Why I Shorted Hillary Clinton

Six months before the election.

In the six odd weeks since the Nov. 8 election, the news media has presented a chaotic post-mortem of what exactly happened in this election. Mostly, they are focused on the unfathomable: how did Hillary Clinton lose? Sexism? Comey? Russian hackers? Putin?

But a number of election analysts saw the problems of a Clinton candidacy from afar. In the spring of 2015, I personally told a group of Silicon Valley liberals that Clinton was probably the weakest candidate the Democrats could choose in the current anti-establishment political climate. Democrats and Republicans alike were openly lamenting even the idea of another Bush-Clinton election.

More damning was the hard electoral evidence already out there on the Democratic agenda under Obama: the loss of the House and Senate, and more than a dozen governorships and state legislatures. How could these facts be ignored? I have discovered in our polarized politics that people don’t really listen to reason, they merely believe. And then they are faced with disbelief at the outcomes. (Scott Adams calls it cognitive dissonance.)

For most of 2015, the primary season was unclear, though most expected the party choices of Clinton vs. Rubio, Walker, Christie, or Bush would play out. Certainly very few–neither myself nor anybody I know–gave Trump even a remote chance of gaining the nomination. The GOP field of intended candidates became a parlor joke of seventeen dwarves crowding the stage. Liberals could not believe any of these could match up to Hillary on the national stage. They reverted to praising her extended political resume, as if that mattered. (Obama, for instance, probably had the shortest resume in modern presidential history.)

I maintained that Hillary had the highest negatives of any possible Democratic nominee and that after this became apparent following the DNC in August, panic would set in. I was off by a month because of someone nobody saw coming: Donald Trump.

After the first few primaries, Trump’s success gave new life to the fantasies Democrats were spinning. After all, Trump had the highest negatives of any candidate in modern history. At the time I tended to agree that a face-off between Clinton and Trump was a bit of a wild card and that by conventional politics, Clinton would seem to be favored. On the Republican side, opinion pollsters and media pundits all discounted Trump’s chances, but his primary wins rolled on. It was about March when I had the epiphany that past history was no guide to the future – this time was different. The anti-establishment wave that had been building since 2000 had finally begun to crest over “politics as usual.”

Ignoring this anomaly, liberals actually began to desire Trump to be the Republican nominee and conservatives secretly wondered if he wasn’t a Clinton shill. But still, I suspected none of what Trump did would accrue to Clinton’s benefit in this election cycle. It was in March, after observing the odd traction of Bernie Sanders, that I laid some wagers betting against a Clinton presidency (note, not FOR Trump or any other nominee, but solely against Clinton for the Democrats). Part of the reason was I felt the confidence of Clinton supporters was emotionally driven, so I got incredible odds that made the bet a no-brainer: 10 to 1, when the betting lines were closer to 4 to 1. I could have laid off this bet on the other side and enjoyed a riskless arbitrage, but I was fairly convinced, as a political scientist who had studied the data on the last 4 presidential elections, that any Clinton-Trump contest would be pretty much a toss-up and I liked the risk-return payoff.

When Trump’s support seemed to be bleeding working-class union voters from the Rust Belt, I was more convinced. But not my liberal Democrat friends. They cited endless poll numbers to support their beliefs, trusting in data from 538. I merely asked that since the polls, including those by 538, had been wrong for almost 9 months, why exactly should they be accurate now? Then they resorted to Electoral College math, but I replied that swing states with slim margins can flip rather easily. A month to two weeks before the election, with Clinton enjoying a 3-6 point lead in the polls I offered to double-down on my wagers against Clinton but got no takers. Apparently, confidence was growing a bit shaky. Trump support never seemed to go away despite the bashing he received in the media.

On Nov. 7, a friend who trusted my objectivity asked me who I thought would win. I said, although traditional measures point to a narrow Clinton win, traditional measures have failed and thus the outcome was still a 50-50 toss-up in my mind. I definitely liked my bet. On Nov. 9, we woke up to a new political reality, but the point is that we should all have seen it coming.

Here is a quote from the Economist assessing the election:

Republicans have long held the edge in America’s wide-open spaces, but never has the gap been this profound: a whopping 80% of voters who have over one square mile (2.6 square km) of land to enjoy to themselves backed Mr Trump. As the scatter plot below demonstrates, as counties become increasingly densely populated, fewer and fewer vote Republican. American politics appear to be realigning along a cleavage between inward-looking countryfolk and urban globalists.

The problem here (see italics) is that this tension in American politics is nothing new. In fact, it’s more than 200 years old. Regional differences have always existed but have become acute at certain times in our history. The urban-rural polarization is particularly sharp today because the parties have divvied up the polity with targeted policies: Democrats target identity groups that mostly live in urban areas and Republicans target everybody else (see this 2006 op-ed on the 2000/04 elections). The divide is compounded by urban media that targets political biases to its main audience: urban liberals. So urban media elites told their liberal urban audiences what they wanted to hear, rather than objective truth. I’m sure liberal reporters like E.J. Dionne, Juan Williams, Meet The Press, the NY Times op-ed page, etc., believed it themselves.

So, now the disillusioned are catching up with reality. Here’s Conan O’Brien stating the obvious:

“I really believe nobody knows anything right now,” says Conan O’Brien. “I really think the whole mantra that everyone must have, not just in this medium but in the world in general, is that no one knows anything.” Trump’s victory has landed a blow to the country’s notions of certainty. “I would say we’re not seeing the death of certainty,” O’Brien said. “But certainty has taken a holiday right now.” Plenty of certainty, now discarded, was generated in 2016. Our cozy silos of belief and customized group assumptions gave us our most brutal campaign in years. “Everyone has their own street corner,” O’Brien said.

As I stated above, partisan preferences have become less about reasoned policies and compromises and more about pure belief systems. Facts that don’t fit beliefs get tossed aside. If you believe Hillary lost because of Putin, or Comey, or sexism, or racism, or Electoral College math, you’re sinking into quicksand of your own making. Winning a majority of almost 85% of the 3141 counties across the nation is a significant statistical feat that can’t be explained by any single factor. From where I sat it had little to do with Trump, who merely road the wave. Rural and suburban America can never be dismissed by either party. Hillary Clinton was the weakest candidate in the post-war era, by far. If I could see it, so could you.*

*BTW, I’m not clairvoyant or particularly gifted with political genius. Using traditional electoral measures I bet on Romney over Obama for an easy win in 2012. But we can learn from our mistakes.








Facing Facts About Race


Last week President Obama weighed in again on the Trayvon Martin episode. Sadly, most of what he said was wrong, both literally and ethically.

I don’t usually post about cultural politics but I link to this truly excellent article by Victor Davis Hanson published by National Review Online, regarding an ongoing tragedy that has sucked a lot of oxygen out of our public discourse.


As the emotionalism of the election results fades, our curiosity demands an objective analysis of the state of our national politics. In most general terms, 2012 appears to have been a status quo election, with both candidates achieving fewer votes than in 2008, and the Senate and House being returned to the same party control. The only real defeat was at the top of the Republican ticket for Romney/Ryan. The other uncontestable conclusion is that there were also far fewer enthused voters going to the polls for either candidate.

Besides the rationalization of déjà vu all over again, this must be considered a defeat for the Republican party in light of the weak performance of Obama’s first term. So, what went wrong? Early voting analysis confirms that the loss can be mostly attributed to traditional, white, Republican voters who stayed home. There were 7 million fewer voters in this cohort of voters compared to 2008. One would have thought that the voters disappointed with Obama would have been motivated to turn out for Romney. One can point to the dismal economic performance, the high unemployment that must be laid on Obama’s economic policies, and the antipathy for Obamacare as the motivating factors. Apparently not.

There was obviously a lukewarm feeling about Mitt Romney and one wonders where it was lodged. Both bases turned out fairly strongly for their parties, the difference was with the middle, the independents and party moderates. These voters were primarily focused on the economy as the primary factor in the election and it appears that Romney’s ineffective economic message, and Obama’s interpretation of that message, can largely explain the marginal difference in the outcome.

The Obama campaign’s negative attacks started early and were expected. But for many months they were largely ignored as Romney was forced to consolidate his general election campaign. This also was expected. The problem is that little was done about it and thus the residual negative impression of the candidate lasted through the summer and the conventions, deep into the election season. Only the first debate seemed to dispel this caricature of the “Bain capitalist vulture,” but it was not enough. I believe we can attribute this to the fact the most effective propaganda holds an element of truth and this applies to both sides. Obama was very vulnerable on the economy, healthcare, and entitlement reform, so he steered clear of these issues. Romney and Ryan both attacked his positions and record. However, the American public has endured almost 25 years of growing crony capitalism enabled by both political classes as well as the monetary institutions of the Federal Reserve and the Treasury. As a turnaround, private equity specialist, Romney was incredibly successful in exploiting the economic policies of the past three decades. Many ideological Democrats met or exceeded this level of success as well, but the constant harping on the Bush years and the traditional Republican support of business elites allowed the Obama campaign to pin all transgressions on the Republican poster boy for success. Want somebody to blame? Blame Greenspan and Bernanke.

Now comes the crucial point: I see little evidence that the Republican establishment understands or credits these failures within its own policy agenda or campaign message. When voters hear Republican candidates extol economic growth, they foresee more winner-take-all success leaving them relatively worse off. They see bankers and financiers with fat bonuses and golden parachutes, leaving the true stakeholders in American capitalism—workers, entrepreneurs, and small shareholders—with the crumbs and the pink slips. This has all been enabled by cheap debt that leverages ownership and control into few hands—the very hands in fact of private equity and leveraged buyout principals. The irony is that the Obama administration has been the architect of these policies as much as any other administration. Goldman Sachs alumni populate the administration’s financial appointments and reap the tax benefits for their investment banking winnings. Apparently what’s good for Goldman Sachs is now good for America.

Wait, stop. This is not an anti-capitalist screed. On the contrary, the argument is pro-capitalist and pro-free market. A clear understanding of the 1980’s buyout era recognizes it was a necessary response to the corporate cronyism of the 1970s. The growth of private equity is also a response to world-wide competitive pressures to avoid the growing costs of regulation. But it also reflects poor policy design from Washington that is primarily motivated by politics. Cronyism doesn’t start and end in the board room, in extends all through the elected political class, the legislature, and the regulatory bureaucracies.

The Obama agenda does not address this cronyism, and therein lies the Democrats’ true weakness. Their only policy prescription is to “sock it to the fatcats,” and “redistribute the wealth,” even though most of the fatcats are paying for the re-elections of the politicians and redistribution is mostly redistributing the pain to taxpayers. It’s a charade. But the GOP’s failure can be traced to its ignorance of what drives democratic politics in this age of winner-take-all economics. A large section of American voters are being left out of the winner’s circle, they no longer buy into “trickle-down” economics, if they ever did, and they have witnessed an unfair and unequal playing field. The GOP must champion free capitalism in a free society, not just successful capitalists. And every member of a free capitalist society should participate at some level as risk-takers and residual claimants. There are many policies that can be applied to reinforce the basic principle of capital accumulation and the rights of ownership. It’s not a giveaway, ownership participation is always earned.

We might ask, what’s fair? Fair is receiving the rewards of successful risk-taking and suffering the consequences of failure. Nobody asks for more than a fair shake. One of the cardinal sins of the rich, powerful, and connected is to rig the system where every gamble is “heads we win, tails you lose.” This is the definition of immorality in a capitalist society, and the political party that puts a stop to it will have no problem gaining the votes of a grateful citizenry.