Odd Lots Live: What to Watch on Election Night and Beyond

Episode Summary

Executive Summary: This live election-eve Odd Lots episode centered on markets, polling, prediction markets, and trade policy. Guests debated how much to trust polls and betting markets, what election outcomes could mean for rates, fiscal policy, and sentiment, and why globalization remains resilient but increasingly tax-driven and unhealthy. The closing discussion with Brad Setser argued that deglobalization is overstated, while U.S. and Chinese policy choices continue to distort trade, tax planning, and capital flows.

Main Topics: Prediction markets and election-night price discovery (Priority: 5/5): Zvi Moschiewicz explained how prediction markets incorporate information faster than conventional sources, but are constrained by liquidity, access, and trader capital. The live Manifold market for his appearance on the show became a demonstration of how quickly odds can move in response to new information and even audience manipulation. Polls, herding, and election uncertainty (Priority: 5/5): Zvi and Skanda Amarnath argued that polls have limited marginal usefulness when races are close and are increasingly affected by herding, methodological opacity, and partisan pollsters. The conversation emphasized that the real question is less exact probability and more the geographic/turnout structure of the vote. Macro markets, rates, and policy reactions (Priority: 4/5): Neil Dutta and Skanda Amarnath discussed how election outcomes may affect fixed income, but argued that the bigger driver of recent moves has been underlying economic data. They stressed that the economy entering either administration is relatively strong, though growth may slow in the near term. Globalization is still alive, but in unhealthy forms (Priority: 5/5): Brad Setser presented a detailed case that the world is not truly deglobalizing. Instead, globalization has continued through tax-driven structures, pharmaceutical profit shifting, Chinese export growth, and trade diversion rather than outright fragmentation. U.S.-China trade, tariffs, and industrial policy (Priority: 5/5): Setzer argued the 2018 trade war created real bilateral decoupling in some sectors, especially autos, but not broad global fragmentation. He criticized simplistic tariff policy and urged more coordinated allied industrial policy, especially around China, EVs, and subsidies. Tax policy and corporate behavior (Priority: 4/5): A major theme was how U.S. tax law shapes where firms book profits and locate intellectual property. Setzer argued the Tax Cuts and Jobs Act changed incentives but did not end offshore profit shifting, especially in pharmaceuticals and tech. Productivity, AI, and what data measure (Priority: 3/5): Neil and Skanda debated how measured productivity has improved post-pandemic and why that matters for inflation and monetary policy. They also noted that AI may improve welfare and efficiency without immediately showing up as large measured productivity gains.

Key Arguments: Prediction markets are among the best available forward-looking information sources, but they are not perfect and can be distorted by access constraints, thin liquidity, and capital limits. Polls are increasingly subject to herding and methodological gaming, so their informational value has a ceiling when an election is essentially close to 50-50. Recent fixed-income moves were driven more by stronger economic data than by a pure 'Trump trade.' Regardless of who wins, the economy entering the next administration features high employment, falling inflation, and relatively solid productivity. Globalization has not reversed; instead it has shifted into forms driven by taxes, intellectual property location, and multinational supply-chain adjustments. The 2018 U.S.-China trade war caused some bilateral decoupling, but not a global collapse of trade integration. Tariffs are less effective than often assumed because trade can be rerouted or reclassified through third countries. The U.S. tax code remains a major driver of offshore profit shifting; TCJA changed the regime but did not fully repatriate corporate activity. Measured productivity growth above pre-pandemic levels supports the case that inflation should remain contained and stagflation fears are overstated. A Harris administration would likely face a Republican Senate and institutional constraints; a Trump administration would still face thin House margins and bond-market discipline.

Data Points: Stock Movers report length: Five minutes or less - Bloomberg promo describing short audio updates throughout the day Live event timing: November 4 - Odd Lots live recording in New York on election eve Manifold market probability for Zvi appearing: 20% - Displayed at the start of the live prediction-market demo Manifold market probability after live repricing: 44% then 94%-98.6% - Odds moved rapidly as the audience and on-stage discussion changed the market U.S. imports of pharmaceuticals: Doubled since 2016 - Setser used this to argue globalization continues through tax-hub supply chains U.S. pharmaceutical imports from five tax hubs: About half - Setser noted concentration in low-tax jurisdictions, not low-cost ones U.S. imports from Ireland: About one quarter of those imports - Ireland identified as a major pharmaceutical tax hub China exports of manufactured goods: Up about $1 trillion since 2019 - Used to show China’s global export surplus has expanded markedly China imports of manufactured goods: Up about $200 billion since 2019 - Part of the widening imbalance in global manufacturing trade China surplus of manufactured goods: Up about $800 billion since 2019 - Evidence against a broad fragmentation story U.S. corporate tax rate under TCJA: 21% - Setser described this as the central corporate-rate change GILTI rate: 10.5% rising to 13.125% - Setser explained the international minimum-tax framework in TCJA FDII rate: 16% - Mentioned as another tax incentive affecting IP location Pre-pandemic productivity growth: Roughly 1.4% - Skanda and Neil contrasted this with post-pandemic performance Post-pandemic productivity growth: Roughly 1.9%-2.0% annualized - Used to support the view that measured productivity has improved materially U.S. pharmaceutical companies’ 2023 profits: About $60-$70 billion for the top six firms - Setser cited this to illustrate profit shifting and tax planning U.S. federal tax paid by top six pharma companies: Zero - Setser said they reported losses in U.S. operations despite high U.S. prices U.S. personal income tax GDP share: 8% of GDP - Compared with China’s roughly 1% of GDP China personal income tax GDP share: 1% of GDP - Used to show China’s reliance on tariffs and other revenue sources Odds movement example: From 50% back to 98.6% and later 91% - The live market showed how thin order books and off-stage trading can move prices quickly

Pivotal Quotes: "The world has continued to globalize, but in unhealthy ways." — Brad Setzer: Core thesis of the closing interview on trade and globalization "Polls are scammier now." — Skanda Amarnath: Discussion of herding, partisan pollsters, and the limits of polling models "I take them at least as seriously as any other data point or source of information that we have available. They are the best thing we have." — Zvi Moschiewicz: Defense of prediction markets as a forecasting tool

Implications: Listeners should expect election outcomes to matter, but often less than underlying macro data, institutional constraints, and market structure. The episode argues that trade, tax, and industrial policy—not slogans about deglobalization—will shape the next phase of markets and globalization.