We're not in Kansas Anymore. Or Are We?

In August 2022, voters in Kansas overwhelming rejected a statewide referendum that would have made abortion illegal in Kansas. The final vote was 59% to 41%. What makes this vote so interesting to me is that the polling ahead of this vote was split 50-50! This was a monumental miss for pollsters!!

Why is this important today?

Most of the "fair and balanced" polls currently show Harris tied with Trump in the race for President of the United States. The polls are effectively tied Nationally AND the polls are even effectively tied overall in the 7 major electoral college swing states. 

The key questions that must be asked now are "how good are the polls", is this contest really tied, and does the abortion issue mean as much in the national contest as it did in Kansas in 2022 and other RED states in the two years since? In other words, will there be any significant "crossover" vote among Republican voters because of the abortion issue (or any other Trump-related questionable acts, comments, or policies)? Let's review some relevant polling history.

In 2016, there was an apparent under-sampling of Trump voters in most major polls which resulted in a Trump victory against Hillary Clinton. In 2020, there was still a modest under-sampling of Trump voters, but Joe Biden still managed to win. In 2022, there was a clear under-sampling of Democratic voters as the so-call "Red Wave" never really unfolded and the Democrats managed to hold onto their majority in the Senate and only just barely lost their majority in the House.

Again, why is this important?

I strongly believe that the November 2024 election results will look more like 2022 results as compared to 2016 results. Here's why! Moderate Republicans do not want to admit that they will NOT be voting for Trump. In fact, they may actually vote for Harris. Please keep in mind that every lost Republican vote for Trump is actually a 2-vote swing if he or she "crosses over" and votes for Harris. And it is my view, that many Republican voters who don't want Trump, but can't justify a vote for Harris, may actually stay at home or at least NOT vote for President. If only 2% of Republicans actually vote for Harris instead of Trump (because of 100 different rational reasons), Harris would then win in a landslide, which I now predict!!

The political betting sites (led by Polymarket.com) now show Trump as a 64% probability to win, with Harris just at 36%. Predictit.org shows slightly better odds for Harris, but not by much. Trump is at 59% to win on Predictit, while Harris is only at 44%. Not sure why the total is greater than 100%, but there it is none-the-less (this is not a misprint). It is not hard to speculate that the PolyMarket betting odds are impacting the Predictit betting odds in favor of Trump. Americans are not allowed to place bets on the PolyMarket website where large bets are allowed, but they are allowed to make smaller-size bets up to $850 on the Predictit website, which then creates a minor arbitrage between the two websites. Uninformed very large bets for Trump have recently been placed on the PolyMarket website as compared with less favorable Trump bets from better-informed U.S. speculators that are currently being placed on the Predictit website. However, on balance, all the bets still favor Trump to win.

Please keep in mind that in 2016, Nate Silver's Five Thirty Eight website had Trump's chances of victory at ONLY 29%!! And this probability of a win for Trump at just 29% was actually among the highest of all polling services at that time!

Again, why is this important?

U.S. stock investors appear to be betting big on a Trump victory. I believe that recent record highs in most major stock market indices are discounting a Trump victory and all that comes with it (i.e. lower corporate taxes and more business- friendly Federal regulations for corporations). However, if Harris wins, as I strongly believe will be the case, then equity prices will give up ALL their recent gains and more. The correction in stock prices will probably be greater than 10% if Harris wins. And even if Trump wins, I actually believe there will only be modest upside from here, if any!

Bottom Line: Investors should exit U.S. stocks now or at least reduce their allocation to stocks in a meaningful way! Cash is king!!

Early Xmas Gifts From Donald Trump

Former President Donald Trump is now promising almost a dozen different tax cuts if he is elected President on November 5th. 

Of course, there isn't much talk from the Trump folks regarding how to pay for all these tax cuts. And to add insult to injury, Mr. Trump is proposing massive tariffs on almost everything that is imported into the United States. These across-the-board tariffs would cost U.S. consumers dearly as price inflation on almost everything would be almost impossible to avoid.

Most major U.S. stock indices are now at record all-time highs. It's not hard to speculate that this latest surge in share prices is related to Mr. Trump's recent uptick in the election polls. Who doesn't like the idea of tax cuts? Of course, their negative impact on the Federal deficit would be in the trillions of dollars, and passage through Congress would be unlikely at best.

I believe the American people know political "pandering" when they hear it, and I strongly suspect that Mr. Trump's recent uptick in the polls will be temporary and short-lived.

And if the recent surge in U.S. stock prices is tied in part to Mr. Trump's improved standing the polls, then any setback to his campaign is likely to result in a correction in share prices as well.

Even though oddsmakers are now projecting a Trump victory on November 5th, I continue to believe that Vice President Harris will prevail. I also believe that Democrats will retake the majority in the House of Representatives AND that the current majority in the Senate will remain in the hands of the Democrats. 

In the U.S. financial markets, equity prices look vulnerable to at least a 10% correction while bond prices look reasonable (and a safe place to park idle cash).