Investors Beware Of “XX-Rated” Result In Ohio’s 12th

We suspect a flip of Ohio 12th congressional district to the Democrats, with Danny O’Connor defeating Republican, Troy Balderson,  could  be the structured criticality that generates the political shock to the markets we anticipate is coming.

Structured criticality is a property of complex systems in which small events may trigger larger events due to subtle interdependencies between elements. This often gives rise to a form of stratified chaos where the general behavior of the system can be modeled on one scale while smaller- and larger-scale behaviors remain unpredictable.

For example:

Consider a pile of sand. If you drop one grain of sand on top of this pile every second, the pile will continue to grow in the shape of a cone. The general shape, size, and growth of this cone is fairly easy to model as a function of the rate at which new sand grains are added, the size and shape of the grains, and the number of grains in the pile.

The pile retains its shape because occasionally a new grain of sand will trigger an avalanche which causes some number of grains to slide down the side of the cone into new positions.

These avalanches are chaotic. It is nearly impossible to predict if the next grain of sand will cause an avalanche, where that avalanche will occur on the pile, how many grains of sand will be involved in the event, and so on.  – Wikipedia

The polls have the candidates in a statistical tie, with the latest from Emerson College having O’Connor up by 1 percent.   Stunning given the Republicans took the district by almost 30 points in the November 2016 general.

Female Vote Key

By XX-rated, we mean the female vote,  our Lavender Wave thesis.

Independents are breaking 56% to 28% for O’Connor, and the Clinton voter seem more loyal to their party candidates in this election that those who voted for Trump. Clinton voters are breaking for O’Connor 95% to 3%, while Trump voters are breaking for Balderson 89% to 7%.

A gender divide has emerged as well in the race. Males back Balderson 53%-42%, while females break for O’Connor 51%-40%.  – Emerson College, August 6th

“Already Lost”

The conservative-leaning Washington Examiner has already labeled the race a loss for Republicans,

Though voters don’t head to the polls until Tuesday, Republicans already lost the special election in Ohio’s 12th Congressional District. That will remain true even if their candidate actually wins the race and is elected to office.

Why? As in other, high-profile special election battles over the past year or so — think Georgia’s 6th District, or Pennsylvania’s 18th — the GOP has been forced to pour an exorbitant amount of resources into defending a seat that should be safe. “The Republican National Committee has opened two offices in the district, launched a $500,000-plus get-out-the-vote effort, and dispatched one of its top officials, Bob Paduchik, who ran Trump’s 2016 Ohio campaign,” Politico reported on Sunday. “And outside conservative groups, led by a super PAC aligned with House Speaker Paul Ryan, have dumped more than $3.5 million onto the TV airwaves, far outpacing Democrats.”

Don’t forget President Trump held a last-minute campaign rally in the district as well.

All this for a seat Republicans have held for 35 years, in a district Trump won with 53 percent of the vote to Hillary Clinton’s 42 percent less than two years ago. Recent polling has the two candidates in a close race  – Washington Examiner,  August 6th

The Republican’s “Jackie Moon” Moment?

Unless a “deep fake” surfaces in the next 24 hours and the Dems take the Ohio 12th,  the Republicans are headed for their Jackie Moon moment.

Everybody panic!… There will be no refunds.   Your refunds will be escaping this death trap with your life. – Jackie Moon, Semi-Pro

As you have realized by reading us over the years,  the Global Macro Monitor is all about questioning the conventional market wisdom, challenging investor complacency, and living in the fat tails, always on the lookout for big potential moves and events that blindside and are not priced by the markets.

The special election in Ohio 12th’s  is not on investors’ radar.   It should be.