In the market on which of the 13 members of Trumpâ€™s Cabinet will leave next, I have made several predictions over the past few months:
- Esper: Secretary of Defense Mark Esper isnâ€™t going anywhere before the elections, but might get fired shortly after the elections.
- Pompeo and Barr: Both Secretary of State Mike Pompeo and Attorney General Bill Barr will try to stay in the administration as long as possible.
- Carson: The markets, at 2%, were underpricing the likelihood of drama between Trump and Secretary of Housing and Urban Development Ben Carson. In all likelihood, Carson is fed up with the job and doesnâ€™t want to stick around regardless of the election outcome.
All paid. Long shares on Carson, in fact, were one of the best trades of the year, recently spiking from 1% to 10%. This is how the market stands currently:
I think weâ€™re now entering a new phase of this market, which might be creating opportunities to cash in on lottos.
The markets are likely mispriced for three reasons:
- The GOP is unlikely to hold the presidency. Given that the markets still believe that Republicans have more than a 30% chance of keeping the presidency, traders are probably discounting the likelihood that all 13 Cabinet members will be on their way out come November.
- Trump isnâ€™t likely to fire anyone before the elections. The markets are probably overestimating Trumpâ€™s inclination to fire someone before the elections. As we saw earlier this year, when Trump was considering firing Esper, Senate Majority Leader Mitch McConnell has made clear that he doesnâ€™t want a Cabinet shake-up, and that he is willing to say so publicly when Trump appears to be thinking about it. Now that Trump is depending on McConnell to fast-track his Supreme Court nominee, in the face of public opinion, while McConnell is up for re-election, he has every reason not to irk McConnell with another distraction.
- The remaining Cabinet members are unlikely to quit before the elections. The 13 Cabinet members currently in office are there for a reason. Unlike their predecessors, who either had the dignity to resign or who were not able to accommodate the presidentâ€™s quirks, the current group is doing whatever they can to stay in office. Even if they have little intention of sticking around in a second term, they gain nothing by breaking with Trump a month before the election.
These assumptions lead me to the following conclusions:
- Azar is overpriced. I see little reason to think that the departure of Health and Human Services Secretary is imminent, or that he will get fired after the electionsâ€”at least not before Esper. Azar is trading at 32% in part because, if everyone leaves at the same time, Azar YES will win because his name is the first in the alphabet. The â€œalphabet holdersâ€, in my view, are underestimating the likelihood of someone either getting fired or quitting before Inauguration Day.
- Play the swings on Esper. Continue to play the swings on Esper between now and the election. If the market still isnâ€™t settled on the eve of the election, sell off NO shares and consider going long on Esper.
- Mnuchin wonâ€™t quit. Yes, Trump threw him under the bus with the stimulus talks. But I donâ€™t think itâ€™s enough to cause Treasury Secretary Steve Mnuchin, one of the presidentâ€™s earliest supporters, to quit this time.
- COVID is the wild card. An emergency strikes me as the most likely reason weâ€™ll see a departure before the election. A COVID diagnosis strikes me as the most likely scenario. Eight of the thirteen Cabinet members are trading at 4% or less. None are exactly pictures of health. I donâ€™t see any reason why they are any less likely than anyone else to test positive on COVID. Shares at 2-3% on any of them could spike on a simple, unsubstantiated rumor.
Overall, this is a risky market. With all the MAGA money on the table right now, it may not be worth the trouble. But if you feel like taking a chance on some lottos, the Cabinet market might pay big in the coming weeks.
Pratik Chougule is a contributor to Star Spangled Gamblers and author of the book How to Make Money from Political Predictions: A Guide to Generating High, Steady Returns from PredictIt.