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No, don’t look to a non-Trump/Biden winner

May 2nd, 2020

Biden in particular is great odds against ludicrously short Dem alternatives

Unusual things happen. Fringe scenarios occur and outsiders find ways to win races they aren’t even in. Even so, for both Donald Trump and Joe Biden to be odds against to win the 2020 US presidential election when both are their party’s nominee-elect is pretty extraordinary.

True, Trump is only just odds-against on the Betfair exchange, at 2.08 to back but Biden is right out at 2.42 at the time of writing. Those odds are also, as usual, a little longer than you’ll get at fixed-odds prices where Trump is usually just the other side of evens, at 10/11, but then you have to factor in bookies’ margins there. On the exchange, where prices most closely reflects punters’ opinions in heavily-traded markets, the odds imply that there’s about a 9% chance that neither candidate will win the election – which looks ridiculous to me.

Both candidates have weaknesses, to be sure, but to argue against their nomination now is months after the event. Trump sealed his when the Republican senators backed him in the impeachment trial; Biden remains technically short of sealing victory but as he’s forced all other rivals from the field, that’s only a formality.

The only way either man is replaced now is if they withdraw voluntarily, which essentially means either a health issue or a political scandal so large it renders their candidature impossible. We can certainly rule that second option out for Trump, for whom nothing seems unacceptable behaviour to his party, and we can limit it to an extremely low chance for Biden, who’s been in the public eye for decades and for whom you’d assume that if there were some great scandal, it would be known of by now.

Health, on the other hand, is a little bit more of an issue. Both men are well into their seventies – Biden much closer to eighty – and Trump is overweight, and there’s a pandemic swirling that is particularly harsh towards those in that age group. It’s far from impossible to see circumstances in which one or the other might be replaced. That said, for the bet to pay out, not only would that candidate have to be replaced but they’d have to win.

That’d be a tough ask. We can reasonably assume that Pence would step in for Trump, were that the vacancy, not least because if he had to replace him as candidate then he’d very likely have to replace him as president or acting president too – and it’d be very hard for the GOP not to select a sitting president when there’s no clear alternative and there’ve been no primaries. Pence is currently 66/1 with bookies and almost 100/1 on Betfair. Those odds at least make some sense. (Nikki Haley is the next-priced Republican at 250/1 which I wouldn’t be backing even at those odds but you can see the case and the route).

It’s on the other side of the election that I think the market has it badly wrong. For a start, the Democrats as a whole should be favourites to win, rather than neck-and-neck with the GOP. It’s true that first-term incumbents seeking re-election rarely lose – only Ford, Carter and GHW Bush have done so since Hoover in 1932 (and Ford and Carter might be explained as Watergate exceptions: the former both unelected and tainted by his pardon of Nixon, and the latter and unnatural winner against an unusually weak president).

Even so, Trump’s handling of Covid-19 has provided his opponents with gift-wrapped attack material, and the US economy is tanking appallingly. To put it into a British context, the 30 million new jobless claims over the last six weeks is the equivalent of around 6 million people signing on in Britain. That millions per week are still signing on, weeks after the lockdown began, suggests that these redundancies are not a direct reaction to the infection-protection measures but are being forced by businesses that previously chose not to go down that path, presumably under financial duress. Those sort of strains will not release themselves quickly once the government-mandated economic interruption ends.

Given that Trump only just won in 2016, is behind the polls both nationally and in the key states (and behind where he was when he won), has a very hard ceiling to his support, and events are running against him, the fundamentals point to a Democrat win.

That Biden is around 40% longer than his party is absurd. His party has rallied round him and there are only six months to go. Even if there were cause to rethink his nomination, there’s no clear good candidate. Hillary Clinton is second-favourite for the nomination, at 15/1 (all odds quoted here from the Betfair exchange), which is about as bad a bet as I’ve seen. She lost an election she should have won and nearly lost a nomination she should have won. She’s too much scandal and history around her and, as a non-candidate this time, a lack of mandate.

In fact the shortest-priced odds for the nomination for anyone who did run against Biden is Bernie Sanders, at 99/1 – which is probably about right. He might not really be a Democrat and he might well be easy meat for Trump but he does at least have a lot of votes in the bag. That he is behind Michelle Obama (64/1) is testament to the market not being altogether all there.

Sanders is also behind Andrew Cuomo (35/1), which is still mispriced but a little more sensible. If the Democrat convention did need to find an alternative candidate, Cuomo is someone with a high profile whose Covid-19 response stands in marked contrast to Trump’s. Still, his odds look to me to be still the best part of an order of magnitude out.

By contrast, Gretchen Whitmer is among the 999/1 outsiders. That strikes me not only as an extraordinary disparity with Cuomo but actually possessing a degree of value if you do fancy a Hail Mary punt.

But all this skirts around the main point: Biden’s odds are way out of kilter with his party’s, which are themselves long. I reckon he’s a steal at these prices.

David Herdson