The Debates Won't Matter Either

The cake is baked.

1. Debates

Yesterday we talked about the remarkable stability in the race that has existed since the first theoretical matchup polling began.

My thesis, which I have been pushing for a long time, is that this cake is baked.

Not just baked: It's baked, the icing is on it, its been put in a box, the box stuck in a freezer, and the frozen cake is now on truck making its way to your local supermarket.

What I'm talking about here isn't the result of the election. As I said yesterday, we live in a paradox where the election result is uncertain because we don't know how voting mechanics are going to be altered by the pandemic.

What I'm talking about is basic public opinion. People know Trump. They know Biden. They know which candidate they prefer. And they're highly unlikely to change their minds.

Three weeks from now we're all going to pretend that the outcome of the race hinges on the debates. That they're the defining moment of the campaign, the event which will pull all of the fence-sitters down to one side or the other.

I am skeptical that this will be the case.

For one thing: Historically, debates don't matter. They can sometimes move the needle for a few days, but afterward the race usually reverts to its steady state.

This is true even of the most one-sided debate victories. For example: In 2012, Mitt Romney cleaned Barack Obama's clock in the first debate. Didn't matter. In 2016, Hillary Clinton's first debate exposed Trump as being wholly unequal to the job of president. This isn't just my opinion. It was regarded at the time—even among his media defenders—as a knockout blow. The polls barely moved.

(The only real movement late in 2016 came after Jim Comey came out and torpedoed Clinton, which snapped the rubberband just enough to let Trump luck into his Electoral College victory.)

So let me predict what is going to happen at the debates: The usual suspects and their Russian allies will claim that Trump DESTROYED Biden and exposed Biden as being in need of eldercare. Most humans will have a more nuanced view, saying either that Trump won, or Biden won.

And the polls will not move, either way.

Think of it this way: If 200,000 dead Americans does not change your view of who to vote for in this election, then why would a two-hour television debate change it?

2. Life as a Cop

A couple weeks ago I shared an email from a peace officer I code-named "Jonah Hex." Over the weekend, he wrote in again and his note was so moving that I asked if I could share it with you.

He graciously said yes. So here's Jonah Hex with a little meditation on what it's like to work as law enforcement in a country which is going off the rails:

In 2017, protesters were ruining my life. Okay, they were ruining my Saturday mornings. I was working a swing shift with midweek days off. I had a brief time with my kids before they went to school, and they were asleep by the time I got home. Except for Saturday mornings. We could do something together as long as I rushed off to work at 12:30.

Well, Donald Trump changed all that. The protests went off like clockwork every Saturday morning, and that meant I had to come in early to keep the peace. And I hated it. There were pro-Trump rallies, anti-Trump protests, and two-sided shouting matches with occasional fisticuffs. Then there was the “God Hates Gays” guy who just wanted to watch the world burn. I wondered why so much emotion was expended in a state that went for Hillary by 25%. And I noticed one consistent theme in this ongoing conspiracy against my family time: both sides assumed the police were pro-Trump.

On one particular morning, there was an enthusiastic, if small, group of Trump supporters holding a rally in one of our parks. A counter protest was planned. The counter protesters were dressed in typical SoCal casual dress with the noticeable exceptions of a group of young women dressed as witches (complete with wide-brimmed black hats a la the Wicked Witch of the West) and one Antifa-esque dude. He was wearing a mask and holding a flag of dubious usefulness attached to a stick which looked to be more than a flagpole. He did not prove to be a one-man riot, but I don’t think that’s why he was there.

As soon as the very, very pro-police organizer saw the token revolutionary, she started screaming at him that he would be arrested. I had a sidebar with the irate organizer and asked why we would arrest the Antifista. She informed me it was illegal to wear a mask in public. (I often wonder if she has essentially the same mask policy today.) I patiently explained that California has no such law.

She then wanted the protesters removed from the park as they did not have a permit. I then had to put on my Constitutional scholar hat to explain that no permit was required to exercise free speech. I could see in her eyes that she was becoming less and less thankful for my service.

I watched the counter-protesters. They were all getting their instructions from a nondescript dude with a distinctive, brightly colored hat. I walked over and introduced myself, and asked who was running the event. Bright Hat said, “We have no leaders, we are democratic.”

Okay, guy. I felt unwelcomed by this democratic, tolerant, leaderless group. Nevertheless, Bright Hat had no trouble agreeing to stay at the edge of the rally for his counter protest. The protesters knew the law unlike the older, but less experienced Trump crowd.

Once the festivities were underway, speaker after speaker extolled the virtues of Trump while the protesters chanted their tedious slogans. Everything was going as well as could be hoped, and I silently prayed Thomas the Tank Engine was teaching my kids to be very useful engines in my absence.

Then the God Hates Gays guy showed up. He was not invited, or wanted, by either side. When I explained to the Constitution-loving Trump rally organizer that the man in camouflage with a 12-foot high sign with neon proclamations of the wrath of God against homosexuals was just as welcome as the masked Antifista, the look she gave was pure ACAB.

The addition of the Street Preacher was the catalyst needed to complete the reaction. His opening gambit was to scream at the protesters that the police were going to kick their asses (which came as news to us). Soon he was the center of a line of Trumpers who were screaming at the protesters. The protesters, to their credit, were magnificent trolls. Bright Hat made sure to make it known George Soros was paying them to be there. The cosplay anarchist was riling everyone up by standing there placidly. We moved in between the groups before it came to blows.

I found myself in a line of cops, shoulder to shoulder, alternately facing the Trump supporters and protesters. It was a beautiful symbol of our commitment to peaceful protest, our even-handedness, and our fervent desire that next Saturday, maybe everyone could go to the beach or something so we could finally mow the lawn. Spittle was flying in both directions. We were a thin blue salad bar sneeze shield.

It was a simpler, pre-COVID time. But it was still disgusting.

When tempers had cooled, there was a lull when I was able to come off the line for a break. One of the witches approached me. It was a hot day, and she was melting in slow motion. After looking over her shoulder to make sure no one saw her talking to a cop, she asked, “Do you know when this is supposed to be over?”

I gave her the best smile I could muster under the circumstances and said, “No, but at least I get paid by the hour.”

This protest troubled me. There was no media, no government agency or institution was petitioned for the redress if grievances; it was not really a protest at all. I finally realized it was an internet comments section made flesh.

The exaggerated red, white, and blue dress of the Trumpists and the colorful costumes of the protesters served as avatars. The inchoate rage was recognizable to anyone foolish enough to read YouTube comments (like me).

But instead of ALL CAPS rants against MAGAman57 or Zinnwasright87, people were willing to scream at, shove, and punch their neighbors for voting for the other guy/gal. Now we are living in the 4Chan world where people shoot each other.

At that time, none of my top ten problems could have been solved by the president of the United States of America. I suspect this was true for the others in attendance as well. Far from radicalizing me into a state-funded agent of Trump, this experience made me realize how harmful this monomania could become. It has rendered us unable to work together to fight a deadly plague, and it makes people reluctant to condemn looting and destruction. It is the acid corroding everything it touches.

I don’t know if a Joe Biden victory will fix anything, but I suspect it won’t. That’s why you won’t find me in either mob or even on the line in the middle. I fixed my biggest problem and left the world of unpredictable, mandatory overtime. I’m no longer the tired semi-stranger in my kids’ lives. Civilization will have to manage without me. This fall, I will be teaching my kids how to find Pegasus in the night sky, and we will be far from the city lights and dumpster fires.

I'm glad Jonah Hex got out. But I'm not sure what hope there is for the country, because those people aren't going way.

The part that sticks out at me is the sense that none of this is about anything real. It's a performance. And the play is now become the thing.

I say it all the time because it's true: This is what decadence and decline look like.

3. The Stock Market

The performance of the stock market didn't make any sense to me until I learned that SoftBank is behind it.

Run, don't walk, to Ranjan Roy's Margins piece explaining how SoftBank has moved the entire market by jumping into tech options: 

In a normal market, this risk-hedging wouldn't have any real impact on the price of the stock itself. The amount of options being traded would be tiny relative to the amount of actual stock being traded. All this stuff would be taking place via transactions triggered in the background by automated risk systems and we would instead be analyzing earnings reports to assign long-term valuations.

There had, however, been talk of a secret "Nasdaq whale" that was buying up billions of dollars in call options, and this week we found out it was motherfucking Masa, man!

Now it has also made a splash in trading derivatives linked to some of those new investments, which has shocked market veterans. “These are some of the biggest trades I’ve seen in 20 years of doing this,” said one derivatives-focused US hedge fund manager. “The flow is huge."

and we also need to factor in that normally during the summer, trading volumes are lighter, making any big trade have even more of an impact:

The size and aggressiveness of the mysterious call buyer, coupled with the summer trading lull, has been a big factor in the buoyant performance of many big tech names as well as the broader US stock market, according to Mr McElligott. This week, he warned that dynamics around options meant the heavy purchases forced banks on the other side of the trades to hedge themselves by buying stocks, in a “classic ‘tail wags the dog’ feedback loop”.

Try to understand the self-reinforcing aspects of a strategy like as follows:

SoftBank buys far more call options than the market is used to handling. The market-makers have now sold far more call options than they're used to and need to hedge, meaning they're going to be buying that underlying stock. That pushes the price up, meaning they will need to buy even more of that stock to hedge. And let's not forget the COVID + software will eat the world stories, which are very true. Does anyone want to bet against Apple or Tesla or Amazon or Zoom or Shopify? What other stock are you going to buy?

This explains how a giant company like Zoom goes up 40% in just one day. There's natural buying pressure from people excited about those amazing earnings, but these distorted market dynamics create a buying frenzy as the market-makers who are exposed to these run-ups have to buy more and more of the stock to keep their exposure down. They buy more stock to hedge which triggers algorithms somewhere else to buy more of that stock. Regular humans who just want to buy stocks get alerts about an amazing stock and also buy that stock. Which makes the market-maker who originally sold the option need to buy even more stock to hedge. That's the Gamma Melt-up.

Read the whole thing.