Mainstream Media Says Cohen Testimony Is Groundbreaking -- What Do The Markets Say?

Posted: Mar 01, 2019 11:42 AM
Mainstream Media Says Cohen Testimony Is Groundbreaking -- What Do The Markets Say?

Two nuclear powers are engaged in an active border conflict right now, the President of the United States just met with the Supreme Leader of a third nuclear power, and all the news media can talk about is Michael Cohen.

Believe it or not, the Cohen testimony was not actually the most important thing that happened this week -- but it was entertaining, so CNN (which is actually an entertainment channel) couldn’t stop talking about it.

This is not to imply, as many of Trump’s allies are, that the Cohen hearing isn’t news or doesn’t matter. I’m merely pointing out that it is substantially less important than other world events and has gathered a disproportionate amount of media attention. I believe the data supports this conclusion.

In addition to how the prediction markets reacted to the hearing, I’m also going to update you on the state of the race for the Democratic nomination.

First, Cohen’s testimony has had very little impact on the probability of Trump being impeached on PredicitIt. Just before Cohen testified, the probability of Trump being impeached in his first term was 41%. Then it jumped to 44%, and today it’s back down to 42%.

This supports the assessment made by most intelligent people: the Cohen testimony was embarrassing for Trump, but the President’s former lawyer didn’t offer much in the way of new information, at least of the type that would shift the current political balance.

Taking a broader view, that market has been on the decline for over a month. The probability of Trump being impeached was at its highest level, 54%, in the past 3 months on January 17th. Now we’re sitting at the low 40s.

In short, what Cohen said on Wednesday maybe increased the probability of Trump being impeached by 1%. 1% isn’t exactly worthy of non-stop, hysterical coverage, wouldn’t you agree?

Now on to the Democratic nomination. Sen. Sanders has become the front-runner after he started his campaign with an impressive fundraising effort. He now has a 21% probability of being the nominee, and a 25% chance of winning Iowa, the first state to vote on presidential nominees. Iowa is a must-win for Sanders, as it was back in 2016 when he narrowly lost to Clinton. It’s hard to see how he could defeat the more moderate, establishment figures without capturing the grassroots electorate that Iowa has always represented.

A major contributing factor to Bernie’s front-runner status is the fact that Biden and Beto haven’t announced their campaigns yet. If the latter two announce in a timely manner, you should expect them to occupy the top 3 spots, Bernie and Biden close to each other, probably with Biden a point or two above Bernie, and Beto in competition for third with Kamala Harris.