Too many are "misreading" the polls, betting markets and investor opinion around the election. They are not the same.
Please read this short thread ….
The poll analyzers were only giving Trump a 10% to 20% chance of winning (shown are FiveThirtyEight and the Economist)
(1/5)
Betting markets gave Trump a 42% chance of winning yesterday before the announcement of the positive COVID test. His odds were 47% before Tuesday’s debate. Now they give Trump a 39% chance. This marks Biden’s largest lead.
(2/5)
Investors were more aligned with the betting markets than the polls.
FT – (Sep 25) Investors anticipate Joe Biden election win
UK pollster Survation found that 60 percent of 91 investment professionals polled in Sep, most based in the US, believe Mr Biden will win
(3/5)
The difference between polls and bettors was going to be reconciled by election day. Today’s announcement that Trump tested positive for COVID only accelerates the process.
Betting markets are reducing Trump’s odds of victory and are aligning more closely with the polls.
(4/5)
We have contended the markets never fully priced in a Biden victory (and the increased regulation and higher taxes that come with it). Based on trading this morning, it appears they are now taking the prospect of a Biden presidency more seriously.
(5/5)
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Following every recession, the tenor of inflation shifts.
The current post-COVID recovery, as shown in blue, indicates inflation has reached a significantly higher level, with more volatility (wider standard deviation) than during the post-financial crisis period.
3/6
Something more may be at play, as larger trends in inflation seem to have shifted with the COVID pandemic.
The problem is not mortgage rates, it's inventory (not enough).
Cut rates and home sellers raise prices, and monthly payments remain unchanged. The affordability problem remains. Greedy boomer homeowners get richer.
How to fix affordability?
Reduce zoning and building regulations to increase inventory. The problem is that selfish boomer homeowners wield these laws to restrict supply and drive up the price of their homes.
The Atlanta Federal Reserve calculates a Housing Affordability Monitor.
The median income in the United States (blue) and the income needed to qualify for a mortgage (detailed below the chart). The bottom panel shows the difference.
At 58%, this means one needs 58% more than the median income ($ 83k) to qualify for a median mortgage ($ 130k).
This is a new record, even greater than the peak before the housing crash from 2007 to 2009.
Home prices are too high. Cutting mortgage rates will only incentivize home sellers to increase their asking prices, and the problem persists.
We need more supply, that is what the record "unaffordability" is saying..
A home is considered “affordable” if it costs less than 30% of a household’s income.
The following chart indicates that the average home in the United States now costs 47% of the median household’s monthly income.
An all-time record, surpassing the bubble peak in 2006 before the housing crash.
The OMB Director and Acting CFPB Director @russvought laid out the charges of lying to Congress and mismanaging the renovation of the Fed (Eccles) building.
While the betting market still has Powell getting fired at less than 50%, it is now trending higher.
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The Federal Reserve Act says that a Fed Governor (including the Chair) may be removed “for cause by the President.”
However, “for cause” is not defined in the statute and has never been tested in court in this context.
I would argue "for cause" is not a disagreement over Monetary Policy ("too late" cutting rates), but can be lying to Congress and/or mismanaging the rules around renovating the Fed (Eccles) building?
Powell said this to the Senate Banking Committee on June 25, 2025, as part of the semiannual Monetary Policy Report to Congress.
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"Generally, I would just say we do take seriously our responsibility as stewards of the public’s money. ... There’s no VIP dining room. There’s no new marble—we took down the old marble, we’re putting it back up. We’ll have to use new marble where some of the old marble broke. But there’s no special elevators; there’s just old elevators that have been there. There are no new water features. There’s no beehives, and there’s no roof terrace gardens."
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Technically, Powell is correct because the renovation has not been completed. However, such details are outlined in some plans for the renovations.
Is this a big deal? No. However, if Trump is looking for ANY reason to remove Powell, this might be enough. And it might be enough "for cause" that the Supreme Court will uphold it.
Furthermore, no one in Congress wants to spend any political capital defending a $2.5 billion marble Washington, D.C. building with private elevators, beehives, and private roof terraces.
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Bottom line, Powell may have given Trump an opening to remove him. Will Trump take it?
Or, does Trump want/need "Too Late" Powell to stay as Fed Chairman until May 2026 to use as a punching bag?
Yesterday, Jim appeared on Bloomberg TV, warning that if the Fed cuts rates and the market thinks this is wrong, 10-year yields could surge through 5%.
(Perspective ... 10-year yields were last above 5% in October 2023 and as high as 4.85% in January).
🧵
2/8
President Trump disagrees with this thinking and believes the federal funds rate should be 1% right now.
From a "truth" posted on June 30.
3/8
If (or should I say when) Trump gets a Fed Chair to make 1% happen, how will the 10-year react?
Reminder of what happened last year to long rates when the Fed cuts rates (peach arrow) and the market does not think it's a good idea (cyan arrow).
I would argue that if the Fed cuts rates and you assume mortgage rates follow the federal funds rate lower (they may NOT be the case), home prices would rise, putting the monthly payment right back at $2,860.