The Upcoming Liberal Landslide (Part 1); PredictIt odds and why I think they're wrong; Packing up the field hospital

By Whitney Tilson

Wednesday, May 13, 2020
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1) I do my best to keep politics out of these e-mails because there’s little upside – anything I say politically is sure to infuriate half of my readers.

But elections have important economic consequences, and I don’t think anyone would disagree that the one coming up in November will have important implications for investors.

If you thought there would be a conservative landslide, with President Donald Trump being re-elected and Republicans sweeping both chambers of Congress, thus retaking the House, you would allocate your portfolio in one way.

Conversely, if you thought we would see a liberal landslide, with Joe Biden not only winning the presidency, but Democrats also expanding their majority in the House and taking control of the Senate, I’ll bet your portfolio would look fairly different.

That’s why, over the next six months until the election, I’m going to share my thoughts on the probabilities of the various election outcomes, as well as some ideas on how to position yourself to take advantage of the likely outcome.

In doing so, I’m not expressing an opinion about what I want to happen – merely what I think is likely to happen. So, to those of you in the center or on the right side of the political spectrum, please don’t get angry with me reading what I have to say below. I am simply trying to help my readers make good investment decisions by providing sound, dispassionate insight and analysis.

As always, I welcome my readers’ feedback!

2) Rather than starting with my opinion on what’s likely to happen, let’s take a look at what bettors are saying…

For this, I turned to a real-money betting website PredictIt.

It currently shows that the presidential race is a toss-up, with a Democrat having a 52% chance of winning. As you can see in the chart below, the odds of this outcome have moved up over the last 90 days from a low of 42% in late February, when the stock market peaked:

There’s been a much more substantial move in the odds that Democrats will control both the House and the Senate – more than doubling from a low of 23% to the current 48%:

3) I think PredictIt’s odds are wrong and, accordingly, I’ve made 13 bets on the site, ranging from $200 to $850, totaling $6,250, currently valued at $7,079. (You can do the same – just set up an account and fund it with your credit card.)

It has become increasingly clear to me that we’re going to see a liberal landslide on November 3, with Democrats not only winning the presidency but also both houses of Congress, as they did in 2008 – and for similar reasons: a terrible economy and great uncertainty leading angry, frightened voters to throw out the incumbents.

Nobody wants to say this, however: Democrats, because it could lead to complacency and hurt fundraising and get-out-the-vote efforts… and Republicans, because they so strongly dread this outcome, and also worry that this narrative could become self-fulfilling.

To repeat: this is not a partisan belief. I do not believe this because it’s what I want to happen, but rather based on a dispassionate analysis of: a) our lack of progress in fully defeating the coronavirus (covered in Monday’s e-mail)… b) the enormous economic hole we’re in, which will take years to dig ourselves out of (covered in yesterday’s e-mail)… c) history… and d) current polls.

I’ll address c) and d) in upcoming e-mails…

4) The Samaritan’s Purse field hospital that has been operating for the past six and a half weeks in Central Park’s East Meadow – across the street from my home – discharged its final patient last Tuesday.

Thanks to the massive efforts of our first responders, not to mention the countless New Yorkers who have helped flatten the curve by observing social distancing and stay-at-home orders, the additional beds provided by the hospital are no longer needed.

By any measure, this is wonderful news… and we should all be grateful for the efforts of the Samaritan’s Purse doctors, nurses, and support personnel who came to our aid from all across the U.S., risking their own lives to save others. Amazingly, not one of them became infected with the virus.

I’ve been working hard with the Samaritan’s Purse folks over the past week (with an assist from two of my daughters and a handful of other volunteers) to pack up the hospital so that it can be redeployed soon to another area in need.

Yesterday, we finished our work. It was a beautiful day in many ways: the weather was spectacular (finally!), we completed a job well done, and it brought closure to our time together. It will be so strange not going over every day to pitch in… delivering warm boots, mail, and Costco goodies… bringing Rosie the Therapy Dog by for love-fests… and hanging out with all of my new friends.

Here is a collage with some of my favorite pictures from the past week, and I’ve posted more on Facebook here:

Best regards,

Whitney

Whitney Tilson

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About Whitney Tilson

Prior to creating Empire Financial Research, Whitney Tilson founded and ran Kase Capital Management, which managed three value-oriented hedge funds and two mutual funds. Starting out of his bedroom with only $1 million, Tilson grew assets under management to nearly $200 million.

Tilson graduated magna cum laude from Harvard College with a bachelor’s degree in government in 1989. After college, he helped Wendy Kopp launch Teach for America and then spent two years as a consultant at the Boston Consulting Group. He earned his MBA from Harvard Business School in 1994, where he graduated in the top 5% of his class and was named a Baker Scholar.

Click here for the full bio.