Tuesday, February 14, 2017

Trumps Tax Plan = Equity Market Spike

Trump's plan to decrease corporate taxes from 35% to 15% should lead to a very healthy spike in the market. The math is simple, but it's amazing how few people are talking about it.

Let's go through a simple example for XYZ Corp.Right now, here's what they look like:

Current price:            $100
Pre-tax earnings:         $10
After-tax earnings:     $6.50  (assumes 35% tax)
P/E ratio:                    15.4    (100/6.50)

Under Trump's plan, the new after -tax earnings number is...

$8.50

Assuming the P/E ratio remains constant, the price of the stock must rise. Specifically...

8.50 x 15.4 = $130.77

That's almost a 31% rise, which is about what the market might rise over an average 3-4 years, except this should be more or less immediate. Capital will become cheaper to raise, and my specific hope is that it could revive the moribund IPO market.

Yes, some of this has been discounted since Trump was elected, but not much.

Monday, January 30, 2017

The Permanent Protest

If it's Tuesday, it must be a march for/against (fill in the blank).

The fact is, liberals like being out of power, at least on an emotional level. They need somewhere to direct their permanent state of outrage. It was always a little odd when protests like, say, Occupy, or Black Lives Matter, railed against The Man, when The Man, was, arguably Barack Obama.

Awkward.

But for liberals, virtue signaling is as important as breathing, and taking to the streets is the quickest way to get a good selfie for your like-minded friends on Facebook and Instagram. Even during the Obama years, this impulse could not be contained. Oddly, Obama even encouraged it, as if the center of power was somewhere else.

And Obama, like any good liberal, liked to vigorously employ the levers of power. But you could tell that the hard, detailed work of governance wasn't particularly fun for him, not like the good ol' days, hanging with Bill Ayers, spreading the word about American imperialism. Saul Alinsky had lots to say about how to burn down power structures, but little to say about what to do when the power structure was yours. It's a confused dog that actually catches the bus.

But now, oh yes, oh yes, oh yes, The Man has a new face:



Let the good times roll! Let's march!

One key reason libs are happier out of power is that they can just fall back on bumper sticker aphorisms...

Co-exist!

Dissent is the Highest Form of Patriotism!

Earth First!

Love Trumps Hate!

No need to flesh out any nuance or policy detail (boring!) when you're chanting at a rally.

But the sad fact is that the Left in America has lost the ability to express itself in any coherent way. They are vacuum-sealed in their insularity, and it's rendered them intellectually inert. It's certainly why they were utterly shocked by the election. 

To understand why, let's start with geography:


The left lives in a faint archipelago of densely populated urban areas that gave huge margins to Hillary Clinton.

And then there's the media...



...which skews wildly left. I don't think even libs are trying to argue otherwise anymore. Yes, there's Fox, and the editorial page of the Wall Street Journal (sort of), but everybody else, well, let's just say that 96% of media donations went to Hillary. As a conservative, you can't avoid hearing liberal spin on just about everything. It permeates the air like oxygen. As a liberal, though, it's quite easy to avoid hearing the other side. Simply avoiding Fox and some talk radio gets the job done, for the most part, and you probably dumped your last conservative friend on Facebook a while ago.

And, of course, there are the schools...



I can only assume you've heard about "safe spaces," where students are protected from hearing viewpoints they find upsetting. They're not likely to hear them much, because conservatives at most colleges have learned to keep their mouths shut, lest they have no friends and provoke their professors' ire. Thus, debate is virtually non-existent. I've been told it would be completely impossible to hold a formal debate at Harvard these days on something like a border wall because even if you found students to take the affirmative, protests would shut the whole thing down. Visiting conservative speakers are also routinely shouted down, assuming they make it to campus in the first place.

The only open debates on campus any more are between degrees of progressivism, like the Leninists and Trotskyites of old.

All this results in a progressive movement that's not particularly good at defending itself. If you don't expose your ideas to criticism, you'll have no idea what their weaknesses are, or even their strengths. Which brings me back to...

...the permanent protest.

It's so much easier. No one calls you out in the middle of a march. No one asks for a white paper when you're busy chanting. No one asks you to explain why "dissent is the highest form of patriotism" signs only seem to come out during Republican administrations. No one throws the flag when you use your third Hitler reference of the day.


 
I'm not, for the record, suggesting liberals are stupid. Many of them are extremely intelligent, and many remain my friends. But where critical thinking and reasoned argument are concerned, they are woefully out of practice, and they do not seem inclined to address the problem. The fact is, if you live in a bubble, forever protected from hard questions, you won't ever be able to answer them when they come.

But, whatever, shut up, man. Gotta go make a sign!

Tuesday, January 17, 2017

Of Stinkin' Badges - Pre-Inaugural Thoughts



So, I was walking in front of Trump Tower a few days ago, where a motley collection of 200-300 protesters was chanting, "Love trumps hate!" over and over. As I walked beside them, disdain likely visible on my face, one woman yelled, "F**k you, old white guy!"

Old? I'm hurt. Did I mention they were chanting "Love trumps hate?" 

Hmm.

I haven't posted in some time. I've been too busy, in part, but also digesting. Pigs fly, hell freezes, and the American Left is having an emotional breakdown of epic proportions. It's been great fun to watch, can't lie, although it now grows tiresome.

A few months ago, I advocated voting Trump as I thought there was a slight (25%) chance of his being a good president, versus the big, fat zero chance for...what was her name, again? Well, I'm up to 75%. To be clear, I was no Trump fan, he wasn't even in my Top 10 in the GOP field. Let's face it, he's a deeply odd man, narcissistic, confrontational, tacky. His behavior towards women, while probably not as bad as Bill Clinton's, leaves much to be desired. And he can't string together a single goddamn sentence without a syntax error. C'mon, Donald, you went to Penn! What's up with that?

Regardless, I have been profoundly impressed since election night, beyond anything I could have imagined. His cabinet, in my view, is a home run, up and down the line (with the notable exception of Elaine Chao). One of my abiding concerns about Trump was his lack of a core ideology, but his cabinet is solidly conservative. (Here's wishing them luck dealing with the tens of thousands of bureaucrats who will stymie their every move.)

Then there's the deals he's been cutting with Carrier, Boeing, etc. I will go on the record as being against the sort of inside dealing that got Carrier to stay in Indiana, but wow, what a PR coup for a guy who had been president-elect for mere days. I've never seen anything like it.

Did you see his press conference the other day? What got all the headlines was Trump's (rightful) dressing down of the CNN reporter, which is no surprise given the self-absorption of the media, but the real story was elsewhere, which is to say that Trump wasn't backing down on a damn thing. 

This is quite unusual. Lots of candidates promise lots of things, but usually start hedging once elected as the difficulty of following through becomes manifest. Not so, Trump. The Wall, Obamacare, he's not backing off anything. Reality, and Congress, might conspire against him, but I'm not so sure. When the House stupidly voted to eliminate the Ethics Board, a single tweet from Trump had them scurrying away in fright, reversing their decision.

Oh, yeah, the tweeting. Get used to that. One thing that we can be sure of is that Donald Trump is going to carve a presidency like no other. The rules will all be re-written. Badges? Trump don't need no stinkin' badges. This fills many with profound dread. To them, I say: How well was it working before? 



What fills me with weariness is the near constant display of outrage from the left that I don't expect to abate anytime soon. Of course, the Left exercised perpetual outrage during every GOP presidency since Reagan's, but ironically, under eight years of Obama, a time when things were demonstrably going their way, the outrage only got worse. If it's Tuesday, it must be pipeline protest day! 

Feeling and expressing outrage is now a way of life for the American Left, like 16 year-olds when told they can't borrow the car.  Making sure the rest of us have to see these fits of pique every day has become the job of the media.

Throw a Republican president in the mix? Scream even louder. Call someone a racist! Throw Donald Trump in the mix? Holy crap, it's now the World Series and Super Bowl of outrages. Spleens are bursting in every faculty lounge.

Except, the World Series and the Super Bowl end. This won't. It will be constant, and CNN, NPR, and Vox will make sure none of us can quietly go about our lives without hearing the cacaphony. But here's the thing: while this might bother you and me, Trump doesn't give a crap. He may be the only Republican, ever, about whom you could say that. 

For years, we've witnessed a parade of Republicans who have operated under the illusion that they could get the press or, say, Congressional Democrats, to like them.


Sure, they'll pretend. The press pretended to like John McCain (He's a maverick!) right up until the point he was nominated for president. Ted Kennedy pretended to like George Bush just long enough to get No Child Left Behind passed. I could go on, it's a time-honored scam.

But Trump? He doesn't need you to be his friend. He's got a hot wife, smart kids, and he's moving his chintz to 1600 Pennsylvania Avenue. He doesn't need your stinkin' badge.

This is going to get very interesting.



Electoral Model Follow Up: the election put my electoral model to shame, although I must say it had a pretty good run. The model had Hillary winning 302 electoral votes and in the end, Trump won 306. As you may know, the model is based on prediction markets, which, while better than polls, are still fallible. The Wisdom of the Crowds wasn't so wise this time. Still, I haven't found a better system.

Monday, November 7, 2016

Final Model Prediction

This is my final forecast.

If you haven't followed this model over the years, it's done a pretty good job of calling the election. It has called every election correctly since 2000, one year even getting the electoral count precisely right as well. The model uses prediction (betting) markets state-by-state data, multiplying the odds of a candidate winning a state by the number of electoral votes available in that state, and then adding them all up.

So, for instance, if Trump has a 74% chance of winning Arizona, and Arizona has 11 electoral votes, Trump is allotted 8.14 electoral votes (11 x .74 = 8.14). This is a probability weighted outcome.

Right now, that model has Hillary winning 302 to 236.

However, candidates cannot win partial states (with the exception of Maine and Nebraska). As such, in the final forecast only, I force the model to allot votes in each state entirely to one candidate or the other.

Here is how the states break down:



So, the final prediction is 307 to 231 for Clinton. 

God help us.

What needs to happen for Trump to win? First, hold North Carolina, which I think he will. Then, he needs Florida, which has been trending away for a few days, but is also doable. That's 260. Then he could win both Nevada and New Hampshire, which is a bit of a stretch. Or Michigan and Colorado. Pennsylvania would do the trick, or Michigan plus New Hampshire. (Interestingly, several scenarios get you to a tie, which throws the election to the House, which means Trump wins.) Bottom line: while none of these paths is out of reach, they are still difficult. I wish I could say otherwise.

Here's where I feel obliged to note that while prediction markets tend to be the best way to predict political outcomes - better than polls - they are not perfect. Sometimes the wisdom of crowds blows it. Brexit is a great example, and there may be undercurrents in this election that are similar. Specifically, voting for Trump/Brexit is seen by elites as unsophisticated or rube-like. Poll respondents may be reluctant to admit to pollsters their views. If this is a two or three point effect, Trump wins. Prediction markets may be preferable to polls, but they are undoubtedly influenced by them.

The other thing that could cause polls to be off are turnout models. Republicans should be careful about this, because many thought that pollsters in 2012 were intentionally using biased turnout models. Well, they weren't, or they were and got lucky. But while pollsters are very good at predicting how people will vote, they are not that good at predicting how they will actually vote. Right now, most pollsters are assuming about 6% more self-identified Democrats will turn up than self-identified Republicans. Given the highly visible enthusiasm gap - we've all seen the contrasting images of Trump and Clinton rallies - this does seem like a reach. One wonders if all the disenfranchised, poorly educated, mostly white voters, who don't typically vote in high percentages, will turn out in surprising numbers. Anecdotally, it sure seems that way, and just like Brexit, pollsters might be missing it. On the other hand, I might be wishcasting (my new favorite word).

Go vote tomorrow.

Friday, October 14, 2016

When You Hate Both Candidates


What a situation. 

Neither candidate for president is even remotely suited for the office. And yet, one will occupy it.

Neither is temperamentally suited, and, let's face it, neither is a good person. Donald Trump is a deeply, deeply strange man, and Hillary Clinton should be in jail, among other things. I could argue, successfully, that while Trump's transgressions are predominantly things he's said, Hillary's are things she's actually done, and that's far worse, but let's put that debate aside. Let's stipulate that the candidates are equally awful. 

What to do?

Here's what. Get over the fact that both candidates are each their own brand of reprehensible and come to terms with the fact that one of them will be running the country. Focus on the one thing that no one seems to be talking about: policy. 

Policy is the tie breaker.

Choose the candidate that best fits your policy preferences. It shouldn't be hard, because they are miles apart.

Do you want an activist Supreme Court or one that upholds the Constitution? The next president will decide that one for at least a generation.

What kind of tax code do you want? Hillary wants higher rates and more complexity, Trump is the opposite. On death taxes alone, Hillary wants to go to a whopping 65%, while Trump wants to eliminate them. That's an incredible difference that no one's focusing on.

Do you want open borders or more rationalized, controlled immigration?

How about identity politics with transgender bathrooms and balkanized campuses? Want to double down on that or push back?

I could go on. There are huge policy differences between Trump and Clinton, bigger than in most presidential elections, and almost no one is even noticing. Everyone's caught up in the circus, including the media, who have been shameful. The debate moderators have been feeding into it as well. But policy-wise, we're talking about two very, very different paths forward.

So...


  1. Ignore that bile in your throat
  2. Read up on policy
  3. Pick your candidate
  4. Hold you nose and vote

Sunday, October 9, 2016

Birth of an Industry - Only in America

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I’d like to depart from politics for a day.

Last week, I went to a large conference in San Diego, where my company had a booth. What's interesting is that it was for an industry that didn’t even exit three years ago. I mean nothing, zip, and now it’s huge. If you’re a regular reader of this blog, odds are you don’t even know it exists.

I’m talking about game streaming.

What, no idea what that is? Allow me to give you the brief history.

What if someone had come to you, say, four year ago, and said they had an awesome investment opportunity for you: they were starting a website where you could go and watch other people play video games live.

I’ll tell you what you would have said: move along. Next idea, please. I would have reacted the same.

Well, we all would have been wrong. Really wrong. A billion dollars wrong.

There is a company called Twitch that did exactly that. A year and a half ago they sold to Amazon for a cool billion. That turned out to be cheap, and over the last couple of years, an entire industry has grown up around the idea. It turns out that people, mostly young and male, love watching video games. Many of the more popular “streamers,” the people who send live streams of their games to Twitch, are minor celebrities and make six figures. I saw some of them at the conference, and people were lined up to get selfies with them. 

Nearby, there were endless rows of booths with specialty streamer products like microphones, chairs, and endless accessories. Shaq and Snoop were there, avec entourage, playing in a “celebrity vs. streamer” match.

The way it works is that “streamers” start playing a game of, say, Call of Duty, and upload the action in real time to Twitch. Viewers can watch and type in comments. The streamer can be seen and heard by everyone in a little box in the corner. It looks like this:


Viewers can also make spontaneous donations to the streamer, to which you no doubt say, pfft!, who would do that?

A lot of people, as it turns out. The largest donation to date is $45,000. What do you get? Nothing, really, except maybe a shout-out from the streamer. Seven seconds of derivative fame.

No one over maybe 35 can possibly get any of this. I don’t, and I’m in the industry. 

Here's how much I don't get it. I went to an “unboxing” of a new game, called Breakaway, in a huge theater where I watched as the game was “revealed.” Two thousand people shrieked and whooped around me with every detail. Two teams were introduced on stage, to much fanfair. They then competed in the first ever match, which played out on a huge screen. 

This was a good test because like me, none of the people in the theater were familiar with Breakaway. We were starting on equal footing, and I made a good faith effort to follow the action. Here’s what I saw: eight characters flitting around in all directions with light and objects flying everywhere faster than I think anyone could reasonably process. It was like watching chaos, and I could only follow small portions of the action, missing important developments elsewhere.

Well, apparently my visual processing is wanting, because the shrieking and whooping around me continued. Sometime it would reach audible crests when something happened that I invariably couldn't make out. I'm officially on the wrong side of the digital divide.

If you want to see the whole event, it’s here (the gameplay is towards the end): 



You’re probably wondering what the heck I have to do with any of this, so allow me to explain. If you’re not interested, now would be the time to move on to the Drudge Report.

My new company, LiquidSky (I am co-founder), does cloud computing. Specifically, we let you rent a high-performance Windows PC in the cloud which can be accessed from any device. Got a clunky old laptop? No need to replace it, we turn it into a badass computer with monster bandwidth. Simply use your clunker to connect to your “SkyComputer,” and we stream the experience to you fast enough such that you can’t detect any latency. It looks and feels like your own computer, but it’s not.

We think this will be a big deal, generally, because we’re breaking the model of buying a new machine every few year as your old one obsolesces. We let you keep everything up there, in the cloud, including your files and programs. It’s pretty cool, I gotta say.

But for gamers, it’s particularly cool. Every new game requires ever more demanding hardware specs, and gamers have trouble keeping up. A good gaming PC can run $2,000, but then it’s struggling to keep up a year later. With LiquidSky, gamers and others never need to update their hardware again. Heck, you can even play Call of Duty on a phone, if you get our app.

At our booth, we had two laptops, loaded with two different high-end games, which were connected to our nearest servers in San Jose, which was 500 miles away. The gaming experience was flawless, and most people had trouble believing it was possible. One even looked under the table, thinking we were hiding a server there.

Nope.

Anyway, it was an interesting experience. I’d call it a subculture, but that would be unfair. It’s too big. Gamers spent $91 billion last year. Did you know that more people watched the League of Legends Championship Match last year than the World Series?

Yup, it’s their world now.

Monday, September 19, 2016

Election Model Update

Trump has moved closer, for sure, but before Republicans get too excited, I would offer two caveats:


  1. Trump is still only marginally ahead of his previous high point in late July.
  2. The non-weighted, "simple" model still skews heavily to Hillary. In this model, all electoral votes in a state are awarded to a single candidate. So, for instance, HRC currently has a 54% chance of winning Florida. In the simple model, she wins all 29 electoral votes. In the weighted model, she only gets 13.3.

If probabilities remain where they are, and Clinton still has a greater number of vote-heavy states where she's north of 50%, it implies that things could more easily break her way on election day. Having said this, state probabilities tend to gravitate away from toss-ups as the day approaches.

Right now, the model has Clinton winning 290 to Trump's 248. You can see the progress Trump has made here:



On the other hand, the simple model has Clinton up 323 to 215. Here's the state-by-state breakdown:

Wednesday, September 14, 2016

Taking Down Jim Sleeper

So, I haven't posted in a while. Frankly, I've just been too busy doing real-world things. But when the New York Times Sunday Review takes a shot at you, it's time to carve out a few minutes. It won't take longer than that to dismiss Professor Sleeper.

It started with a New York Times front page article last month called, "College Students Protest, Alumni's Fondness Fades and Checks Shrink." The gist of it is in the title: that alums are getting wise to some of the full-on craziness going down on campuses. I was quoted a bit, saying, among other things, "this is not your daddy's liberalism," and "I don't think anything has damaged Yale's brand quite like that," referring to the widely-viewed video of "Shrieking Girl," which can only be properly appreciated by viewing it yourself:


Two weeks later, a Yale professor named Jim Sleeper wrote a piece for the Sunday Review called, "Political Correctness and its Real Enemies." He started out by repeating a few of my quotes...

NEW HAVEN — Last November, Scott C. Johnston, a 1982 Yale graduate, was attending a conference organized by the William F. Buckley Jr. Program at his alma mater when student protesters disrupted it. Soon after, he watched an online video of a black Yale student hurling imprecations at a professor who headed her residential college for failing “to create a place of comfort and home.”

Such protests have prompted Mr. Johnston and other alumni to cease funding what they see as coddled children and weak-kneed administrators. “I don’t think anything has damaged Yale’s brand quite like that” video, he said. “This is not your daddy’s liberalism.”

The article, as you will see, is an incoherent mess. Had I tried to turn this in as a paper in high school, it would have been handed back dismissively with the word "rewrite" scrawled in red ink. I urge you to read it yourself to see if you can figure out what the hell he's trying to say.

But let me try.

Sleeper said...

"What the video didn’t show were the hundreds of white students having their first frank conversations about race with minority classmates."

First conversation about race? Seriously? Is anything else discussed on campus these days? Identity politics trumps all.

"A thousand students of all colors joined a vibrant campus “march of resilience” — I know, because I was on campus last fall."

Well, Sleeper, so was I. I was at that conference, the one progressives tried to shut down, the one Sleeper neglects to mention was a conference on free speech. Oh, and he also leaves out that as we were leaving, some of us were spit on. But he manages to get in that we were there for the Buckley Program. Read: it's just a bunch of crazy right-wingers, so discount anything they say. He goes on...

"Free speech and open inquiry are alive and well on campus."

Bwahhahahahahahahahaha.

(Sorry, can't help it.)

Sleeper, of course, is talking about colleges in general, not just Yale. So, why then would the University of Chicago feel the need to explicitly state that they won't ban speakers? Why is it that all speakers who are banned are conservative? Why is it that a friend, who has a son at Yale, recently told me that conservative undergrads have learned to keep their mouths shut? You see, Sleeper lives in a bubble where open debate consists of sparring shades of progessivism. He thinks debates between Code Pink and the Progressive Student Alliance on whether Donald Trump is the devil or merely evil constitutes "free speech and open inquiry."

"But it isn’t the protests per se that damaged open inquiry and expression, but the frenzied way they have been portrayed by the right."

Frenzied? Frenzied was Professor Christakos being surrounded by shouting students because they were upset about the mere concept of insensitive Halloween costumes (think Frito Bandito), and then being hounded out of Yale altogether. Frenzied was 200 students trying to physically break up a free speech conference and then spitting on attendees. (You can read my full account here.)

Frenzy is the default condition of the Left these days, having elevated the emotion of outrage to a virtue. The Right, on the other hand, is about as frenzied as a garden club meeting. We have day jobs.

"What motivates (conservatives) is not the defense of free speech, but an ideology that condemns “politically correct” activists and administrators and dubiously recommends “free markets” as the best guarantors of such rights."

Okay, I confess I have no idea what Sleeper is talking about here. Free markets are great, but he seems to conflate them with free speech. Hey Professor, they're both good, they're both necessary, but they're not the same.
  
"If anything, the real threat to free inquiry isn’t students, but that same market imperative that First Amendment defenders claim to hold dear. Most university leaders serve not politically correct pieties but pressures to satisfy student “customers” and to avoid negative publicity, liability and losses in “brand” or “market share” — terms that belong in corporate suites but appear, increasingly, in deans’ offices."

This is where Sleeper really leaves the rails. He's (apparently) saying that the threat to free speech isn't from the students who specifically want to place limitations on it, but from we evil people on which the university relies for donations. Here, he's seizing on my use of the word "brand," implying that somehow those of us who work in, and support, market economies are somehow subverting universities' missions of free inquiry.

You see, those of us who are the most vocal about free speech on campus are really, deep down, the ones trying to subvert it, all to feed our corporate agenda. Got that? Professor Sleeper: I could just as easily have said "reputation" instead of "brand." Might that have spared us the tortured logic?

"Today wealthy donors back groups like the Intercollegiate Studies Institute: the Bradley Foundation, the Scaife family foundations and the Koch brothers’ DonorsTrust ( for donors who don’t want to go public) that funnel money to, among others, the David Horowitz Freedom Center... and Campus Watch..."

When you're starting to lose even your leftie audience, shout "Koch brothers!" It's Pavlovian. Follow Sleeper's logic here: there are people - Kochs! - who give money to universities who also give money to conservative causes, and therefore college administrators dance to their tune.

For anyone paying the faintest attention to campus politics these days, the notion that administrators are doing anything - anything at all - conservative, is risible. If there were truth in this, things would be a whole lot different, starting with the status of Professor Sleeper's tenure.

"(Conservative's) selectively legalistic “free speech” strategy helps turn collegial contentions into rhetorical battlefields by hyping and even provoking progressive offenders."

So, by defending free speech, it is we who are the bad guys, not Shrieking Girl and her friends. Sleeper thinks we need to be more sensitive...

"...freedom requires self-restraint and respect for others."

Translation: we need more safe spaces, trigger warnings, micro-aggression training, and banning of insensitive conservative speakers. (I am getting good at translating from the liberal.)

"The reason is that conservatives’ yearning for ordered liberty is being debased not by liberals but by the casino-like financing and predatory lending and marketing of a “dynamic capitalist economy.'"

Whaaaaaat? Stop, please just stop, before you teach again.

"If collegiate civil societies are lurching into ditches as often now as the “free speech” campaign claims, that’s partly because the larger society is, too. Yes, some students are as intemperate as the Republican presidential nominee, and some deans accommodate them. Their behavior may not be your daddy’s liberalism, but what their outraged critics are selling isn’t his conservatism, either."

And, yes, there it is kind readers. In a singular act of logical gymnastics, Sleeper's big close manages to wedge in Donald Trump, ignoring the fact that all the "intemperate" students, like "Shrieking Girl" and the would-be expectorators, are on Sleeper's side of the aisle.

The New York Times should be embarrassed that they run pieces like this, but it's what we've come to expect.

Tuesday, July 26, 2016

Has Clinton Left Herself Open to Extortion?



"I know everything."


The news this week that hackers released a trove of DNC emails has the media world atwitter, but they're missing the big picture. Their focus has been on the specific content of this particular batch of emails, and that it reveals a primary-rigging party infrastructure, headed by the loathsome Debbie Wasserman Schultz.

Okay, true enough. That's a legit story, particularly on the eve of the Democrat convention. 

Wasserman? Gone, although now comfortably ensconced in the big-money machinery of the Clinton campaign, her payday assured. But Wasserman's a sideshow.

The bigger picture here is who hacked these emails, and why? Democrats, having dismissed any concerns about state-sponsored hacking during Hillary's server scandal, are now pointing their fingers at the Russians. They think that Trump is coordinating the attack with Putin, which is flat-out comedy gold.

But, they may be half right. There's a decent chance the Russians are behind the hack. There is a huge hacker culture in Russia, and their government is known to employ it for their own ends. If that's the case, and they easily hacked the DNC, is there even the slightest chance they didn't hack a lone server in Hillary's basement? Let's face it, there's a decent probability the Russians have all those tens of thousands of emails that Hillary went to such great lengths to conceal.

We all know what's in those emails, too, even if we don't yet have access to the smoking gun. It ain't yoga. The Clintons put the State Department up for sale, exchanging favors for either large money transfers into the Clinton Foundation or bogus speaking fees. Bill and Hillary are two grifters whose ambitions took the con to heights never before seen.

So, if you're Vladmir Putin, what do you do with such a bounty? One option is do undermine Hillary's chances for election, preferring instead to deal with Trump, who would presumably be of more help in staving off the mutual threat of radical Islam. The first email dump might have been a shot across the bow.


But a second, perhaps more compelling, option exists: extortion. In this scenario, Putin holds back from here, hoping Hillary actually gets elected. After that, he makes it known to Hillary through surrogates exactly what he has, and how he can easily feed it all to that dependable lackey, Julian Assange. 

Given Hillary's highly developed instincts for self-preservation, there's no question that such a development could alter the world's geo-political map. Or maybe Russia plays it more subtly, instead opting for small wins, like snapping up the odd strategic mine here and there.

Either way, it's chilling.

I'm not big on conspiracy theories. Emphatically not. But let's review what we know:


  1. The DNC was successfully hacked by someone who is using the information for political advantage
  2. Many believe, including the DNC itself, that the Russians were behind the attack
  3. James Comey stated that it was "likely" that foreign governments tried to hack Hillary's personal server, although the FBI couldn't prove it
  4. The Russians (or Chinese) would certainly have hacked Hillary's server if possible
  5. Hillary's server had far fewer security safeguards, undoubtedly, than the DNC's
Right now my model says Hillary is likely to win. We may have the first president since JFK to leave themselves open to extortion. 

That's the real story.

Monday, July 25, 2016

It's That Time - Re-Introducing the Election Forecast Model




In 2004, I introduced a model I built to predict presidential elections. More specifically, it predicts the outcome of the electoral college, which is all that matters, after all. So far, the model has worked out pretty damn well: in 2004, it hit the electoral count on the nose, and in 2008 2012 it got the winner right, missing the actual count by only 21 votes both times, or roughly the value of an Arizona swinging from one candidate to the other.

The model is built on "prediction markets," where real-world betting happens on each state's outcome. Betting is continuous, and from it we may infer each state's real time probability. I then multiply this probability times the number of electoral votes available in that state for the probablity-weighted outcome. It is understood that one cannot win part of a delegation, it's all-or-none
(excepting Maine and Nebraska). Still, for predictive purposes, you don't want to hand 100% of, say, California's electoral votes to Hillary just because she has a 95% chance of winning those votes. You give her 95%. It's effectively a small hedge against something dramatically unexpected happening.

It's time to roll out the 2016 model. Right now, it has Hillary winning a somewhat tight election, 299 to 239. In 2012, Obama won 332 to 206.


 
State Electors Percentage Repub margin current betting weighted expected
of Electors 2016 market odds  electoral votes
Alabama 9 1.67% 23 100 9.00
Alaska 3 0.56% 15 100 3.00
Arizona 11 1.86% 9 70 7.70
Arkansas 6 1.12% 24 100 6.00
California 55 10.22% -33 6.5 3.58
Colorado 9 1.67% -7 21 1.89
Connecticut 7 1.30% -17 0 0.00
Delaware 3 0.56% -19 0 0.00
Dist. of Columbia 3 0.56% -87 0 0.00
Florida 29 5.02% -1 40 11.60
Georgia 16 2.79% 8 78 12.48
Hawaii 4 0.74% -43 0 0.00
Idaho 4 0.74% 21 100 4.00
Illinois 20 3.90% -17 7 1.40
Indiana 11 2.04% 10 85 9.35
Iowa 6 1.30% -6 43 2.58
Kansas 6 1.12% 20 100 6.00
Kentucky 8 1.49% 23 100 8.00
Louisiana 8 1.67% 17 100 8.00
Maine 4 0.74% -15 0 0.00
Maryland 10 1.86% -26 4.5 0.45
Massachusetts 11 2.23% -24 7 0.77
Michigan 16 3.16% -9 22.5 3.60
Minnesota 10 1.86% -8 17 1.70
Mississippi 6 1.12% 11 100 6.00
Missouri 10 2.04% 10 81 8.10
Montana 3 0.56% 13 100 3.00
Nebraska 5 0.93% 21 100 5.00
Nevada 6 0.93% -6 34 2.04
New Hampshire 4 0.74% -6 33 1.32
New Jersey 14 2.79% -17 9 1.26
New Mexico 5 0.93% -10 0 0.00
New York 29 5.76% -28 8.5 2.47
North Carolina 15 2.79% -2 51 7.65
North Dakota 3 0.56% 20 100 3.00
Ohio 18 3.72% -3 42 7.56
Oklahoma 7 1.30% 34 100 7.00
Oregon 7 1.30% -8 0 0.00
Pennsylvania 20 3.90% -6 34 6.80
Rhode Island 4 0.74% -28 0 0.00
South Carolina 9 1.49% 11 100 9.00
South Dakota 3 0.56% 18 100 3.00
Tennessee 11 2.04% 20 95.5 10.51
Texas 38 6.32% 16 91.5 34.77
Utah 6 0.93% 48 84.5 5.07
Vermont 3 0.56% -36 0 0.00
Virginia 13 2.42% -4 22.5 2.93
Washington 12 2.04% -15 8 0.96
West Virginia 5 0.93% 26 100 5.00
Wisconsin 10 1.86% -6 21 2.10
Wyoming 3 0.56% 40 100 3.00
Totals 538 100.00%      
red = swing state (odds between 30 and 70)




270 needed to win
Republican 238.6




Democrat 299.4

There are caveats.


First, since the election is four months out, the data is pretty thin (i.e. the state-by-state markets are very thinly traded right now - some haven't even traded at all, in which case I relied on the closing data from 2016).


Second, when I cited the model's accuracy, what I was really referring to was the last snapshot before each election. During the months-long run-up, there will be plenty of fluctuation, but it will still tend to be the best indicator at any point in time. Obviously, as circumstances change, so does the forecast.


Why does this work better than polls? Because it's real people betting real money, not people answering polls on the phone where their responses could be shaded for any number of reasons - particularly this year!

 
I will start to graph all this and post more frequent updates as the election draws nearer.


Naked Dollar readers with good memories will also remember I have another model that shows directional movement for both campaigns. I'll get to that shortly.