Reflections on the Election and GDPNow
I discussed the fact that models cannot think this morning in Is Nate Silver Underestimating Democrat Senate Chances in Georgia?
It occured to me that I made similar statements previously about Pat Higgins’ GDPNow model.
Here is a snip of my Georgia discussion. Following that, let’s look at the flip side of the coin.
Random Noise
Silver just flipped again on Iowa, and has been going back and forth for a week. Iowa is again in Trump’s column.
I solidly disagree and may revisit Iowa soon. But now Silver has Ohio in the Biden camp.
When you change your mind every day, or even sometimes twice a day you are changing your mind on noise.
That’s what we have: noise.
Models Can’t Think!
In reference to the Georgia Senate election, I also said Models cannot and do not do what I just did. That is take a look at a debate in which Perdue was clearly slaughtered, then make a judgement call on it.
Nor do they properly look at momentum.
I have the same criticism of Pat Higgins’ GDPNow economic model. It cannot think about “why” or make value judgements on what is happening.
When weather is a factor, GDPNow cannot make adjustments. When Covid hit, the numbers were so screwy the GDPNow model was programmed to discard the numbers as outliers that could not possibly be correct.
Models only do what they are programmed to do, typically look at data and historic trends.
There are clear errors being a slave to models, but there is a flip side.
Humans Overthink!
The flip side of the coin, and it’s an important one is that humans overthink.
The lead image is from Psychologists Explain How To Stop Overthinking Everything
I have a huge collection of all the amusing things, people have said would matter in this election.
People believe all kinds of things matter that won’t matter and in fact cannot possibly matter.
I will post the collection after the election, and some of them will have you laughing.
Beauty of Models
The beauty of a model like Nate Silver’s and Pat Higgins’ GDPNow Models is they don’t overthink.
Silver waits for the polls, GDPNow waits for the economic data.
I am very happy for Silver’s forecasts and I find them helpful for my own thinking. The same applies to GDPNow.
It’s easy to poke fun at models when they are wrong (and even when they aren’t).
I think Nate Silver is brilliant. I feel the same way about Pat Higgins.
But as I explained to a couple of friends recently, I add no value if all I do is parrot the calls of others.
What’s Happening and a Look Back at 2016
US Election Countdown
Very pleased with a reference by @johnjhardy, head of Head of FX Strategy at Saxo Bank.
Hardy notes many of the things I did. He also referenced my calls in 2016, including a bit on Rust Belt analysis that I forgot about.https://t.co/TGLIeLrzMk
— Mike “Mish” Shedlock (@MishGEA) October 30, 2020
Mish
Excellent post, Mish. Thanks.
The best model has been the stock market. Trump has a slight edge, but this week’s sell-off has reduced his lead. Markets up on Monday and Tuesday favor Trump. Markets sideways to slightly down would be a coin toss. Heavy selling favors Biden.
Overthinking in American politics is much more rampant than people seem to realize and it’s a real problem.
The whole QAnon movement is an exercise in extreme overthink, where people feverishly try to decipher cryptic messages that don’t mean anything, they’re just gibberish. I suppose when people feel desperate or threatened they’re more likely to perform mental gymnastics to reach a conclusion they like.
No matter how this election goes (I expect a narrow Biden win) a lot of people are going to look crazy, with wild predictions that didn’t remotely reflect reality. Many people have been wrong in US elections before, but not THIS wrong.
Interview with two pollsters who say a Trump win is likely link to politico.com
Trump is going to win again. I was firmly in the Biden camp but I guess I over thunk it.
Trump will firmly win this thing on Election Day. I think emotion is playing into the “models” now. A model doesn’t think but bad data will make them worthless.
Biden has to much baggage. Very similar to Hillary. Are the democrats about to make the same mistake twice? Anyone in the primary against Biden could have beat Trump. Well except his running mate. Talk about the bottom of the barrel.
I said a year ago that Biden was Hillary in old white guy drag. I wanted Mike Bloomberg….boy was I stupid.
The running mate will probably go far…..if she gets with the program and embraces reparations and UBI.
Trump could still win. I don’t trust polls…..and I don’t have much faith in human nature anymore. We shall see.
The energy for Trump in many places is very high. Most people are voting for Biden because they don’t like Trump more so than they like Biden. This generally doesn’t win elections.
Hillary had this same problem. It looks like a repeat.
….legally settled Latinos probably don t like other Latinos coming to the US competing for their jobs…
I have a good friend that runs a commercial cleaning company. He has several llegal immigrants employees. We have talked in the past how much they had illegal immigrants. I would guess it’s the same thing as you putting in the work and someone else cheating.
You are correct though. I expect the Latino vote to not be a gimme for the democrats like in the past.
Very interesting but the questions asked determine if one responds or not. For example asking which flavour of ice cream you prefer has a much higher response rate than asking who you are going to vote for. It’s a different ballgame.
The problem with models for presidential elections today is that the data is highly suspect. Ten of fifteen years ago a pollster had around a 50% response rate. Today it’s around 5%. That skews the data too much to be normalized by mathematical methods so it’s garbage in, garbage out. If you read studies in reviews dedicated to polling you see that they are well aware that it is the biggest problem and it’s not getting better. I should mention that the polls seem to be tightening and the difference is narrowing. Soon the spread will be tight enough so that the pollsters can claim that they were in the range of statistical error giving themselves an out for being wrong and thereby saving their reputations. It’s a common behaviour among the white-collar variation of the human race. I believe it’s called “covering your ass”.
It’s fashionable now to be anti Trump. Lil Wayne can out supporting Trump and has been destroyed on social media. The same thing with 50 Cent. Now a couple rappers mean nothing in the grand scheme of things but people learn by example and truthfulness in just the black community about Trump could be way off.
We will see but I suspect polling will be worthless after this election. I see I firm Trump victory in the cards.
If Nate Silver is completely wrong about two in a row, his credibility should be completely destroyed.Statistically a quarter would be more accurate.
Credibility has more to do with marketing rather than accuracy in most professions tied to the media. Pollsters like Silver have become a pundits. I would guess a considerable percentage of his money now comes from that source and not companies.
Hadn’t really thought about that but I am sure you are right. Give Nate a few hundred thousand to keep him firmly in your corner.
I could imagine the fallout if he shifted and gave Trump a 75% chance of winning. He would quickly be banished to the crazy bin. When polling and capitalism meet.
any thoughts on supermodels?
You can’t afford the heroin habit.
Well now that’s what I was thinking when I saw the title of this post! Mish should at least have shown a supermodel when he wrote ‘beauty of models…”
Sounds like you want your model to react to momentum and volatility. That could be done but then it would no longer be parsimonious
Not quite
Models can only do what they can do.
Hopefully when I make judgement calls, I do so in the right direction. It will not be always.
Yes we overthink things no doubt, on Trump he has done some major damage to the standard GOP platform as well as the Dem platform, in fact it can be argued he inadvertently dealt a huge blow to the entire U.S political system that would under normal circumstances have taken a generation, so in that we should be thankful.
The playing field past this election is going to look very different. Washington D.C has been exposed inadvertently and they are now facing a real loss of confidence and even worse have lost any type of moral high ground, prepare for a very bumpy ride as the citizenry now demands Bread and Circuses now that the charade has been exposed and they want in on the action also.
Some observations:
The Age of Taxes is over: Any tax proposal is DOA at this point from both bases including the democrats base, it’s simply not needed, the reserve currency can be leveraged via deficits, so any pain is unneeded, no new significant taxes at the national level until the collapse at least 3 generations if not more away. This knocks out a major party plank for the dems and they will face growing calls for real socialism in the next 10-20 years, which very few Dem politicians/Wall Street really want.
The Age of Austerity is over: The GOP plank of austerity/low deficits conversely is done even for their base, very few will support austerity, it’s simply not needed, the reserve currency can be leveraged via deficits, so any pain is unneeded, no new significant austerity at the national level until the collapse at least 3 generations if not more away. This knocks out a major party plank for the GOP and they will face growing calls for real socialism in the next 10-20 years, which very few Republican politicians/Wall Street really want.
The Age of innocence is over:
Does that mean the $150-250K a year I pay to the IRS is gonna get reduced?
No?
It’s okay…..I’m used to pain. I expect to die standing up.
No, what it means is that you will keep paying taxes/faithfully participating/believing in the political system until you have a FTE/Loss of Confidence event. I wouldn’t expect it to come in your lifetime if it didn’t come in the last 16 years or so in which the curtain has been pulled back for you to see. You will in essence keep complaining about this until you die.
I pay a lot of taxes also but rarely do I complain because I have accepted they are collected to continue the charade and pay them little to no thought, the U.S government doesn’t really need your 150K-200K, it’s nothing to them, they can simply have the treasury issue T-Bills for 10000 times that amount and the Fed buy them up, it’s that simple, the U.S controls the reserve currency, as the country it is the undisputed leader financially, militarily, culturally and formerly morally.
You will need to go through a long grieving process but rest assured if you go through out it you will come out of it for the better if you make it!
I never was a believer….when I was young I knew my vote didn’t matter..but at some point I got sucked in, started caring, started voting against the worst villains, who almost always won anyway…..
Well, you probably know the rest.
Had kids, they grew up and became way too liberal….and I turned into an old curmudgeon. I complain about Democrats as much as I complain about Republicans….and my wife thinks I like Trump…I have to keep disabusing her of that notion.
I’m an investor and I have skin in the game….so I wish Chairman Powell luck on keeping this game of musical chairs going as long as possible. A Greatest Depression of All Time is not how I want to spend my last years. Keep on printing……QE to the stars and planets.
I love my job, too. Probably won’t ever retire…hopefully the money I leave my kids will still be worth something at that point in time.
Eddie,
Very good to hear, I was fearing you were a believer type, you have disabused me of that notion. Yeah it’s when you get sucked in , I was sucked in for over 10 years myself, finally unplugged myself for good. Yes I do know the rest :). These days I observe the process with amused mastery, it’s mostly entertainment these days , human behavior in certain situations is fascinating as you watch the veneer melt away and the real person come out to play.
It’s always good to believe, but you have to build your own belief framework these days, if it’s coming from anyone but you, there is a good chance it’s just another game to trap you into. I myself am heavily invested in the market and keep on buying even today, I have absolute faith our pal Jerome/Fed will keep this going as long as he can, which is pretty damm long, even today I’m buying :).
10-4 on the job, you gotta keep busy.
It’s a shame that all these Dems, like Mish, are fleeing their failed states and moving to states like Utah and voting for the same party and policies that ruined their former domiciles – shit in the nest policy at its finest.
And, what will happen when the US ceases to be a “reserve currency”? Such things are not forever, so we know for sure it will cease. The higher the Debt/GDP ratio, the sooner it will happen.
Have you looked at China’s debt? Europe? Japan? I’m not going to post a link, because I keep getting my posts deleted when I do…..but you might watch Peter Zeihan’s presentation recently in Santa Clarita…….its up on Utube.
When the dollar goes they all go….or more likely the others go first and we follow when the entire credit system locks up. That’s what happened when the Great Depression hit.
This is a test to see if I get deleted again.
Donald Trump created a lot of economic damage in Iowa as crops rotted in his ill-advised trade war. Iowa has long been known as an independent state that goes back and forth all the time every four years. I just don’t see how Iowa is rallying behind Trump as millions of dollars that was supposed to come into the state from China was lost.
Overthink?…..Moi? 🙂