thru the lens of a recovering financial advisor and happen to think that the fundamental economic picture is pretty darn good.

Nevertheless, former president Trump tells us we're basically an economic failed state.  His followers believe it too.  Polling data from the New York Times and Siena College reveals that only 2 percent of voters believe the economy is excellent.  21 percent call it good.  28 percent consider it fair; while nearly half, 49 percent, rated it poor.

I do not minimize the reality that some individuals and families find themselves in economic circumstances that are diminished.  Maybe they've struggled since the Great Recession of 2008 with the 2020 COVID-induced recession delivering a one-two punch.  Yet, clearly there is a perception problem; and it is a problem that the Democrats own and continue to struggle-with.  I happen to believe that this perception disconnect has its roots in something of an idealized view of where voters were in the pre-COVID years versus where they are today.

It is a fact that before COVID inflation and mortgage rates were lower.  Unemployment was slightly lower than today.  And, of course, all of that ended with the 2020 recession resulting in a ginormous spike in unemployment, negative economic growth and a crash in the financial markets.

Since then, and over the last four years, growth in household income has been higher year-over-year, the markets are at record highs and the US economy rivals any other similarly-advanced economy globally.

Kamala Harris needs to work on her economic messaging.

If she wants to win the election.

Skin In The Game

So here we are; several months since Joe Biden abdicated the throne and Vice President Harris and Governor Walz have turned the election campaign on it's head.  If you watch the polls the democrats have turned the tables in several battle ground states and possibly reversed the trend in others and nationally.  What I would give to be a fly on the wall in Trump or Harris campaign HQ.  But let's not get over our skis -  is this a sugar high, a honeymoon or an implosion?  No way to know for sure.  Besides,  polls have been sketchy the last couple-three national elections; and I happen to believe that the outcome remains a tossup.  So I want to speak to the subject of gambling, or wagering.  

I've touched-upon this subject from time to time; sometimes from the POV of a financial guy and sometimes outright humor.  Back in the first week of June I took a stab at a topic I had been reading-up on and listening about; a subject that I thought was maybe gonna gain some traction - that of actually wagering on US Elections.  With every passing week it seems to be gaining traction now that we have a real competitive campaign.

For some time government regulators with oversight on Wall Street have been trying to clamp down on growing election wagering in the US.  With a completely reconfigured presidential race a tsunami of trading on this fall's election has taken-off.  At the time of the publication of this post, traders (gamblers) favor Harris over Trump.

PredictIt, formerly a largely academic pursuit and now off-shored was witness in July to its busiest wagering volume reaching roughly 120 million contracts - a spike of more than 500% over June.  $1.1 billion has been bet on crypto-based Polymarket since June, according to Dune Analytics, and 88% of that has been political bets on the U.S. election.

Consequently, this has the increased attention of the Commodity Futures Trading Commission (CFTC) who has proposed rule-making that would expressly outlaw wagering of this sort with scattered support in the US Senate.

As a recovering financial guy with almost forty years in the wealth management biz I've seen more than my share of feeding frenzies in the equity, fixed-income, commodities, futures and other derivatives markets; and market bubbles, more often-than not, end badly.  After-which seasoned veterans, put on their boots, roll-up their sleeves, slip-on their autopsy gloves and sift thru the bloody detritus of mostly novice online traders who got themselves slaughtered chasing phantom profits.

Markets always correct.

Nevertheless, none of this is outlawed or banned.  Financial markets are regulated and there is ample opportunity for the unguided to squander their savings on dreams, brass rings or Pumpkins and Mice.  The CFTC needn't ban wagering on election outcomes as much as they might regulate them with reasonable guardrails just like any other market. 

The UK has grappled with their own tempest in a teapot with the revelation that some conservative members of parliament got caught placing bets on the timing of their recent snap election.  Did it impact the July 4th outcome?  Who knows?  Considering the level of outrage when this got found-out it's entirely possible.  Should politicians be barred from betting on elections?  Or allowed to do so at their own political peril?  

A week and a half ago, a federal judge cleared the way for Americans to place bets on the outcome of congressional elections via a prediction-market startup.  A ruling that may potentially expand further legalized wagers on elections in this country.

Wagering requires bettors to put their money where their mouth is.  Betting markets may be useful when politics are chaotic.  With skin in the game facts displace misinformation.  

We got a game-on folks....

A Six-Pack of Republicans

This is from an article published in August of last year; so it's dated.  Feel free to ignore any reference to the trials and tribulations of the Ron DeSantis campaign for the GOP nomination for president.  

Nonetheless, on the heels of almost nine years of fealty and obeisance to Donald Trump, only a few would argue that the party is still defined by Ronald Reagan’s famous three-legged stool of the religious right, fiscal conservatives and neoconservative hawks.

But if the Republican Party is no longer in Reagan’s image, it’s not necessarily a populist-conservative MAGA monolith, either.

Last July's New York Times/Siena College poll found that only 37 percent of Republicans count as part of Mr. Trump’s loyal base.

And while majorities of Republicans side with Mr. Trump on almost every issue, those majorities are often quite slim: Around 40 percent of Republican-leaning voters support aid to Ukraine, support comprehensive immigration reform or say abortion should be mostly or always legal.

But if the Republican Party isn’t quite a MAGA monolith, what is it?  To better understand the party today, the Times split Republican and Republican-leaning voters into groups, based on the results of the Times/Siena Poll.  The groups were defined by how Republican-leaning voters felt on the issues — not how they felt about Mr. Trump.

The results depict a Republican coalition that consists of six groups:

The Moderate Establishment (14%). Highly educated, affluent, socially moderate or even liberal and often outright Never Trump.

The Traditional Conservatives (26%). Old-fashioned economic and social conservatives who oppose abortion and prefer corporate tax cuts to new tariffs. They don’t love Mr. Trump, but they do support him.

The Right Wing (26%). They watch Fox News and Newsmax. They’re “very conservative.” They’re disproportionately evangelical. They believe America is on the brink of catastrophe. And they love Mr. Trump more than any other group.

The Blue Collar Populists (12%). They’re mostly Northern, socially moderate, economic populists who hold deeply conservative views on race and immigration. Not only do they back Mr. Trump, but he himself probably counted as one a decade ago.

The Libertarian Conservatives (14%). These disproportionately Western and Midwestern conservatives value small government. They’re relatively socially moderate and isolationist, and they’re on the lower end of Trump support compared with other groups.

The Newcomers (8%). They don’t look like Republicans. They’re young, diverse and moderate. But these disaffected voters like Democrats and the “woke” left even less.

Mr. Trump’s dominance of the Republican Party is founded on an alliance between the Right Wing and Blue Collar Populists, two groups that combine to represent nearly 40 percent of Republicans — and about two-thirds of Mr. Trump’s MAGA base of seemingly unshakable support. 

The bottom line is that (in case anyone cares any more) the growing numbers of center-right voters, Reagan Republicans and independents still retain some clout in a general election.  The Big Fat Middle.  I'll be watching to see if the same polling is published in a couple of months.

Complete article here.  It's an academic read if you're not blocked by a pay wall.  Stay-tuned.....

Independents Day

A Gallup Poll published only a few weeks ago served as evidence that those who identify politically as independents  make up the largest contingent of voters in the country.  A whopping 43%, tying a record previously set in 2014.

The number of individuals who identify as Democrats set a new record low of 27% - coincidentally the same as the number of respondents who identify as Republicans.  

The decline in Democratic identification has been dropping a point for each of the last three years.  The people at Gallup surmise that this decline is a consequence of President Biden's low job approval rating.

The rise in number of those identifying as independents can be traced to 1991.  Having previously been the largest political group this rise has largely been at the expense of Democrats.  

This trend has given Republicans a small bump as Gallup learned from survey respondents that when asked, independents in 2023 indicated they were slightly more likely to lean Republican.

When asked to describe their views on a spectrum ranging from liberal to conservative - last year 25% described their political views as liberal, 36% as moderate and 36% as conservative.  These findings have largely remained unchanged for a decade.   

Taking a longer view, those who describe their views as conservative and moderate have shrunk over the last two decades; while those with self-described liberal views have risen from a low of 20% over the same time period.  

You're probably scratching your head and wondering if this has any impact on how things will play-out in the 2024 primaries and general election.  I know I'm curious.  However, not being a pollster I suppose I'm going to have to wait and see.  Exiled from the GOP to wander in the desert with my brethren it likely has to have some implications; exactly how this will manifest is not known.  Again, the Gallup folks suggest that this might not be a positive for Democrats and that independents who lean Republican may give the GOP a slight edge.  Personally, I think (wild-ass guess) Donald Trump is going to be the X Factor.  The ultimate trump card (pun intended).

You can perform a deep dive into the data over here at Gallup.  Meanwhile, I'm certainly not feeling any love from anybody.  Funny that.