The big no-brainer was that Obama secured his party's nomination, and that, as far as these things go, the outcome of the convention was as the markets predicted. Now, I say that in lieu of the gloomy commentary of the right-wing pundits, who are claiming that the Clintons didn't endorse Obama wholeheartedly enough, and that Obama's wife was the only one who seemed to have any affection for him. (Methinks the audience was pretty excited...) Underneath this rhetoric hides a larger point: Obama does not have as many political allies as McCain does, and he will have to woo a significant number of moderate voters that heretofore supported Hillary if he wants to stand a chance come November.
On the Republican side, McCain chose Palin as his VP. Palin is unknown, unlike Biden, and has some spots on her candidacy that will be hard to get out. Most significant is that her illegitimate grandchild has already been the target of many attacks that ask, essentially, how will Pailn help run the country if she can't even keep her daughter in check? When you frame the issue in light of Palin's belief in life over abortion, which presumably extends to her family, the issue can be used to attract fundamentalist Christians, which I think is the best way to turn an assuredly-bad outcome into a potentially-good one. Other notable qualities of Palin include her union-husband, her previous membership in an Alaskan-secession group, and her Regeanesque attitude towards business and government. The left-wing pundits are having a field-day with her, naturally, and though I feel somewhat sorry for the Palins as a family, it's to be expected. Political campaign ads this season have been dirty enough on both sides of the aisle, and any imperfection in one's personal life seems, sadly enough, fair game.
I am struck by a couple of interesting points regarding Palin. Those on the left are assaulting her lack of experience, which is rather amusing considering Obama's roughly-equal level of political practice. Hypocrisy is a powerful tool in politics, especially when one believes in it himself. Palin is going to snag a lot of ex-Hillary voters, because she is a woman, a feminist, and because her husband is a big union-man. At the same time. it seems probable that her strong conservative convictions will help the Republicans keep right-wingers going to the polls.
What have the markets thought of these recent developments? An examination of the prediction markets over the past two weeks reveals that Obama has gained overall, with a notable drop over the past few hours. McCain's price has dropped over the past three days, although the overall trend is up.
A look at the futures markets over the past 100 days shows the overall trend. McCain has been steadily gaining value, and Obama losing value.
Now, the question is, who will win? Although I can fit a trend to the data according to the previous data-points, it will not be that reliable an indicator of the future, because this prediction market is influenced not so much by the past price as by what market participants think the future will be, now.
Footnote: For those wondering, the green bars at the bottom represent the volume traded on a particular day. As you can see, the volume of each security increased dramatically during the lead-up to the respective party conventions. This makes sense -- people get excited.
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