Preparing for Obama's SOTU Address

I might tune into the SOTU (State Of The Union) address tonight. Unfortunately, I have to watch the Unknown Kids (unknown Wife has a girls night out). If I weren't, I might be willing to try one of the following SOTU drinking games:

• From the Huffington Post
• From the San Francisco Chronicle
• From the New York Daily News
  

But, since I have to watch the kids (and I want to have a liver once I'm 60), I guess I'll just have to content myself with SOTU Bingo.

Inconceivable!

I don't discuss it much on the blog, but those of you who know me know that I'm a bit of a political junkie. So, I've been watching the goings on in the Massachusetts Senate race the last few weeks. I grew up in a neighboring state, and was fed a regular serving of Kennedy media in my younger years.

So, to see a Republican senator elected to Ted Kennedy's old seat is nothing short of amazing. By all accounts, Brown did as masterful a job of campaigning as Coakley did a horrendous one.

It should make for interesting times the next few weeks as the Democrats decide what to do as far as the Health Care plan is concerned. This may be the death knell for it.

Time will tell.

Obama Awarded Nobel Peace Prize

When I read this morning that Obama had been awarded the Nobel Peace Prize, I first thought it was a joke. Then, when I found out that it was real, I realized it was still a joke. Unfortunately, it was one that the prize committee played on themselves. They've definitely beclowned themselves - if I were to guess why they gave it to Obama, I'd have to say "Because he's not Bush").

I know, I know - this isn't a political blog (it's supposed to be about finance, or at least about being a finance professor). But some things cry out for comment.

Since it's Friday at 5:00, I guess it's time to call it a day. If the weather holds out, I'm trying a 100 kilometer ride tomorrow. Should be interesting - the course is not as hilly as the last ride. But, it might rain, in which case I'll stay home.

update: a reader just informed me that nominations had to be in by February 1st. So that means that Obama was nominated after eleven days in office.

update 2: From Greg Mankiw: "First Year Grad Student Wins Nobel Prize In Economics"

update3: From the Wall Street Journal: "Our own reaction is bemusement at the Norwegian decision to offer what amounts to the world's first futures prize in diplomacy, with the Nobel Committee anticipating the heroic concessions that it believes Mr. Obama will make to secure treaties that will produce a new era of global serenity."

Stock Markets and Inaugurations

Yesterday, the Dow dropped approximately 4%, and the S&P500 dropped by a little over 5% on Inauguration day. This was the worst "inauguration market" day in history. So now we'll wait to hear the talking heads either say how there's a correlation (or even a causation) between the two, or explain how there's not.



In reality, it was probably more due to State Street Bank's disappointing earnings numbers - their stock plunged almost 60% on the news, and led many other financial stocks down. If markets are efficient (and they are, relatively speaking), Obama's inauguration should already have been priced in.

McCain and Obama Presidential Futures Contracts

I talk about the Intrade Political Futures markets a lot in my classes. They're a good example of how markets process dispersed information. There's a lot of debate about whether they actually predict many kinds of events or merely (in the case of the Presidential elections) merely react to polls. But despite that, they're a fairly simple market that's useful for demonstrating a number of concepts about markets (expected values, bud-ask spreads, trading volume, etc...).

Also, I'm a political junkie, so it's fun to see students in a finance class actually think about politics in a different way.

In any event, it now seems like the McCain for President contract and the Obama contracts have switched places (they're trading at $0.495 and $0.50 respectively). I always find it interesting to see how they react to various news events.

As an aside, I usually get a bit of a traffic spike when I post something on McCain, Obama, or the presidential elections. Unfortunately, it also results in a lot of fevered comments that I have to delete to protect all my many readers' (all three of them) delicate sensibilities.

Of course, if I did it for the traffic, I'd just mention that I have Sarah Palin Bikini pictures.

But that would be wrong. Very, very wrong.

It's Time For Prediction Markets Again

As the elections come closer, people one again start talking more about political prediction markets. In fact, they're well known enough that the the Wall Street Journal will now be featuring regular commentary on what the prediciton markets say about the various political candidates.

The pieces will be written by Wharton's Justin Wolfers. He's one of the sharpest young economists on the scene, and extremely well versed on the topic.

Click here to read his first piece.