Trump traders could be courting some big losses

[mahatmakanejeeves]

Yahoo! Finance
Trump traders could be courting some big losses

Rick Newman · Senior Columnist
Tue, October 29, 2024 at 4:07 PM EDT 6 min read

The Trump trade is hot. … The stock price of Donald Trump’s media company — ticker symbol DJT (DJT) — has soared by more than 300% since late September. That’s a sure sign traders think Trump will win the presidential election, making Trump’s flagging Truth Social app an essential destination for everybody orbiting Trumpworld. … Other Trump trades are booming too. … Bitcoin (BTC-USD) is near record highs, given Trump’s newfound support for cryptocurrencies. Interest rates are rising in the belief that Trump will slash taxes once again and push deficits higher, putting upward pressure on rates. Some money advisers are telling clients that Trump’s plan to cut the corporate tax rate will boost earnings and stock values.

It’s all possible — if Trump wins. But Trump might lose, and there are some signs that investors may be overestimating Trump’s election odds and placing a lot of bets that might go bust. … In betting markets, Trump and his Democratic rival, Vice President Kamala Harris, were tied as recently as early October. Trump’s odds of winning have been rising ever since, with the RealClearPolitics average showing 63% odds of a Trump win and just 36% odds of a Harris win. That’s the largest lead Trump has had in betting markets since Harris replaced Joe Biden at the top of the Democratic ticket in July.

Traders seem to be taking their cues from Trump’s rising odds in betting markets. But betting odds are completely different from polls, which show a dead heat. Betting markets show a probability of winning, which is different from the marginal lead in a poll. Jim Bianco of Bianco Research points out that in betting markets, anything less than 66% odds for Trump is the equivalent of a toss-up. Trump would only be clearly favored if his odds in better markets were above 66%, and they’re not.

Analysts at Citi noticed this disparity during a recent conference on international finance in Washington, D.C. “Investors are almost uniformly expecting a Trump victory,” Citi explained in an Oct. 28 analysis. “Political analysts, on the other hand, still see the race as very tough, and biased to Trump, but close enough to 50-50.”

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[Jsnow79]

1. Gambling is a gamble

They are doing little more than playing the lotto with their money. I wouldn’t put bets against anything that’s anywhere near a 50% chance.