EMERGENCY INVESTORS CALL: Kavanaugh Roulette, Revised

Alright, look. I’ll shoot straight. I don’t have the stones to play the Kavanaugh markets without second guessing myself. Last we met, I’d settled on a trading strategy that was about as alpha as a hair metal show in Oakland.

Votes Final

But I’ve been flying half-mast ever since then. Now my portfolio’s feeling more like the v-neck section of an American Apparel store:

Kav Revised Market

What changed?

Nothing. And I don’t think anything will change. A one-week FBI probe isn’t going to dredge-up anything new on teenage Kav’s sexual proclivities; and if it does, it’ll just be another he-said-she said episode inside a prep school pantry. That’s not going to be compelling enough to flip Republican votes. In fact, it might do the opposite. An FBI report that either: (1) clears Kavanaugh; or (2) fails to corroborate any of the accusations against him might be all the cover that embattled Democrats like Joe Manchin (WV), Heidi Heitkamp (ND), and Joe Donnelly (IN) need to switch their votes to a YES.

In this version of events, Democrats running for re-election in red states would run the ball behind the broad shoulders of an FBI white-washing. The moral cover of such a report would be enough to divide Trump Democrats from the Resistance progressives currently burning themselves in the streets to stop Brett Kavanaugh. With enough populist voters juiced-up on their Democratic Senator’s YES vote for Kavanaugh, endangered pols like Manchin and Donnelly could have the muscle to run out the clock on their Republican challengers.

So yes, there is a version of events that leads to Kavanaugh clearing the Senate with 52 or 53 votes, as Judge Neal Gorsuch did.

So here’s the new strategy:  I’ve sold my hedges and trimmed my position in the 50 and 51 vote categories by 1/2. This has cost me about 12% of my money. Now I’m accumulating shares in:

Kav Next Justice

I’m loving this market place for a few reasons: first, it’s still a good rate of return. Spending 62 cents to make 38 is a deal any dummy would take. So don’t be a dummy.

Second, it’s a backdoor hedge. As I’ve said, Kavanaugh’s confirmation is a rare opportunity to chase a 5-10x return with decent odds. But from where I sit, it looks more likely that Kavanaugh will over-perform than under-perform, which means that taking yes at 62 here is actually a great way to hedge my admittedly indulgent buys in the 50 and 51 vote categories.

And if you’re still nervous, you can manage your risk the opposite way. You can go out and buy YES on Kavanugh receiving 49 or fewer votes, or play the negative risk game and buy NOs on vote categories 50 or greater.


— Will the FBI find something to corroborate the accusations against Kav? Nope.

— Will another “scandal” break? Yup.

— Will there be corroborating witnesses to flip Republicans? Nope.

— Will Trump withdraw Kavanaugh’s nomination? Maybe. Caligula was more predictable than that guy.

I’ve said it before, folks. This is gambling. Man-up or watch from the sidelines.


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