November 2022

the control freak's guide to life, money & probability

There are important risks associated with transacting in any of the Cboe Company products discussed

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12 | Modern Monetary Monopoly

18 | Luckbox leans in with Christopher Leonard

His book, The Lords of Easy Money, reveals “How the Federal Reserve Broke the American Economy.”

20 | The Midterms Roundtable

Our panelists are split on what issues will motivate voters, but they’re unified in predicting some surprises.

24 | What Young Voters Want

Ballots cast by voters under the age of 30 matter. Here’s how the age group’s concerns could influence this election cycle.

26 | Are We Doing Voting Right?

Ranked Choice Voting is gaining in popularity from Maine to California and from Alaska to Virginia. But does it work?

30 | The Case for Political Debates

Televised presidential debates can make or break candidates, but without reform they’re in danger of disappearing.

34 | Making Strides Toward Legal Highs

Legalizing recreational marijuana in more states may affect the markets and could influence federal lawmakers.

36 | Margin of Error Matters

The Normal Deviate’s analysis of statistical metrics may change your perspective on the predictive power of polls.

2022

It’s a game of chance when it comes to the markets and the economy, and the Federal Reserve holds all of the cards.

Politicos and politicians face off during the midterms: (From top left clockwise) Federal Reserve Chair Jerome Powell; Dr. Mehmet Oz (R) who faces Lt. Gov. Ron Fetterman (D) in the Pennsylvania Senate race; Herschel Walker (R) faces Sen. Raphael Warnock (D) in Georgia; Sen. Mark Kelly (D) faces Blake Masters (R) in Arizona.

editor in chief ed mckinley

managing editors

yesenia duran elizabeth schiele associate editors kendall polidori mike reddy editor at large garrett baldwin technical editor james blakeway contributing editors vonetta logan, tom preston mike rechenthin

creative directors tim hussey, gail snable contributing photographer garrett roodbergen editorial director jeff joseph

comments, tips & story ideas feedback@luckboxmagazine.com contributor’s guidelines, press releases & editorial inquiries editor@luckboxmagazine.com advertising inquiries advertise@luckboxmagazine.com subscriptions & service support@luckboxmagazine.com media & business inquiries

associate publisher elizabeth schiele es@luckboxmagazine.com publisher jeff joseph jj@luckboxmagazine.com

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Luckbox magazine content is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, transaction or investment strategy is suitable for any person. Trading securities and futures can involve high risk and the loss of any funds invested. luckbox magazine, a brand of tastytrade, Inc., does not provide investment or financial advice or make investment recommendations through its content, financial programming or otherwise. The information provided in luckbox magazine may not be appropriate for all individuals, and is provided without respect to any individual’s financial sophistication, financial situation, investing time horizon or risk tolerance. luckbox magazine and tastytrade are not in the business of executing securities or futures transactions, nor do they direct client commodity accounts or give commodity trading advice tailored to any particular client’s situation or investment objectives. luckbox magazine and tastytrade are not licensed financial advisers, registered investment advisers, or registered broker-dealers. Options, futures and futures options are not suitable for all investors. Transaction costs (commissions and other fees) are important factors and should be considered when evaluating any securities or futures transaction or trade. For simplicity, the examples and illustrations in these articles may not include transaction costs. Nothing contained in this magazine constitutes a solicitation, recommendation, endorsement, promotion or offer by tastytrade, or any of its subsidiaries, affiliates or assigns. While luckbox magazine and tastytrade believe that the information contained in luckbox magazine is reliable and make efforts to assure its accuracy, the publisher disclaims responsibility for opinions and representation of facts contained herein. Active investing is not easy, so be careful out there!

PHOTO: ALAN MATTHEW

NO DEBATE

I’m sentimental if you know what I mean I love the country but I can’t stand the scene

And I’m neither left or right

I’m just staying home tonight

Getting lost in that hopeless little screen

But I’m stubborn as those garbage bags

That time cannot decay

I’m junk but I’m still holding up this little wild bouquet

Democracy is coming to the USA

—Democracy, Leonard Cohen, 1992

The tribes at the forefront of our political division complain bitterly about the inci vility of our discourse. Opposing chieftains point fingers at each other on social media and on tribal cable channels, slinging slurs like “snowflake,” “extremist,” “militant,” “radical,” “hateful” and “dangerous.” They’re not out to convert the opposition but to rally their own clan’s warriors for the imminent judgment day—the upcoming midterm elections.

As this issue of Luckbox goes to press, midterm candidates have spent nearly $7 billion on advertising, with $50 million going to Google and Facebook. The total is expected to be near $10 billion by election day.

In Pennsylvania, a “purple” swing state, spending in the Senate race between Demo cratic Lt. Gov. John Fetterman and Repub lican candidate Dr. Mehmet Oz, is expected to top $160 million, shattering the previous all-time spending high for the Keystone State’s Senate battles.

But record-high spending isn’t the only controversy in Pennsylvania. Oz has been hammering the Fetterman campaign to agree to a public debate that might shed light on the lieutenant governor’s fitness to hold office after a recent stroke. With a comfortable lead in the

Thinking Inside the Luckbox

polls, the Fetterman camp has been reluctant to commit to an appearance on the debate stage.

His campaign isn’t alone in its reticence. For years, candidates with big leads have shied away from formal debates.

Instead, they rely on ads to deliver care fully crafted messages. Why give your oppo nent a “gotcha” moment when you can avoid it? Then there are the estimated 60 hours of preparation required for a debate. The risks outweigh the potential benefits for a front-run ner focused on winning.

But when candidates eschew debates, the public invariably loses. At this writing, elec tion debates have been confirmed in just two competitive Senate races.

Here’s what the nonpartisan National Democratic Institute has to say: “Debates are generally the only time in the course of a political campaign where the candidates come together in a neutral setting that allows citi zens to make a side-by-side comparison of their positions and leadership styles. Debates are really the ultimate job interview for elected officials.”

That appears to be the prevailing sentiment among voters, as well. Check out the Luckbox Readers Survey results which appear on p. 30.

What’s more, the first 2016 Presiden tial debate between Democrat Hillary Clin ton and Republican Donald Trump was the most-watched of all time with an estimated 84 million viewers. For context, only the farewell episode of M*A*S*H* and some Super Bowls have attracted larger audiences.

Yes, voters appreciate debates. But televised debate suffered a setback when comedian Jon Stewart appeared on Crossfire, the nightly political show that ran on CNN for 12 years.

Stewart blew up the program, hosted by conservative Tucker Carlson and liberal Paul Begala, by proclaiming it was “hurting Amer ica.” The program was canceled shortly after that, and nearly 20 years later, not a single show provides opposing viewpoints with equal time and an immediate opportunity for cross-examination.

It’s a situation contributing columnist Clea Conner (The Case for Political Debates, p. 30) would like to change. She’s CEO of Intelli gence Squared, a non-profit operating a live event and internet platform for structured, Oxford-style debates on politics, economics and culture.

Conner says honest debate could help bring civility to American politics. Perhaps the warring tribes would even come to agree on a truce. Everyone would benefit.

Luckbox is dedicated to helping active investors achieve skill-derived, outlier results.

1 Probability is the key to improving outcomes in the markets and in life.

2 Greater market volatility brings greater opportunity for astute active investors.

3 Options are the best vehicle to manage risk and exploit market volatility.

4 Don’t rely on chance. Know your options because luck smiles upon the prepared.

Ed McKinley Editor in Chief Jeff Joseph Editorial Director

Your thoughts on this issue? Please take the next reader poll at luckboxmagazine.com/survey

OPEN OUTCRY

We asked Luckbox readers if the current political climate prevents them from saying things they believe because others might find them offensive.

Agree 68%

Disagree 32%

Should voters be required to show an I.D. at the voting booth?

Yes 89% No 7%

Would you say that the U.S. economy is currently ...

In a recession 66%

Not in a recession 22%

Do you approve or disapprove of the job Joe Biden is doing as President?

Luckbox Readers Morning Consult + POLITICO

Strongly approve 11% Somewhat approve 23% Somewhat disapprove 11% Strongly disapprove 55%

READERS SURVEY

17% 26% 13% 42%

While inflation is clearly among the most important issues, elected officials must find ways to work across party lines. The electorate has to reject the political grandstanding at extremes from both sides. Politics isn’t a reality show and shouldn’t be accepted as such.

—Aaron Montell, Denver

Getting new blood into our system of government. The establishment has proven that they (both sides) are so far out of touch with the populace that we need to start talking about term limits or maximum age.

—Andy Ream, Tucson, AZ

The economy. My 401K’s 38 years’ worth of savings has lost 25%.

—Name withheld by editor

Great criticisms of crypto. I’ve been in crypto since 2016 and have always supported it, but the last two to three years have been painful to watch and I’m not happy with a lot of the developments or lack of development in the space. The need for more education and coverage is vital for the market to decide on crypto’s future.

—Spencer Beyer, New York

We asked Luckbox readers what they think is the most important issue in the midterm elections. Here’s what they had to say:

The Border. You can’t have a sovereign country with no border control. You can see the hypocrisy with the recent Martha’s Vineyard incident. Great example of NIMBY [Not in my backyard].

—Marty Mallek, Hobe Sound, FL

Authoritarianism. We seem to disagree on fundamentals. A fair segment of the population appears willing to disregard democracy and is intent on destroying this one. If we don’t get this right, then none of the other issues matter.

Michael Conley, Asheville, NC

Inflation, the economy, excessive spending, open southern border, lack of unbiased news reporting and unpunished crime!

—Jim Lorence, Ankeny, IA

Two ways to send comments, criticism and suggestions to Luckbox

SCAN THIS

Love crypto discussions. It is the future currency of the world.

—Caleb Bolander, Loveland, CO

I do not find any point in digital assets, and while I have always liked glittery things, they do not produce a return.

—Katherine Wildey, Lakewood Ranch, FL

I always look at the Trades & Tactics articles; these provide a good reminder of when to use the various options strategies. I loved the pickleball article. I started playing the game four years ago in Florida, where we stay for three months of the winter. It is a great workout.

—Kevin Callagy, Stamford, NY

In general, I like the timeliness, brevity and clarity of the content in Luckbox. The subjects chosen for discussion are typically current and relevant. I like how the content is factual and data-driven.

—John Andrick, Kahului, HI

Email tips@luckboxmagazine.com

Your thoughts on this issue? Take the reader survey at luckboxmagazine.com/survey

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POLICY & POLITICS

“After the global financial crisis, the response to disinflation was zero rates, printing a lot of money and quantitative easing. That created an asset bubble in everything. [The Fed is] like reformed smokers. They’ve gone from printing a bunch of money, like driving a Porsche at 200 miles an hour, to not only taking the foot off the gas, but just slamming the brakes on.”

$17.8 BILLION

size of the global legal cannabis market in 2021.

It’s expected to reach $22.1 billion this year.

—Grand View Research

SEE PAGE 12

Hedge fund manager Stanley Druckenmiller on central bank efforts to combat inflation with tighter monetary policy

“I believe there’s going to be a Republican turnout in most states that is higher than anyone is going to predict, including us.”

Midterm musings from Robert Cahaly, an American pollster and founder of the Trafalgar Group

SEE PAGE 20

SEE PAGE 30

Heading into the U.S. midterm elections, debate appears to be in decline, a casualty of fragmented digital media, a deeply polarized political culture and a democracy losing its sense of cohesion.

—The Guardian

SEE PAGE 34

8 million

the number of newly eligible voters in the upcoming 2022 Midterm

—Center for Information & Research on Civic Learning and Engagement

SEE PAGE 24

U.S. jurisdictions used ranked choice voting in their most recent elections.

—FairVote, September 2022

SEE PAGE 26

The S&P 500 Index tends to underperform in the year leading up to midterm elections. Its average annual return in the 12 months before a midterm election is 0.3%—significantly lower than the historical average of 8.1%. It tends to outperform the market in the 12 months following a midterm election, with an average return of 16.3%.

—U.S. Bancorp Investments

SEE PAGE 52

“IN MANY WAYS, ETHEREUM IS ALREADY THE DOMINANT CRYPTOCURRENCY [NETWORK BECAUSE] 70% OF TOKENS ARE BUILT ON ETHEREUM. IF THE MERGE IS SUCCESSFUL, IT WILL ENCOURAGE EVEN MORE UPGRADES TO ETHEREUM AND THAT SHOULD PUT IT IN A STRONG POSITION TO ALSO BE THE DOMINANT CURRENCY IN MARKET-CAP TERMS.”

—Niclas Sandström, CEO of investment firm Hilbert Group, CoinDesk

people participated in Burning Man 2022 in Nevada’s Black Rock Desert

USA Today

SEE PAGE 39

pounds of cannabis are expected to be cultivated legally in the U.S. in 2030 (20 million pounds more than in 2020)

—New Frontier Data

SEE PAGE 42

people attended Bourbon & Beyond in Louisville, Kentucky, over four days— a record for the festival

The number of NICS (National Instant Criminal Background) checks performed for Americans purchasing firearms in 2021.

The total nearly equals the number of first-year NICS checks during the administrations of former presidents Donald Trump and Barack Obama combined.

SEE PAGE 58

SEE PAGE 60

SEE

54

Rage Room Raves

With midterms approaching, our reporter relives the rapture of expressing anger— and she didn’t have to clean up her mess

By Vonetta Logan

In the words of the great philosopher Frederick Durst from the band Limp Bizkit, “It’s just one of those days, where you don’t want to wake up, everything is fucked, everybody sucks. It’s all about the he-says, shesays bullshit. I think you better quit, talking that shit. And if my day keeps going this way, I just might, break something tonight. Just give me something to break.”

Every day, it seems another story pops up in the media that makes me say, “We are on the dumbest timeline.” Everyone is angry. But this isn’t a pissing match. We’re all entitled to that visceral rage. So, we found it fitting for this issue of Luckbox, which is filled with political hot takes, to also offer a bit of lighter fare on the rapturous experience of rage rooms. If we can’t all get along, can we at least agree that smashing stuff from plates to printers to the patriarchy is a damn good time?

Rage rooms, anger rooms or break rooms— where you pay a small fee to destroy everything in a room without having to clean it up—are a quickly growing institution dedicated to that lesser known sin, wrath. Think of it as your own private frat house. All of the destruction— none of the criminal charges. In the U.S., an estimated 60 of these venues are operating,

according to CNN.

I visited Kanya Lounge, Chicago’s only rage room, to see if hulking out could bring me peace. Kanya features three custom rage rooms that patrons can rent for 30-minute incre ments. Your $98 fee gets you one premium item, like a computer monitor, printer or TV; one small item, like a VCR, keyboard or DVD

solid steel pipe feels cold and hefty in your hand. You get into a rhythm. As you arc that pipe into motion, your rage becomes corpo real, vivid and almost a living, breathing thing. Everything else just falls away.

player; and a mix of seven standard items, like plates and glasses.

Your rage concierge (OK, I just invented that but it’s a good description) escorts you to your private rage room and outfits you with an apron, gloves, and a helmet with sound-reducing ear muffs and a fold-down face shield. My RC, Chris, told me to “choose my weapon,” and like a scene from The Warriors, I selected a metal pipe from a five-gallon bucket. Can you dig it?

Then, it’s just you, your personal demons and a printer from the early ’80s. I did my best Carrie Underwood Before He Cheats bat twirl and went at it. My first few smashes were tentative. Like, is this OK? I feel bad. But that

Plates are the most satisfying to smash. There’s a wild explosion as the tiny shards fly toward your face. As a writer on deadline, I took delighted girlish glee in smashing a multi tude of computer keyboards. Who’s QWERTY now, bitch? And the flatscreen monitors had a most satisfying crack that started in the center, then spread outwards like a thousand tiny spider webs. Sometimes, I screamed when I smashed things. Other times, my resolute determination just rendered satisfied grunts when my steel pipe made contact.

The 30-minute session flew by. When I was done, I was sweaty, and my heart rate was so elevated that my rage session measured as a full-fledged workout on my Apple Watch. Who knew? Rage burns calories! Afterward, I felt great. Lighter, freer, less heaviness in my chest.

It’s just you, your personal demons and a printer from the early ’80s you can smash.

Kind of like I had simultaneously had some excellent Indica, took a Xanax and actually went to bed with a competent man.

As I exited the room, I ran into a young lady named Bethany whose eyes were bright and wild behind her glasses, her cheeks flushed with exertion. “Holy crap, I bent my pipe!” she exclaimed. I asked what brought her and her partner, Ethan, to Kanya Lounge. “She’s had a lot of pent-up anger,” Ethan tells me. “For the past 21 years!” Bethany pipes in. “It’s my birthday today.” Ethan says he googled “rage rooms,” and this was the only thing that popped up. So, the couple made the drive from Aurora, a suburb of Chicago.

I then went downstairs into the lounge to speak to the manager, Guss Castro, about why rage rooms are such an experience. Kanya opened in 2020 during the height of the pandemic. Guss, who started as a bartender, but now manages the lounge, said he truly believes in the efficacy of rage rooms. “The pandemic messed up a lot of people,” he said. “So many people are sad and a little angry. There’s so many stories told in the room. We’ve seen people crying, people really

angry, stopping, then just crying. It really works, though. I think doctors should recommend this place.”

During the pandemic, business was hampered by occupancy restrictions, but now the lounge sees an average of 40-60 reservations a day.

Who’s showing up? Nearly “99% of the reservations are from women,” Castro said. He laughs and in a lilting accent recounts a common occurrence. “Women come in with this (angry) face, and I start to see they need something extra and I open the door and throw a couple extra plates in there.” He goes on to explain that when the rooms are booked by

“I have a daughter who is 14,” he said. “She comes in with a little attitude. I say bring a couple friends with you. I asked the owner (rooms are tech nically for 18+), and he says, take it. Maybe 25 minutes, the kids were sweating, breaking keyboards, printers and monitors—everything. Kids have a lot of things on their mind that they don’t want to share with their parents.”

Anecdotally, rage rooms are the best thing that ever happened to me. Scientifically, the jury is still out.

“We have this culture in which people are often really angry,” clinical psychol ogist Dr. Scott Bea said in an inter view for the Cleveland Clinic. “Yet, we’ve not taught people how to express anger in healthy ways or what anger’s all about or how it’s sometimes useful.” According to Dr. Bea, anger rooms and other physi cal outlets for anger may temporarily expel the bad feelings. But they don’t address the underlying cause of anger or help people learn healthier ways to manage their emotions. “I think it’s fine if you want to go have fun with it, but I don’t think it’s particularly therapeutic,” he said.

couples, men often just stand in the corner, mouths agape as their ladies seek revenge on a 40-pound printer. He also mentions that TikTok is bringing in a younger clientele who want more experiences, and that he’s seen the positive change the room can bring even in his own daughter.

For me, my first rage room foray was a catharsis—a reawakening, a rebirth of a kinder, less rage-y me. Nothing is more satis fying for a woman than making a mess that she doesn’t have to clean up.

Vonetta Logan, a writer and comedian, appears daily on the tastytrade network. @vonettalogan

THE ESTIMATED NUMBER OF RAGE ROOMS IN THE U.S.

Chicago’s Kanya Lounge, kanyalounge.com

Vonetta Logan raging!

MODERN MONETARY MONOPOLY

THE MEDIA PLAYS ALONG WHILE THE FEDERAL RESERVE USES ITS POWER TO BENEFIT THE RICH AT THE EXPENSE OF AVERAGE CITIZENS. BY GARRETT BALDWIN

The Federal Reserve dictates to the markets and the economy at its whim, but not many Americans understand its monetary game.

Since 1977, the Fed has had a dual mandate to manage prices (inflation) and maximize employment. To reach those goals, the Fed engages in “open market operations.”

These operations include hiking and cutting the Fed funds interest rate, a figure that affects the credit of every citi zen and business in America. The bank can also provide or tighten liquidity to the financial system by buying or selling assets that include U.S. Treasury bonds and mortgage-backed securities. It can set capital reserve requirements on lending institutions.

This isn’t the full story behind the Fed. It’s just the elevator pitch. That pitch, however, is foreign to most Americans.

Twenty-one percent of Americans admit they “know nothing at all about the responsibilities of the Federal Reserve,” according to an April

2022 poll by Axios/Ipsos. Only 7% say they “know a lot about the Fed’s responsibilities.”

This shocking poll is reason for concern.

With the central bank signaling intent to raise interest rates above its current 3.0% to

MANAGING THE ECONOMY

On Sept. 21, the Federal Reserve hiked its Fed funds rate by 75 basis points. This was the third consecutive meeting where the central bank increased interest rates by that amount, bringing its official rate to 3.0% for the first time since 2008. Markets expect the Fed will hike rates by 75 basis points again during its November meeting.

The markets also have priced in a higher likelihood that the Fed will raise rates to at least 4.25% by 2023 to contain and, hope fully, reduce inflation.

3.25% range, the central bank’s decisions will have a greater immediate financial impact than those of any politician running for office this fall or any presidential candidate in 2024. These actions will change the labor market, credit access, housing prices and much more.

So, why aren’t more Americans paying attention?

But all this language—basis points, funds rate, liquidity—strikes most people as wonky and unintelligible. The financial news that’s generally available is edited for bond traders, not blue-collar workers.

Could this tilt be why only 7% of Americans know how the Fed really works?

Perhaps. But help is on the way in a new book called The Lords of Easy Money Author Christopher Leonard offers a simple

Financial news delivered in plain English would shock the public.

but deep dive into the role the Federal Reserve has played for decades in America’s economy. (See Monopoly: By the Rules, p. 15).

Leonard says financial media haven’t provided adequate insight into what the Fed’s decisions mean for the average citizen.

“For the financial press, there is this guiding idea that you cover the Fed for the bond markets or for the traders,” Leonard said in an interview with Luckbox. “You write how [Fed Chair Jerome] Powell signals large-scale asset purchases to produce more market liquidity.”

That jargon-laden coverage leaves the general public in the dark. “Every time someone hears about the Fed, it’s boring,” Leonard continued. “It doesn’t seem applica ble to their lives. If they’re not trying to make a move in the bond market, they don’t care.”

If the Fed increased the funds’ rate from 0% in early 2022 to more than 4% by December, it would have far-reaching consequences for the economy. The media should report how people are affected.

“The public does want to understand the critical role the Fed plays in both stoking infla tion and then fighting inflation,” Leonard said, “or how the Fed dramatically increased the price tag that must be paid to fight inflation.”

The right way of explaining all that seems clear, he maintained. “More media outlets and newspapers should start [covering] the Fed in plain English,” he said. “The focus is on the way it impacts everyday people and our economy, as opposed to the idea of ‘how can I make a buck off this news?’”

Financial news delivered in plain English would shock the public, Leonard insisted.

People would learn higher interest rates reduce access to credit, constrain consumer spending and discourage investment in busi nesses. Rate hikes drive up the interest on mortgages and drive down house prices. The Fed’s tightening can threaten the labor market, potentially costing individuals their current jobs or depriving them of new opportunities.

Yet, just 8% of respondents correctly recog nized that the Fed’s mandate includes “maxi mizing employment,” according to the Axios/ Ipsos poll.

Most Americans aren’t aware of the Fed’s role in the fight against inflation, either. While Congress passed the Inflation Reduc tion Act this year, monetary policy based on higher interest rates will do much more to lower prices. The poll showed only 34% knew the Fed’s role includes managing inflation or stabilizing prices.

Then, there’s the Fed’s influence in the hous ing market.

PAYING THE PRICE

Sixty-four percent of Americans own real estate, according to the research firm The Zebra. That means roughly 35% of Americans do not own their own houses.

Millennials, defined as those born between 1981 and 1996, are reaching the age when past generations were buying homes. But insuffi cient income and high house prices are forcing many of them to keep renting.

Maybe the policies of the Federal Reserve are also contributing to the generation’s finan cial malaise.

“Nearly a third incorrectly indicated that the Federal Reserve controls mortgage rates, while a plurality (45%) say they don’t know,” the Axios/Ipsos poll indicated.

The Fed’s decisions affect the labor market, house prices and access to credit. So, why aren’t more Americans paying attention?

While the Fed doesn’t control mortgage rates, it directly influ ences the housing market through its Fed funds rate and its owner ship of Treasury bonds and mort gage-backed securities. Buying bonds helps the Fed constrain yields on these assets and provides liquidity to the financial markets.

Mortgage-backed securities comprise a bundle of home loans typically originated by compa nies like Fannie Mae, Freddie Mac, or Ginnie Mae. The real estate backs the loans. The buyer of these assets receives a payment each time homeowners pay their mortgage and interest.

In 2022, the Fed owned about 33% of all mortgage-backed securities (MBS)—a portfo lio valued at $2.71 trillion. Studying the data leads one to the conclusion that it’s difficult to argue there isn’t a direct relationship between the Fed holdings of MBS and housing prices in the last 14 years.

FED-FUELED HOUSING COSTS

In 2020, The New York Times reporter Jeanna Smaller penned an article with this headline: Home Prices Are Roaring. Is That the Fed’s Problem? She noted that experts worried that “the central bank’s big bond purchases could be helping to inflate … the housing boom.”

Housing prices, measured by the Case-Schil ler Index, surged by 30% between March 2020 and December 2021. That was the largest jump since the run-up to the 2008 financial crisis.

In August 2022, housing prices added another 8.8% year-to-date, according to Fitch Ratings.

While demand indeed outstripped supply in the post-COVID era, the Fed’s commit ment to lower interest rates and large balance sheets helped fuel a run on available units. Meanwhile, the Fed also engaged in one of the more questionable decisions of this infla tionary cycle.

In 2021, while the central bank warned that inflation was “transitory,” it still aggres sively purchased billions in mortgage-backed securities. That helped keep interest rates low and offered cheap liquidity to the market. But by failing to raise the Fed funds rate earlier and suppressing market rates through bond purchases, the era of easy money helped

By the Rules

THE FEDERAL RESERVE uses its monopoly on the underlying cost of capital in the United States to distort financial markets and promote economic inequality. To understand how that’s happening, consider Has bro’s popular Monopoly board game.

In 1903, Elizabeth J. Magie Phil lips, a feminist who hated the mo nopolies of the gilded age, created The Landlord’s Game—the precur sor to Monopoly. That was a decade before the founding of the Fed.

In the version of Monopoly that became popular during the Great Depression, players start the game with $1,500 and earn $200 every time they pass “Go.” Along the way, they can purchase properties, collect rent, build houses and hotels, and pay taxes and fines to the bank.

The game ends when other players go bankrupt. Monopoly is essentially a game of “liquidity.”

House Rules

One of the primary complaints about Monopoly is that it takes too long to complete a game. It should take an hour but usually lasts much longer. That’s because players often engage in “house rules” that inject too much cash back into the game.

A popular house rule allows

players to pay taxes and fines to the center of the board instead of back to the bank (as the rules dictate). Then, players who land on the “Free Park ing” square can collect the money.

That’s the problem. The written rules of Monopoly don’t say anyone should collect money when they land on Free Parking. The landing space offers no gains or losses. It’s a free place to park your piece.

But the popular house rule allows players to collect hundreds or thou sands of dollars, granting them more capital to purchase properties or avoid bankruptcy. The distortion of Monopoly’s integrity with these cap ital injections lengthens the game.

A 2014 survey by Hasbro, the maker of the game, found 68% of respondents openly admit to having never read the rules in their entirety. In addition, 49% have made up their own rules. But these numbers still reflect a populace more knowledge able about Monopoly than about the inner workings of the Federal Reserve.

Print More Money

The Federal Reserve’s continued quantitative easing over the last 13 years has distorted business cycles, fueled asset bubbles and prevent

ed certain Americans from owning homes and other assets.

A popular meme on U.S. econom ic inequality—driven by Fed policy— relates to the popular board game: “Imagine playing Monopoly and never buying anything that could produce more money—just collecting $200 for passing go,” it reads. “This is how most people live their lives.”

Meanwhile, the game’s central bank can never run out of money.

The bank of Monopoly starts with $20,580 and can always create more money.

The rules state: “The Bank never ‘goes broke.’ If the Bank runs out of money, the Banker may issue as much as may be needed by writing on any ordinary paper.”

In simple terms, the players don’t follow the rules—and end up length ening the game’s boom and bust nature to their own detriment.

Instead, they add new liquidity… and keep the game going.

Likewise, the Federal Reserve’s commitment to such easing has extended business cycles and kept the wealth inequality game humming since 2009. Now, we’ll find out what happens when interest rates rise, unemployment increases and some one decides to flip over the board.

Policy&Politics

drive home prices up significantly.

While the Fed says it plans to reduce its balance sheet over the next 18 months, it has largely missed its targets so far.

QUI BONO?

Who benefits from the Fed’s policies of cheap money and housing inequality? Leonard devoted an entire chapter of his book to the subject.

“First of all, it’s these little entities you’ve never heard of: Blackstone and Goldman Sachs and Wells Fargo and JPMorgan,” Leonard wrote jokingly. “Then there’s Larry Fink’s BlackRock, who was on the phone with Jerome Powell like eight times a day during the crisis. Carlyle Group and other private equity firms benefit from these policies, time and time again.”

People find news about the Fed boring. It doesn’t seem applicable to their lives.

In the book, Leonard offered an example of the Fed’s accommodations during the Repo Meltdown in September 2019 and described how the Fed bails out institutional traders.

“The Fed was doing everything to normal ize the market, another symptom of just how distorted they’ve made everything,” he wrote. At the time, those hedge funds bet big on the Treasury market with forward contracts. “Those folks were about to lose their shirts. But they didn’t. The Fed stepped in to calm the repo market, and pumped cash into the banking system.”

Some would argue the Fed has helped some Americans by keeping rates low and enabling people to make money in the hous ing market in the last few years. But anyone who bought a house in the last 12 months may face falling home valuations if the econ omy rolls over soon.

And non-homeowners? They receive no reprieve from the Fed’s monetary policies.

Instead, many non-homeowners may pay higher rents. With less supply on the market (artificially created by a run on the assets and now more competition from investment management firms like BlackRock), rent may only climb higher—as it has in 2022.

How much do Americans understand the role of the Federal Reserve Bank?

A lot: 7%

A little: 38%

Not very much: 33%

Not at all: 21%

When you play Monopoly, what does a player receive for landing on Free Parking?

46% The money in the middle of the board

44% Nothing 10% $100

LUCKBOX READERS SURVEY

28%

of Americans believe the Fed is doing a good job, compared with 38% in 2021.

The Fed’s reviews are largely influenced by party affiliations: 39% of Democrats believe the Fed is doing a good job versus just 17% of Republicans and 27% of Independents.

AXIOS/IPSOS POLL, APRIL 2022

Perhaps the less the citizenry knows, the more the investment firms benefit, according to Leonard. He’s convinced that the only hope for most people is that the media will openly discuss the impact of the Fed’s policies and shine a light on practices that could improve the situation.

Companies like BlackRock and Blackstone don’t just win—they’re also shielded from fail ure, he maintained.

“Not only did the Fed save them from a really bad bet,” Leonard said, “but when the

Fed did that, they piled in even further so then the price tag of saving them will be even higher next time.”

For Leonard, here’s the bottom line: “What the central bank is doing absolutely benefits the richest of the rich and the most sophisti cated financial players.”

Garrett Baldwin, a commodity and trade economist, serves as Luckbox editor-at-large. He actively trades value and momentum stocks and wagers on sports and prediction markets.

CHRISTOPHER LEONARD

LEANS IN WITH ON THE LORDS OF EASY MONEY

HERE’S HOW THE FEDERAL RESERVE TAMES JOURNALISTS, UNDERESTIMATES INFLATIONARY PRESSURES AND CREATES MONEY OUT OF THIN AIR

BY GARRETT BALDWIN

Christopher Leonard, author of The Lords of Easy Money

Investigative reporter Christopher Leonard wrote The Meat Racket and Kochland before turning his attention to the Federal Reserve System in his 2022 book, The Lords of Easy Money: How the Federal Reserve Broke the American Econ omy. Financial journalist Matthew Taibbi described the new book as “a gift to media audiences that rarely get a clear look at a confounding topic.” Leonard uses simple language and a quick pace to explain complex subjects like quantitative easing and what the Fed’s actions have meant for the U.S. economy over the last few decades. To read the full interview, visit luckboxmagazine.com.

Luckbox: Why do you want Americans to read your book?

Christopher Leonard: So they understand the mechanics of how the Fed interacts with our economy. I explain the machinery and the plumbing of how the Fed creates money and how it executes monetary policy. It’s so important to understand quantitative easing, money being created inside these reserve accounts on Wall Street. I feel that reporting gave me a clearer understanding of how the system works.

Second, I hope people understand the decision-making process inside the Fed. Remember, these are people—the FOMC [Federal Open Market Committee] has 12 voting members. These are human beings like everybody else. One of the biggest myths of the Alan Green span era is that the people who run this institution are super geniuses and know everything. They don’t. I appreciated the chance to read through their internal debates and interview people to capture the human element of that decision-making.

[Also,] I wanted to write about quantitative easing so your aver age tired business traveler could understand the size and scale. I became much more negative toward the Fed’s policy during the investigation.

What is the underlying problem with the financial media’s coverage of the Fed?

If someone takes a job as an average city hall reporter in a metro news paper, they understand their job is to be fair but to be the watchdog and to be critical. When you come to the Fed, the watchdog role is totally neglected.

The Wall Street Journal’s Dion Rabouin is one of the brightest guys in the financial press. He covered the Fed for Axios. And he made the mistake of asking tough questions. They would stop taking questions from him during the press conference. They put people last in line. They shut off access. It leads to a press pool that can be trained.

Why do you think the market doesn’t believe Loretta Mester of the Cleveland Federal Reserve when she says the central bank will raise the fed funds rate to 4% to confront inflation?

Because the market has observed this time and time again. When asset prices start to fall, the Fed reverses course. There has been a pattern that started with Greenspan, which we refer to as the “Fed put.” When

One of the biggest myths of the Alan Greenspan era is that the people who run [the Fed] are super geniuses and know everything. They don’t.

asset prices start to fall, the Fed will step in and bail them out. [Federal Reserve Chair Jerome “Jay” Powell], in my mind, is most famous for the Powell pivot of 2019. When he said tightening and interest rate hikes were on automatic pilot, the markets fell over the holidays in 2018. And he said, ‘Sorry, just kidding. I don’t mean it. I didn’t mean it was on autopilot.’ And he stopped. So the market has bet against the Fed being serious about tightening.

Why is this time different? I think the problem is that we haven’t fully factored in how much infla tion is embedded. It’s deep. It’s widespread. Inflation expectations are way higher than people would want them to be. This is a serious thing that really might force Jay Powell to follow in the footsteps of Paul Volcker in a real way.

THE BASIC MECHANICS and goals of quantitative easing are actually pretty simple. It was a plan to inject trillions of newly created dollars into the banking system, at a moment when the banks had almost no in centive to save the money. The Fed would do this by using one of the most powerful tools it already had at its disposal: a very large group of financial traders in New York who were already buying and selling assets from the select group of twenty-four financial firms that were known as “primary dealers.” The primary dealers have special bank vaults at the Fed, called reserve accounts. To execute quanti tative easing, a trader at the New York Fed would call up one of the primary dealers, like JPMorgan Chase, and of fer to buy $8 billion worth of Treasury bonds from the bank. JPMorgan would sell the Treasury bonds to the Fed trader. Then the Fed trader would hit a few keys and tell the Morgan banker

Quantitative Easing Made Easy

to look inside their reserve account. Voila, the Fed had instantly created $8 billion out of thin air, in the reserve ac count, to complete the purchase. Mor gan could, in turn, use this money to buy assets in the wider marketplace. This is how the Fed creates money—it buys things from the primary dealers, and it does so by simply creating mon ey inside their reserve accounts.

[Ben S. Bernanke, former chair of the Federal Reserve] planned to do such transactions over and over again until the Fed had purchased $600 billion worth of assets. In other words, the Fed would buy things using mon ey it created until it had filled the Wall Street reserve accounts with 600 billion new dollars. Bernanke wanted to do this over a period of months. Before the crisis, it would have taken about 60 years to add that many dollars to the monetary base.

There was one more thing about quantitative easing that made it so powerful. Bernanke was planning to buy long-term government debt, like 10-year Treasury bonds. This was a bigger deal than it sounds. The Fed had always bought short-term debt because its job was to control shortterm interest rates. But the central bank was now targeting long-term debt for a strategic reason: Long-term debt was Wall Street’s equivalent of a savings account. It was the safe place where investors tied up their money to earn a dependable return. With quan titative easing, the Fed would take that savings account away. It would

reduce the supply of 10-year Treasury bills that were available. All the money that the Fed was creating would now be under a great deal of pressure because it could no longer find a safe home in a 10-year Treasury. All the new cash would be pushed out on the yield curve, out there into the risky in vestments. The theory was that banks would now be forced to lend money, whether they wanted to or not. Quan titative easing would flood the system with money at the very same moment that it limited the refuge where that money might be safely stored. If eco nomic growth was weak and fragile during 2010, then quantitative easing would shower the landscape with more money and cheaper loans and easy credit, enticing banks to fund new businesses that they might not have funded before.

From The Lords of Easy Money by Christopher Leonard. Copyright © 2022 by Christopher Leonard. Excerpted with permission by Simon & Schuster, a Division of Simon & Schuster Inc.

“My current view is that it will be necessary to move the fed funds rate up to somewhat above 4% by early next year and hold it there … I do not anticipate the Fed cutting the Fed funds rate target next year.”

LORETTA MESTER,

Policy&Politics

THE MIDTERMS ROUNDTABLE

POLITICOS AND POLLSTERS ARE SPLIT ON A LOT OF ISSUES, BUT THEY’RE PREDICTING SOME SURPRISING RESULTS IN THE UPCOMING BALLOTING.

BY ELIZABETH OWENS-SCHIELE

What issues are motivating Americans to vote in the midterms?

JUDY: What we’re seeing in the polling, and this is something that hasn’t changed, is the economy and inflation are the abso lute biggest issues for voters. The Dobb’s deci sion has energized Democrats. [In Dobbs v. Jackson Women’s Health Organization, the U.S. Supreme Court overturned Roe v. Wade and revoked the constitutional right to abor tion]. While the environment is still favorable toward Republicans, it’s gotten slightly less favorable over the last few months. Repub licans are the proverbial dog who caught the car on Roe v. Wade—they have had 50 years trying to overturn this, and now that it’s overturned it feels like they haven’t thought very much about where to go next. They’re being defined by a position that very few actual Republican voters—and not that many Republican elected officials hold—which is an abortion policy that allows no abortions in any circumstance ever. The Democrats have worked very hard to define them that way. They haven’t done a great job of laying out a more moderately pro-life policy. But the economy and abortion are the top issues right now. When you pit them against each other, the economy is still most important for most people. But the abortion issue has sort of energized Democratic turnout and enthusiasm.

THE PANEL Rachel Bitecofer Robert Cahaly Nick Gillespie Dan Judy Scott Keeter

VICE PRESIDENT OF NORTH STAR OPINION RESEARCH IN ALEXANDRIA, VIRGINIA. HE HAS BEEN A POLLSTER FOR 21 YEARS, AND HIS FIRM WORKS ON THE REPUBLICAN SIDE OF THE AISLE BUT ALSO CONDUCTS NONPARTI SAN, ISSUE-BASED PUBLIC AFFAIRS POLLING. JUDY HAS WORKED ON SEVERAL WINNING U.S. SENATORIAL CAMPAIGNS.

of the other party as people like to think about it. It’s a fear and threat response to the other party. The in-party makes the out-party’s voters feel threat ened, because they control the levers of power, and they use them to do things. That’s why the midterm effect has always benefited the out-party. This time, though, because of Roe and these trigger laws, there’s this massive threat reaction in the other part of the coali tion. What we’re now looking at are two different waves that will run into each other. It’s going to make predicting this outcome very difficult

BITECOFER: The main issue that will define this cycle is the evisceration of Roe. It changed the fundamentals of the cycle in which the midterm helped the Republican Party as the out-party. It’s a long-standing, empirically robust pattern in American poli tics. It would have been a pattern that we probably would have seen play out to some degree had it not been for the Roe eviscera tion that’s upset everything. It has inflamed negative partisanship, which is not just hate

CAHALY: Inflation, crime, the border, and the general frustration with how the federal government handles things are the driving main issues that are affecting people. Others will be abortion related to some of the state’s reactions to Dobb’s decision. One [issue] I see with the same intensity is student loan forgiveness, which I see creating great inten sity on the other side.

GILLESPIE: I don’t think you can get away from the basic, economic direction of the country. I think everything is an epiphe nomenon of that. There’s no question that things like foreign policy and what we saw

Dan Judy

@danjudy

Nevada is a pretty swingy state, so that’s probably the Republicans’ best opportunity for a pickup.

—Dan Judy

in the early 2000s in the wake of 911, then the subsequent launching of the War on Terror, really have an impact. I think even questions like abortion are not as important as unemployment, inflation and whether the country is going in a good or a bad direction. Typically, polls before the Dobbs decision, showed that maybe 20% of people really put abortion rights as one of the absolute top issues they would vote on, and they were split evenly between pro- and anti-abortion forces. I don’t know that it will be a particu larly strong issue for people. Younger people are split and vexed on the issue, and they don’t show up in large numbers. Because this is a midterm election, there is not a galvaniz ing candidate like a Barack Obama or in a negative way, a Donald Trump, to really get the youth vote out.

Should pollsters correct their process if they haven’t already done so?

KEETER: We did think after 2016 that we might have found a smoking gun, which was that some pollsters were not adequately accounting for the educational composition of their samples. One of the changes in American politics in the past 10 to 20 years has been that less-educated white, non-Hispanic Americans have become more conservative and more supportive of Republicans. If your samples underrepresent less-educated people, which almost all survey samples will in their raw form, then you have to address that statistically through the process of weighing the data. But it is a very difficult problem if a particular type of person, by their attitudes, is less willing to be interviewed. Because there’s almost no way to adjust for that in a direct fashion other than just putting your thumb on the scale, which maybe pollsters are tempted to do.

CAHALY: Republicans are about five times as hard to get to participate in polls as were Democrats—so you have to go the extra mile. Most [polling] groups don’t acknowledge a simple fact—people are hesitant to take polls, and people lie. If you can’t acknowledge that, then you can’t really get to the truth.

What races are you following in the midterm elections? Why?

JUDY: On the Senate side, the Republicans can’t afford to lose any seats they currently

Nick Gillespie

POLITICAL COMMENTATOR AND COAUTHOR OF THE DECLARATION OF INDEPENDENTS: HOW LIBERTARIAN POLITICS CAN FIX WHAT’S WRONG WITH AMERICA. HE IS AN EDITOR AT LARGE FOR REASON, WHERE HE HOSTS THE WEEKLY REASON INTER VIEW PODCAST.

@nickgillespie

hold. That’s one of the reasons they’re in a little bit of a bind because some of the seats they currently hold are leaning Democratic, or many are tossups. You have to look at Pennsyl vania, Ohio, North Carolina—the Republicans can’t afford to lose any of those. The Senate races generate more interest, partially because there are fewer races so it’s easier to focus. The candidates, especially on the Republican side, are kind of unorthodox and that makes them a little more interesting to follow. The Repub lican takeover of the House—I don’t want to say it’s a foregone conclusion, but it would be a major upset even now for the Repub licans not to take the House. In the Senate, the control is very much in the air, it could go either way, so I think that’s one of the reasons why the Senate races tend to get a little more attention. Nevada is one of the better oppor tunities—it hasn’t gotten quite as much oppor tunity or quite as much attention as Georgia and Arizona, partially because the candidate there, Adam Laxalt, is a little more orthodox and not quite out there like a Herschel Walker [Georgia] or Dr. Oz [Pennsylvania]. Nevada, it’s a pretty swingy state, so that’s probably the Republicans’ best opportunity for a pickup.

GILLESPIE: Regarding Senate races, I’m interested in the Peter Thiel candidate in

Arizona, Blake Masters, and J.D. Vance in Ohio. I’m curious to see how they fare because they’re doing less well than they should be, given those states and their party affiliation. They represent a particularly toxic version of populism. If we see either of them lose, or barely squeak by in victory, it shows that populism of a Trumpian variety is kind of a paper tiger, which I think would be a good outcome. Anti-immigration people and people who are anti-free trade might be able to win by attract ing Democratic votes in certain instances and Republican votes, but in the long haul, those are loser positions.

CAHALY: There are races that people don’t think could flip, but we think keep your eye on Patty Murray in Washington state. I think that’s one that needs to be very carefully watched—there’s a lot of frustration up there, and she’s running against a very good candi date [Republican Tiffany Smiley]. We think the Republicans are going to be victorious in Nevada in both the Senate and governor’s races, but watch the Patty Murray [Senate] seat, and possibly the Colorado Senate seat, [where Republican Joe O’Dea is challeng ing Democratic Sen. Michael Bennet]. But we see Murray a little more on the bubble. We also see Republicans in most trouble with Ron Johnson [of Wisconsin] because I think this is an anti-incumbent year and so I think for incumbents to win, they have to be particularly well-liked and particularly well attentive to the needs of their state. We think Herschel Walker [of Georgia] will win and we don’t think that’s a surprise—better than 50% that Herschel Walker wins. Same thing in Arizona—even money. We don’t think J.D. Vance has any trouble. We think North Carolina is not really hotly contested— it’s a tight margin but it’s the same kind of tight margin Republicans will continue to win by in North Carolina. We think [Republican Blake] Masters has even money chances of winning in Arizona [against Democratic Sen. Mark Kelly] and probably the same thing in New Hampshire with [Republican Don] Bolduc [facing Sen. Maggie Hassan]. They’re even— not a surprise if they win and not a surprise if they lose. Washington state would be a surprise and Colorado would be a surprise.

The biggest shifts you’re going to see are in minority groups ... that have been routinely ceded to the Democratic Party.

—Nick Gillespie

Rachel Bitecofer

ASSISTANT DIRECTOR AT WASON CENTER FOR PUBLIC POLICY. SHE HAS LAUNCHED A LIBERAL SUPER PAC NAMED STRIKE PAC, WHICH SHE DESCRIBES AS “A WAR MACHINE FOR THE LEFT.” SHE HOSTS THE ELECTION WHISPERER PODCAST AND IS A SENIOR ADVISOR TO THE LINCOLN PROJECT.

@RACHELBITECOFER

in Virginia. Frankly, many of that crowd is engaged now, and they’ve been pouring into school board races and paying attention. It’s just a whole bunch of average moms and dads who used to be a little too busy for politics to realize that it’s more important than maybe it had been to them in the past. We’re watching to see how close that turnout mimics what we saw of Virginia, as a percentage, because it usually is not a huge percentage of a midterm turnout.

What’s the No. 1 misconception about polling?

JUDY: We’re looking at college-educated voters in the suburbs, especially suburban women. Those were the voters in the 2018 midterms, and also in 2016, and 2020 presi dential elections who really sort of swung from being traditionally Republican to voting for Democrats, and that was all driven by Donald Trump. With Trump not on the ballot, the question is how many voters return to Repub licans. Ideologically and culturally, they might be a little more center-left. A few months ago, those voters would be swinging back pretty strongly toward Republicans. In the wake of Dobb’s, that’s been muted a little bit. Hispanic voters have started to take more steps toward Republican candidates over the last couple of election cycles. Republicans still have a long way to go among many Hispanic voters. Still, they seem to be gaining in strength there, especially with many big races in Texas and in Florida, where you have a big concen tration, and on the Senate side in Nevada and Arizona. If the Republicans could improve their standing among the Hispanic blocks in those states, it would give them a much bigger chance to swing those Senate seats.

CAHALY: We’re watching parents with school-aged children because some of them seem to be the most frustrated after what they have witnessed, whether it was mask mandates or vaccine mandates or some of the things they think their children were taught outside of their belief system. They got very, very engaged

GILLESPIE: It’s particularly tough to know because I think turnout will be lower than people expect. We’ve had a couple of recent midterm elections that have drawn pretty big crowds. I suspect that’s not going to be as big as we’ve seen in recent midterms. I think in 2024, the biggest shifts you’re going to see are in minority groups, particularly Blacks and Latinos that have been routinely just kind of ceded to the Democratic Party. We’ve seen this over the past few national elections where that is starting to break down in a way that maybe 50 or 60 years ago, the Catholic vote started breaking down or the union vote started breaking down. I think that is arguably the most important shift that is coming. But in these midterms, what we’re going to see is a reversion to older people and wealthier people coming out in large numbers to vote, I don’t think the youth vote is going to be particularly strong or particularly impactful.

JUDY: Polling is not predictive. It’s a snap shot in time. If you’re polling a race that shows a candidate up by 7 or 8 points, that’s good for that candidate but it does not precede a 7or 8-point win in November. It’s a snapshot of how the electorate feels at a certain time. One of my friends, a good Democratic pollster Mark Mellman, says that we’re not very good at predicting the future; we’re pretty good at predicting the present and good at predicting the past. I always warn people—the close races are harder to poll. Mathematically, the margin of error in a race that’s 48-48 is higher than in a race that’s 55-40. The closer the race gets, the harder it is to get right. That’s not necessarily a misconception, but it’s more of a warning to folks—as they look at polling, take it with a grain of salt because it’s a snapshot in time.

KEETER: People place way too much faith in polling—they assign to it much greater speci ficity in its accuracy than it really can sustain, given the fact that it’s based upon a meth odology that depends on random sampling.

CAHALY: The misperception is that poll sters know what they’re doing. When average people look at polls and give them any credi bility, without knowing a little bit about which poll and who did the poll, that’s a mistake.

Robert Cahaly

SENIOR STRATEGIST AND POLLSTER FOR THE ATLANTA-BASED TRAFALGAR GROUP. HE OVERSEES A GROUP OF ALLIED COM PANIES WORKING WITH FEDERAL, STATE AND LOCAL CANDIDATES AND WITH BUSI NESS AND INDUSTRY GROUPS. CAHALY IS AN EXPERT IN STRATEGY, POLLING AND DATA ANALYTICS.

@ROBERTCAHALY

Polling is an industry that has not adjusted to where modern people live because they’re still using a lot of old techniques and old methods and, frankly, a lot of old science to do it. That’s why the results are prob lematic. There is a significant amount of the vote that is going to be very hard to poll. It was one thing when they broke out dirty Walmart shoppers in 2016. In 2020, people were getting canceled, and people were getting called God-knows-whatkind-of-names just for express ing conservative opinions that are out of mainstream media acceptance. So, they chose not to participate in polls. Voters who didn’t want to participate in 2020, [were turned] into submerged voters in 2022. They’re not talking to anybody and not putting signs in the yard. They’re not putting stickers on the car, not posting on social media, and not answering polls—because they don’t want to be labeled.

What voting blocks are you watching and what shifts are you anticipating?

The main issue that will define this cycle is the evisceration of Roe.

—Rachel Bitecofer

Republicans are about five times as hard to get to participate in polls as were Democrats.

—Robert Cahaly

Is the country going in the right direction, or has it gotten off on the wrong track?

Right Direction: 13% 28%

Wrong Track: 87% 72%

LUCKBOX READERS POLITICO/MORNING CONSULT SURVEY OF REGISTERED VOTERS

How enthusiastic are you about voting in the midterm elections?

Extremely: 45% 32%

LUCKBOX READERS POLITICO/MORNING CONSULT SURVEY OF REGISTERED VOTERS

What is the top set of issues on your mind when you cast your vote for federal offices?

Economic Issues: 53% 43%

Security Issues: 14% 10% Women’s Issues: 9% 12%

LUCKBOX READERS POLITICO/MORNING CONSULT SURVEY OF REGISTERED VOTERS

Luckbox readers overwhelmingly feel more confident in Republicans to manage 12 of 14 major national issues but agree Democrats may have a better handle on climate change and the environment.

71%

The probability the Democrats will win the Senate, according to FiveThirtyEight’s forecasting model (as of Sept. 23).

Only 31% of Luckbox readers are confident Democrats will retain control of the U.S. Senate in the midterm elections.

Scott Keeter

SENIOR SURVEY ADVISOR AT PEW RE SEARCH CENTER. HE HAS CO-AUTHORED FOUR BOOKS, INCLUDING WHAT AMERI CANS KNOW ABOUT POLITICS AND WHY IT MATTERS. IN 2016, KEETER WON THE AMERICAN ASSOCIATION FOR PUBLIC OPINION RESEARCH’S HIGHEST HONOR FOR “OUTSTANDING CONTRIBUTIONS TO THE FIELD OF PUBLIC OPINION RE SEARCH.”

@POLLCAT

People place way too much faith in polling ... given that it’s based upon a methodology that depends on random sampling.

—Scott Keeter

I believe that there’s going to be a Republican turnout in most states that is higher than anyone is going to predict, including us.

Are midterms determined by the “base” of each party?

GILLESPIE: President Joe Biden has been going on the attack lately to make the midterms into a national election. Weirdly, in many ways, it’s a referendum on Donald Trump, who’s been out of office and who has very low odds of becoming the Republican candidate in 2024. It’s an understandable strategy, but I don’t think it’s going to work and it’s not going to overpower Biden’s performance so far. He has delivered many of his campaigns promises to spend a boatload of money, but that is not particularly popular. He’s below 50% in terms of approval ratings and, historically, when a first-term president goes into the midterms, and when his party goes into the midterms, they’re losing three dozen seats or more. There’s every reason to believe the Democrats will get wiped out in the House. They may hold onto the Senate. Even Mitch McConnell has commented on the low quality of Republican Senate candidates. It’s just the Republican Party’s penchant, both in presidential races as well as elsewhere, for running candidates who have no political experience, or even any experience in administrative positions. It’s kind of staggering. I think that will come back to bite them in the ass.

JUDY: If you cannot turn out your base in the midterms, you have no chance. This cycle with the Senate races, there will be a chunk of swing voters. If you look at what college-educated suburban, ex-ur ban white voters have done over the last three, or four election cycles, those voters still matter, and there are a lot of them that are still in play. Then again, the Hispanic community is going to be in play in a lot of races, so you can’t just count on turning your base out.

WHAT YOUNG VOTERS WANT

BALLOTS CAST BY VOTERS UNDER AGE 30 MATTER, AND HERE’S HOW THEY COULD INFLUENCE THIS ELECTION CYCLE.

BY KENDALL POLIDORI

By the time Luis Aguilar was 7 years old, he was already serving as a translator to help his immigrant parents and grandparents vote in elections in California’s Central Valley.

“With my grandma, we’d walk to the poll ing place, which was miles away,” Aguilar recalled. “I’d have to tell her, ‘This is who we’re voting for. This is what you have to do.’”

That experience helped prepare him for his current role as a team leader at HeadCount, a nonprofit organization that registers young voters at concerts and music festivals.

It also gave him a keen sense of the impor tance of casting a ballot.

“I’ve seen that growing up in a space that is so dependent on agriculture and migrant farmers that there was a need for representa tion in our leaders,” he said.

But many young people don’t share Agui lar’s faith in the importance of politics. Polls reveal the No. 1 reason they don’t participate in elections is they feel their vote doesn’t matter.

Still, turnout is increasing among voters ages 18-29. Fifty percent of the age group voted in the 2020 presidential election, an 11-point increase from 39% in 2016, according to The Center for Information & Research on Civic Learning and Engagement (CIRCLE). The election of 2020 had “one of the highest rates of youth electoral participa tion since the voting age was lowered to 18,” CIRCLE officials said.

Youth voting in 2022 is on track to match or exceed 2020, with 37% reporting they will

HeadCount meets youth where they are—music festivals, concerts and other events—to make them comfortable with registering to vote.

“definitely” vote in the midterm elections, according to an April 2022 poll by the Insti tute of Politics at Harvard Kennedy School.

Young adults appear likely to vote in the midterms because they’re motivated by high-profile Supreme Court rulings, mass shootings and congressional hearings, NBC reported in June.

THE HISTORY

Young voters have had the lowest turnout of all age groups in past U.S. elections and shouldn’t be viewed as a monolithic group, said CIRCLE’s Communications Team Leader Alberto Medina.

Half of young people don’t have a college degree, for example, so “what’s going to work to engage one young person and help them

grow into a voter might be vastly different than what another young person needs— based on the community they come from, or their interests and experiences,” Medina said.

Young people are spread fairly evenly along the political spectrum, too. In a 2018 poll, CIRCLE found 56.4% chose to affiliate with a political party—33.1% are indepen dents, 35.5% are Democrats and 20.9% are Republicans.

Politicians would pay more attention to the concerns of young people if more of them came to vote, said Tappan Vickery, HeadCount senior director of programming and strategy. Typically, youth voter turnout drops off by about 50% in midterm elec tions, compared with presidential elections, she said.

Aguilar noted that 8 million 18-19 year olds are now eligible to register to vote for the first time, but many feel disconnected from politics. They’re impatient with slow-moving changes in policy because they’ve grown up seeing things happen in real time in the digital world.

“Young voters want to see change,” Vickery said. “There are people who are not happy with the process because they don’t feel like change is happening enough. But they’ve been turn ing out, and hopefully they’ll turn out again because change is slow.”

CIVIC ACTION

Young people tend to vote for change, and a desire to close the political generation gap tops their list of issues.

President Biden is 79 years old. Nancy Pelosi, speaker of the U.S. House of Repre sentatives, is 82 years old. Mitch McConnell, minority leader of the U.S. Senate, is 80 years old. And the list goes on.

The country’s political leadership represents a generation that will not have to live with the long-term effects of their decisions. But they’re shaping the lives of today’s young people.

That’s why investing in young people is the only way democracy will survive, said Maxim Thorne, CEO of the nonpartisan, nonprofit Civic Influencers, a group that works to engage young people in politics.

“From the birth of this nation to current times, young people have led the charge in activism and a belief in democracy,” Thorne said.

Organizations like Civic Influencers and HeadCount meet youth where they are— at colleges and universities, trade schools and even events such as concerts and music festivals.

“It’s a really powerful moment to think about the size of a room or space at a [music event] and the number of people you can connect with and talk to,” Vickery said. “Peerto-peer voter registration is one of the most effective things you can do.”

Young people engage with politics differ ently than other age groups, Vickery noted. Social media is a great tool, but it’s impersonal. Meeting them in spaces where they already are makes them feel more comfortable to ask questions and interact.

Thorne agreed. “It’s wonderful when the speaker, the president or the major ity leader speak, but young people don’t necessarily listen to these people,” he said.

Top issues for younger voters

1. Abortion

2. Mental health

3. Education

—RANKING COURTESY OF CBS/YOUGOV AND INSTITUTE OF POLITICS AT HARVARD KENNEDY SCHOOL SURVEYS

85%

Of people who register with HeadCount and vote for the first time will continue voting. —HEADCOUNT

What is the ideal age for a President?

55-64 / 52%

Age does not matter / 20% 45-54 / 14% 65-74 / 11%

NO survey respondents selected ages 75-84

LUCKBOX READERS SURVEY

% of registered voters who say they have given a lot of thought to the midterm elections...

Ages 18-29 / 20%

Ages 65+ / 50%

LUCKBOX READERS SURVEY

Senate Races Where the Youth Vote Matters in the Midterms

#1 Georgia

Arizona

Pennsylvania

Wisconsin

—CIRCLE’S 2022 YOUTH ELECTORAL SIGNIFICANCE INDEX MEASURES YOUNG PEOPLE’S LIKELY ELECTORAL IMPACT BY IDENTIFYING RACES WHERE YOUTH HAVE AN ESPECIALLY HIGH LIKELIHOOD TO PLAY A DECISIVE ROLE IN 2022—ESPECIALLY IF THEY ARE ENCOURAGED AND SUPPORTED TO VOTE.

RANKINGS AS OF AUGUST 2022

WHERE YOUTH VOTES MATTER

The youth vote could prove decisive in the midterms, research by CIRCLE indicates. The center uses a Youth Electoral Significance Index (YESI) to quantify young people’s likely impact.

“These are database rankings of the races where we believe young people could have a decisive impact on the result, and actually swing the election in many cases,” Medina said.

CIRCLE takes into account election laws, age demographics of a state or district and recent history of youth voter participation.

According to CIRCLE’s findings, the top five Senate races with youth electoral significance are in Georgia, Arizona, Nevada, Pennsylva nia and Wisconsin. They can influence guber

natorial races in Wisconsin, Arizona, Kansas, Michigan and Georgia. They could hold the key to House races in districts that include Washington’s 8th, Kansas’s 3rd, Virginia’s 2nd, Colorado’s 8th and Michigan’s 3rd.

“Young people have power—they can decide elections,” Medina said. “Research consis tently shows that young people are incredi bly passionate about social issues. They care about what’s happening in their communi ties. They care about what’s happening to their peers.”

In 2020, for example, 12 congressional seats were flipped by 1%, which Thorne credits to campus involvement. The House race in Iowa’s 2nd Congressional District was won by just six votes.

Candidates across the country are winning races by fewer votes with each election cycle. But to have a voice in who wins those increas ingly close elections, young voters—and voters in general—should understand the election laws in their states, Vickery said.

“Election laws changed in 2020 because of the pandemic, and 36 states have changed their laws again since 2020,” she noted. “So, I would not make the assumption that voting is exactly the same as it was the last time you turned out. Take the time to make a plan to vote and make sure you understand the process so that you don’t get hung up.”

Youth voting in 2022 is on track to match or exceed 2020.

ARE WE DOING VOTING RIGHT?

ADVOCATES ARGUE THAT RANKED CHOICE BALLOTING EMPOWERS VOTERS, ENCOURAGES CANDIDATES TO MODERATE THEIR VIEWS, DISCOURAGES NEGATIVE CAMPAIGNING AND STRENGTHENS THIRD PARTIES. SKEPTICS AREN’T SO SURE. BY ED MCKINLEY

Ranked choice voting may seem mysterious to most Americans, but this relatively rare way of casting ballots has colored the results of recent elections from New York to Alaska and from Maine to California. Now, it’s poised for its biggest test yet in this month’s midterms.

Proponents declare the current interest in ranked choice voting—or RCV—is just the beginning of a major overhaul of the nation’s elections. Political scientists interviewed by Luckbox agree RCV is having a moment in the spotlight but could slide back into obscurity.

Simply stated, RCV enables voters to rank their preferences on a ballot with more than two candidates. Instead of choosing just one nominee, they indicate their first choice, second choice, third, fourth and so on.

It’s a panacea that could cure many of the political ills of a divided nation, according to FairVote, a Washington-based group that’s been working to spread RCV for 30 years.

“There’s a whole host of exit surveys show ing that voters who have used ranked choice like it, and they understand it and they want to keep using it,” said Deb Otis, the organiza tion’s research director.

Academics seem open to RCV but less enthused.

“On one hand, ranked choice voting is far more prevalent in the United States than it’s ever been today,” noted Mark P. Jones, a professor of political science at Rice Univer sity and author of Voting and Political Repre sentation in America: Issues and Trends. “That said, it’s only used in a small fraction

of U.S. elections.”

“It’s had moments before and gone away, so I would be skeptical about whether it could be different this time,” said Robert G. Boatright, a political science professor at Clark Univer sity and author of Getting Primaried . “I think one problem ranked choice voting has is we’ve had this whole national argument about whether it’s easy for people to under stand it or not.”

HOW RCV WORKS

On an RCV ballot with more than two candi dates, voters rank their choices. Let’s suppose,

for example, that three nominees are running for an office. Citizens could rank their first, second and third choices.

Office seekers who receive more than 50% of the first-choice votes win. The election’s over.

But if no one earns a majority in the first round, then the third-place candidate is elim inated, and their second-place votes become first-place votes for the other two candidates.

Confused yet? Applying some numbers to the example should help explain the process.

We can use the vote totals from Alaska’s recent special election to fill the seat in the U.S. House of Representatives that became vacant

A sign with a diagram of a marked ballot helped voters understand ranked choice voting in the recent New York mayoral race.

PHOTO: REUTERS

with the death of Republican Rep. Don Young.

According to The Washington Post , the count of first-choice votes went 42% for Democrat Mary Peltola, 31.2% for Republi can Sarah Palin, and 28.5% for Republican Nick Begich III.

No one won a majority, so the count went to a second round. Begich was eliminated and his second-choice votes became first-choice votes. That gave Peltola 51.5% to Palin’s 48.5%.

An analysis of Peltola’s victory illustrates some of the purported advantages and possible

RANKING CANDIDATES

Voters

Sample Ballot

according to Otis.

RCV also discourages negative campaign ing, proponents say, instead rewarding candi dates who form coalitions with rivals. In an example from the recent New York mayoral race, candidates Andrew Yang and Elizabeth Holtzman advised voters to pick the other candidate as a second choice, Jones noted. He also said Palin seemed unusually friendly with Peltola in Alaska.

RCV prevents true extremists with strong minority support from winning, according to Jones. Such candidates might prevail in a system where a plurality wins—say 30%—but reallocating votes under RCV to arrive at a majority helps boost moderate candidates. “You’re reducing the ability of part of the base to influence the outcome of the election, which is one of the goals [of RCV],” he said.

The Alaska special elec tion demonstrated a reassur ing strength of RCV in that the

winner of the first round prevailed in the second count, Otis said.

But that’s not always the case. Republi can incumbent Bruce Poliquin led the first round in a Maine Congressional race in 2018, only to lose to Democratic challenger Jared Golden in the second round of the four-per son contest.

Still, that was a closely contested election in the Pine Tree State of Maine. Otis said that when a candidate leads by 10 points in the first-choice voting, an opponent has almost never come from behind to win.

Yet the resulting confusion in Maine was unsettling, Boatright noted, emphasizing that “it’s easy for Maine Republicans to spin that and say our guy was done wrong.”

As though there weren’t already enough uncertainty surrounding RCV, skeptics cite voter confusion as a drawback.

But the Alaskan special election dispelled that fear, according to Otis. She quoted a study indicating 85% of voters in the state found RCV simple and that 95% received instruc tion on how to fill out their ballots.

weaknesses of RCV. It happened in a system that began with a primary that included nearly 50 candidates from almost as many parties. The primary narrowed the field to four candidates from three parties. One of the four dropped out, pitting three candidates from two parties against each other in the general election.

ADVANTAGES OF RCV

Advocates maintain that RCV encourages candidates to assume more moderate positions to broaden their appeal to a wide range of voters. That worked for Peltola in Alaska, who showed a degree of openness to fisheries issues and fossil fuel exploration that’s unusual for Democrats,

ACHIEVING A MAJORITY

Boatright agreed with that optimistic view, saying “a lot of the evidence coming out of Alaska is that voters generally knew what they were doing.”

Suppose the candidate with the most first-choice votes fails to receive a majority in the first round of a ranked choice election. That initiates a second round where the office seeker with the smallest number of votes is eliminated. The votes for the eliminated candidate are then reallocated to their supporters’ second-choice candidates to produce a majority.

Although it may not have been a factor in recent voting that Luckbox examined, RCV strengthens third parties, observ ers agree. Voters can express their approval of candidates who have little chance of winning by marking them their first choice, while still maintaining a voice in the election by showing their support for their second choice over their third.

RCV is sometimes called “instant runoff” voting because it eliminates the need to hold another election when no candi date receives a majority. Doing away with a second visit to the polls saves time and reduces expenses.

Exit surveys indicate voters who have used ranked choice voting understand it and want to keep using it.

RANKED CHOICE MAP

Here’s a rundown on the spread of ranked choice voting across the country.

RCV for statewide/ presidential elections

RCV used for 2020 presidential primaries

RCV used in local elections

RCV used in party elections

Ranked ballots for military & overseas voting

–FAIRVOTE

(AS OF MARCH 1, 2022)

Wider use of RCV would also promote prog ress on issues voters care about, Otis main tained. Candidates would be elected with a broader base of support and less obligation to niche groups. Once elected, officials would fulfill campaign promises based on issues instead of vows to perpetuate culture war skirmishes.

RCV works especially well when parties choose candidates from a crowded field at a convention instead of a primary or caucus, Jones noted. That’s because convention dele gates know more than the general public about a long list of candidates. RCV at conven tions has yielded strong candidates for the Republicans in Virginia and the Democrats in Utah, he noted.

OBJECTIONS TO RCV

In Alaska, RCV may have hurt the Republican party because GOP loyalists split their votes between Palin and Begich. But moderation won out because enough Begich voters chose Democrat Peltola to lift her to victory. However, RCV skeptics note that 21% of Begich voters didn’t indicate a second choice. While Peltola won 51.5% of the first- and second-choice votes, that doesn’t account for something called “exhausted” votes, notes the Election Daily website.

When a last-place candidate like Begich is eliminated, their second-choice votes are real located and the ballots that listed no second choice are “exhausted” and become irrelevant to determining the winner.

But if the exhausted ballots are included in the count, Peltola won with 48.5%. Any way the voting is sliced and diced, she won, but the Election Daily argument under cuts the FairVote position that RCV neces sarily produces a majority.

Some also take exception to the notion that candidate coalitions are necessarily a good thing.

Democrat Eric Adams, an African American, won this year’s New York race for mayor but during the campaign accused opponents of racism for combin ing forces against him, according to Real Clear Politics

Good, bad or something in between, how likely is RCV to proliferate?

85%

Municipalities use ranked choice voting

2States use ranked choice voting extensively

THE SPREAD OF RCV

Today, 53 municipalities are using it, Maine and Alaska are using it for all federal elec tions, and four states are using it for military and overseas voting, according to Otis. “That’s reaching 14 million people,” she said.

Six states have passed legislation to insti tute it in the future, and it’s on the ballot in referendums in this month’s elections in 10 places that include the state of Nevada and nine cities scattered around the country, Otis continued. When it succeeds in a city, it’s often instituted by nearby cities, something that’s happened in California and Minnesota, she noted.

“Working for ranked choice voting in states and cities is one of the key ways that we can pave the way to national reform,” Otis main tained. “We can achieve this in a decade.”

With more RCV just ahead in the midterm elections, the nation should get a clearer view

Ranked choice voting in cities and states can pave the way to national reform.

ranked choice

in elections with three

more candidates

of voters said they understood ranked choice voting in a recent Alaskan election 53

of the process, Boatright said. He provided a laundry list of what might happen: Big donors may split contributions among more than one candidate to ensure their type of politi cian emerges victorious. Political parties may back less-extreme standard bearers. Candi dates may become open to alliances with their competitors. Voters might do their homework more diligently to help them choose among multiple candidates.

What could ultimately occur with the spread of RCV? The past may provide a clue. Let’s begin by recalling that Democrat Bill Clinton won the presidency 30 years ago with 43.0% of the vote, compared with 37.5% for Republican George H.W. Bush and 18.9% for Independent Ross Perot.

“The Clinton election in ‘92 might be the one recent election that could have been altered by rank choice voting,” said Jones. “That’s because, arguably, more Perot voters would have selected George H.W. Bush as their second preference. So, in a small number of states, it might have made a difference.”

As recent elections have demonstrated, a small number of votes in a few states can make all the difference: Hillary Clinton could have won in the Electoral College in 2016 by scor ing one point more in the votes of three states.

So, advocates may be right when they crusade to entrench RCV.

THE FILIBUSTER: All Talk and No Action

by Ed McKinley

AS EARLY AS 1831, members of Congress began preventing the House or Senate from voting on proposed legislation by talking it to death. One or more lawmakers would simply take the floor and refuse to stop speechifying until the bill’s sponsors gave up on it.

It’s called the filibuster, and it’s changed over the years, according to Gregory Koger, professor of political science at the University of Miami, and author of Filibustering: A Political History of Obstruction in the House and Senate.

It wasn’t used much until South erners applied it to delay civil rights legislation in the 1960s. Right now, it blocks nearly every progressive bill passed in the House from com ing to a vote in the Senate.

The House has outlawed it for all but those in leadership positions. But the Senate has given members the right to bring it into play just by signaling intent to do so—without having to stand and deliver a speech that lasts for hours on end.

The only way to stop a Senate filibuster is through cloture, which means 60 senators have to vote to end the silent filibuster and bring the proposed legis lation to a vote. That means a simple majority can’t do much in

the chamber, Koger noted.

But that could change at any moment if the Democrats use their entire 51-vote majority to quash the filibuster. Theoretically, they could do that because there are a few exceptions to the filibuster that would allow voting the filibus ter down.

Many in the Democratic Party might like to eliminate the filibuster so they could enact a liberal agenda into law, but they don’t have the votes because Democratic Sen. Joe Manchin of West Virginia and Kyrsten Sinema of Arizona oppose abolishing it, Koger said.

Those two senators cite their preference for bipartisan legisla tion as a reason for their position, he noted. Another hurdle might arise among other Democratic senators if the issue ever came to a vote. That’s because of the fear that the majority party can become the minority in the next election cycle and thus lose what many might view as the veto pow er of the filibuster. What’s more, centrist politicians benefit by keeping the filibuster because it frees them from taking a position on controversial votes, he said.

So, the filibuster may be here to stay—at least for the foresee able future.

THE CASE FOR POLITICAL DEBATES

BY CLEA CONNER

The year is 1960. Presidential hopefuls John F. Kennedy and Richard M. Nixon take to the stage for the first televised presiden tial debate in American history. As the vice president of the United States, Nixon is well known. Kennedy, a Democratic senator from Massachusetts, is out to prove he’s experi enced enough for the job.

But the headlines that followed this historic exchange didn’t focus on the quality of the candidates’ remarks or the efficacy of their policy prescriptions. It was Nixon’s five-oclock shadow and “gaunt appearance” that dominated the discourse.

Nixon had refused makeup; Kennedy opted for a “light powdering.” Many thought the young senator won the debate against the significantly older-looking and seem ingly agitated Nixon. Later, in his memoir, Nixon wrote: “I recognized the basic mistake I had made. I had concentrated too much on substance and not enough on appearance.”

Many Americans would say the same thing about subsequent presidential debates. Today’s debates have been reduced to a string of “gotcha” questions for candidates. They result in personal attacks, repetitive question ing, uninformative soundbites and scripted rebuttals. There is no serious discussion of policy.

They are, by design, joint press confer ences with journalists playing the role of jury instead of moderator. After the last round of debates, New York Times journalist Elizabeth Drew’s Op-Ed titled Let’s Scrap the Presiden

tial Debates went viral on social media, spark ing a vibrant debate about, well, debates.

The year is now 2022. The Republican National Committee (RNC) has taken a stand against the Commission on Presiden tial Debates (CPD), voting unanimously to withdraw from the CPD entirely.

“The Commission on Presidential Debates is biased and has refused to enact simple and common-sense reforms to help ensure fair debates, including hosting debates before voting begins and selecting moderators who have never worked for candidates on the debate stage,” RNC Chair Ronna McDaniel

said in a statement.

Presidential debates have always been political dog and pony shows, but if we want to restore truth and accountability to the public square, we need to fix the formats and elevate the role of the moderator beyond that of an interviewer.

The trouble here is that debates win elec tions. Millions of Americans watch the pres idential debates, and for some undecided citizens, the debates play a pivotal role in influencing their vote.

Debates offer the only opportunity for voters to see candidates face-off directly. We

CANDIDATES SHOULD CONFRONT EACH OTHER IN STRUCTURED DEBATES—NOT THE FORMATS OF RECENT YEARS.

When presidential hopefuls John F. Kennedy and Richard M. Nixon appeared in the first televised debate in 1960, many believed Kennedy won for his looks and poise.

REUTERS

get a sense of how they handle themselves in a disagreement. How ardently they defend their values and beliefs—and formulate convincing arguments—directly informs our perception of their leadership ability.

Personality, character and trustworthiness are key ingredients to leading successful nego tiations with other titans on the world stage. For many Americans, their vote is won on the debate stage.

So, if presidential debates win elections, why are they always so bad?

The short answer is this: The debates we see today were born of legal strife and contentious partisan political rivalry, and things haven’t improved much. The long answer is complex and requires a dive into American broadcast history.

After the Kennedy-Nixon debates, an incumbent candidate with a lead in the polls wouldn’t agree to a debate for the next 16 years. Why would they risk the entire election on one

would take the risk and break a 16-year hiatus, he responded: “I’m 32 points behind. What the hell else am I going to do?”

Carter wanted to debate because he didn’t

Since the New Deal, broadcast networks had been barred from staging political debates. The Federal Communications Commission (FCC) intended to guarantee fairness on the airwaves, but broadcasters believed the ban prevented them from presenting candidates and issues to the public.

gaffe, a single misstep or bad lighting? They were able to say no, so they did say no.

Then, in 1976, the tides turned. Incumbent President Gerald Ford agreed to debate Jimmy Carter, a newcomer from Georgia. When the debate organizers asked why President Ford

think the country really knew him well enough to grant him a win at the ballot box. Even though he was ahead, he believed he needed the visibility.

One minor detail: It was illegal for broad casters to stage a debate at the time.

Exemption from the “equal time law” required that an outside party sponsor the debate and that it be broadcast in its entirety and no later than a day after the debate occurred to ensure it was considered a “bona fide news event.”

Enter Newt Minow, the godfather of Amer ica’s presidential debates. The former chair of the FCC, Minow organized the Kenne dy-Nixon debates and would later serve as the first co-chair of the Commission on Presiden tial Debates.

Minow worked with the League of Women Voters, a respected and long-standing, nonparti san civic organization, to resurrect the debates in 1976 and 1980. But many would argue the pres idential matchups weren’t held in the best

“If a radio or television station sells air-time to one candidate, it must offer to sell the same amount of time to other candidates for that office.”

“I had concentrated too much on substance and not enough on appearance.”

—Richard Nixon, commenting on his first debate with John F. Kennedy

The second presidential debate between Democratic Candidate Hillary Clinton and Republican Donald Trump was held in a town hall format in October 2016.

Republican Vice President George H. W. Bush (left) and Democratic Massa chusetts Gov. Michael Dukakis faced off on the red carpet in 1988. Bush pledged, “Read my lips, no new taxes,” a promise he couldn’t keep because Democrats controlled the Senate. Questions about Dukakis’ opposition to the death penalty—even if his wife were raped and murdered—haunted him during the rest of the campaign.

—FCC EQUAL OPPORTUNITY SECTION (315) OF THE COMMUNICATIONS ACT OF 1934

possible way, largely because of candidates’ demands and conditions.

For starters, they negotiated a debate format that—by any standards—wasn’t even a debate. The League wanted the candidates to debate each other (which seems reasonable given the circumstances), but the candidates refused.

“They were totally averse to the idea of confronting one another in rebuttals or conversation,” recalls Minow. They agreed to take questions from journalists and modera tors but not from each other. A panel would ask questions, and the candidates would avoid any sense of confrontation. No reaction shots of the live audience would be shown, a practice which persists to this day.

After hosting two presidential debates, the League dropped out entirely. According to Minow, the group felt the parties were collud ing on the terms and dictating how the debates would need to happen. The League stated it had “no intention of becoming an accessory to the hoodwinking of the American public.”

The only way debates could occur, it seemed, was to have the two major parties institution alize the idea of presidential debates. The FCC began to allow broadcasters to hold politi

cal debates, and what evolved is the current Commission on Presidential Debates.

But the role of the CPD isn’t just to mount debates. It also negotiates with the parties so that debates can happen every election cycle. That’s not easy, but the debates have happened for the last 30 years.

Many notable, make-or-break moments have marked debate history. But most post-de bate analysis misses the point: It’s not about winning or losing—it’s about informing the electorate.

Now, the debates have become part of an existential problem as Americans struggle to

understand what is a fact and what isn’t. It’s hard to believe, but that’s where we are.

It’s the role of debate to bring both sides together to examine the argu ments with reasoned analysis and use evidence to support arguments that drive sound policymaking. Debate is critical to a functioning democracy. That shouldn’t come as a surprise because the first democ racies were established through rigorous, intelligent and structured debates.

So, what does all of this mean for 2024? The RNC’s decision to leave the CPD signals a shift toward a better definition of the role of debate in Amer ican elections.

“We are going to find newer, better debate platforms to ensure that future nominees are not forced to go through the biased CPD in order to make their case to the American people,” McDaniel announced. “I’m hope ful we can establish a more meaningful and constructive approach to debate for both parties, starting with the format and choice of moderators.”

The stakes are high. Seeing our elected offi cials engage in substantive debates would serve as a model for how we the people should navigate tough conversations about increas ingly complex questions.

Fake news can’t survive the scrutiny of real debate. But, can civil society survive without a vastly improved presidential debate stage? It’s time to clean up America’s five-o’clock shadow of civil discourse and establish a new playbook for the presidential debates, driven by civility, substance and quality.

Clea Conner, CEO of Intelligence Squared U.S., a nonpartisan debate organization, is advocating for a new take on the debates in 2024.

U.S. President Barack Obama debates foreign policy with Republican presidential candidate Mitt Romney in October 2012 in a roundtable format.

Today’s presidential debates have been reduced to a string of “gotcha” questions.

91 %

of Luckbox readers believe it is very important (69%) or somewhat important (22%) that political candidates participate in debates.

PHOTO: GETTY

MAKING STRIDES FOR LEGAL HIGHS

THE CANNABIS INDUSTRY MAY GROW SUBSTANTIALLY THIS YEAR, ESPECIALLY IN THE MIDWEST. HERE’S HOW THE MIDTERMS COULD AFFECT THE BUSINESS. BY MIKE REDDY

Illegal Completely Legal Medical Only

Midterm voters will decide the legal fate of recre ational cannabis in a number of states, spark ing speculation about how the balloting may affect pot stocks and the industry at large.

Those five states—Maryland, South Dakota, Missouri, Arkansas and North Dakota—had initiatives or amendments on their midterm election ballots at press time. Oklahoma almost marked a sixth, but its state Supreme Court in September denied a request to include a recreational legalization measure on the 2022 ballot. Medical cannabis is legal in all six.

But cannabis remains a federal Schedule 1 controlled substance and has been since former President Richard M. Nixon signed the Controlled Substance Act into law in 1970. California—where Nixon had previously served as both a member of the U.S. House of Representatives and the U.S. Senate—became the first state to propose a legalization ballot measure only two years later. It was defeated, garnering only one-third of the voters’ support.

A little over two decades later, the Golden State made history yet again in 1996 as the first state in the union to legalize medical cannabis, sewing the first patch in what is now a patchwork of more than three dozen states with laws permitting the legal consumption of pot. In total, 37 states have legalized cannabis for medical use, and 19 have legalized its adult recreational use and sale.

Basic math tells us that 19 could soon become 24, but even if all five states pass their initiatives and amendments, is it enough to move the needle?

“There are so many legal states now that the addition of a few doesn’t matter much in my view,” said Alan Brochstein, the founder of New Cannabis Ventures and 420 Investor, via email. “A really significant state, like say Texas (where there will never be a referendum because the state doesn’t allow them), could be important. When I look at the states that are or that may be voting, they don’t really matter in my opinion.”

Brochstein has been a cannabis indus try analyst since 2013, so he’s witnessed the market’s reaction to two midterm elections and two presidential elections. With that hindsight, he maintains that elections gener ally aren’t too impactful.

Ballot Measure

“It can help when there are referendums of adult-use legalization that get improved,” he noted, “but the composition of the House or Senate or even the presidency don’t have a big impact.”

Still, other industry followers, such as the principal of Denver-based financial services platform Cannabis Capital Advisors, Chris topher Stefan, say elections do matter “from the mayor, to the state, to the governor, to the Congressional map, to the Senate map, to the people they put in positions as regulators and U.S. attorneys.”

“The candidates that you vote for to get put

As more states legalize cannabis for recreational use, in your opinion, this is a…

Good idea 53% Bad idea 28%

As more states legalize cannabis, federal officials are taking the issue more seriously.

into office to make the law, pass the law and /or influence the rules are going to have a lot of impact over how that market looks,” Stefan said. “Those rules really do matter and will

Asked whether industry leaders should closely follow elections, Stefan said, “They better be.”

Mason Tvert, a partner at the cannabis policy firm VS Strategies, said passing state laws to legalize cannabis can have a ripple effect.

“Every year that new states adopt adult-use laws,” he said, “we see more federal officials taking the issue seri ously, beginning to speak with their constituents about these issues, and in many cases, beginning to repre sent those constituents’ interests at the federal level.”

ments with cannabis policy.”

But Tvert cautioned industry observers should keep in mind that ballot measures—even if approved on election day—could still face legal challenges before they’re implemented.

Over 54% of South Dakota voters in 2020 approved a state constitutional amendment to legalize the adult recreational use of canna bis. Three months later, a circuit judge ruled the measure was unconstitutional because

Estimating a date for federal legalization is “a fool’s errand.”

it constituted a revision of the constitution rather than an amendment—a decision the South Dakota Supreme Court upheld.

Recreational cannabis is back on South Dakota’s ballot in 2022, but what happened in 2020 should serve as a sobering reminder that neither making the ballot nor winning voter approval guarantees a measure will be put into practice.

“In states with more conservative-lean ing state Supreme Courts or more conser vative-leaning legislatures, there’s been a greater likelihood of speed bumps or possi bly even roadblocks,” Tvert said. “And so, it’ll be something to look for as to whether state lawmakers or other opponents of cannabis policy reform are taking actions to prevent implementation.”

have material impacts in the marketplaces these companies operate in.”

The rules, he said, are the most import ant determining factors in any market. What makes election cycles so critical is that they represent the greatest opportunity to influence or change those rules.

While Tvert said predicting a date for passage of federal legalization is “a fool’s errand,” he noted that when there’s more discussion or any sort of legal development related to cannabis, it tends to affect publicly traded companies and the general markets overall.

“This year could result in substantial growth of the cannabis industry, especially in the Midwest,” he said. “And that’s a part of the country that thus far has had fewer advance

MARGIN OF ERROR MATTERS

Apoll’s margin of error can inspire hope or panic among candidates and the voters root ing for them.

It begins with the fact that election season turns every political junkie into a statistician. For many, it may be the only time they inter pret a statistical metric, and they may find margin of error unfamiliar. But that doesn’t mean it isn’t crucial.

A margin of error measures how likely it is a sample of voters (or any set of data) will mirror the entire population. Polls include it to warn that the sample may or may not capture the best representation.

For example, a pollster might report that “53% of voters would vote for Candidate A, and 47% would vote for Candidate B, with a +/- 5% margin of error.” That means the actual percentage of people who’d vote for Candidate A could be as low as 48% and as high as 58%, and the actual percentage of people who’d vote for Candidate B could be as low as 42% and as high as 52%.

Further, the “confidence interval” the poll ster used is usually included at the bottom. For example, a “95% confidence interval” might be used for a particular poll.

Even though the confidence interval says the actual percentage of voters for Candidate A has a 95% chance of being between 48% to 58%, there’s still a 5% chance that the actual percent might be below 48% or above 58%.

A 99% confidence interval would leave only 1% outside its range, but that would make the margin of error much wider. A very high confi

dence interval can make the potential range too wide to be useful, while a very low confidence interval can leave too much uncertainty. That’s why most polls use a 95% confidence interval.

In the margin of error calculation, a Z-score is used that matches the desired confidence interval. It’s the number of standard devia tions the data point is away from the mean. The higher the confidence interval, the higher

the Z-score. A Z-score table shows the values for a given confidence interval, and a 95% confidence interval has a 1.96 Z-score, while a 99% confidence interval has a 2.58 Z-score.

So, a poll’s margin of error requires a Z-score for the desired confidence interval (“Z”), the number of voters in the sample (“n”) and the percentage of voters for a particular candidate (“p”), which are plugged into this formula.

For example, if 500 people were polled in a Congressional district and 53% said they’d vote for the Democrat and 47% said they’d vote for the Republican, the margin of error with 95% confidence would be:

VOTERS CAN INTERPRET THE TRUE MEANING OF A POLL IF THEY UNDERSTAND THE IMPORTANCE OF THE MARGIN OF ERROR, CONFIDENCE INTERVAL AND SAMPLE SIZE. BY TOM PRESTON

PHOTO: GETTY

Election season turns every political junkie into a statistician. But for many, it may be the only time they interpret a statistical metric.

Based on a 4.4% margin of error, the Demo crat’s actual support has a 95% probability of being between 48.6% and 57.4%, and the Republican’s actual support has a 95% prob ability of being between 42.6% and 51.4.%. A Democratic voter might interpret those numbers as the Republican’s support having a

the percentage of voters is on the high end of her range, the Republican could pull off an upset. In most cases, where voters are closely split, margins of error can give some hope to supporters of both candidates.

The key to the confidence interval is the sample size of the poll. A small number gener

has a 3.09% margin of error and a sample size of 5,000 has a 1.39% margin of error. Larger sample sizes make smaller reductions in the margin of error. The problem for pollsters is that the cost of polling a much larger sample is much greater than the benefit from reducing the margin of error.

Because the margin of error is so dependent on sample size, it can behoove the underdog to use a smaller sample, and the favorite to use a larger sample. The former can increase the margin of error and make it seem the under dog has a chance at victory, and the latter can reduce it and make it seem the favorite is all but guaranteed a win.

low probability of being higher than the Demo crat’s support and thus be cautiously optimistic.

On the other hand, the numbers show that if the Democrat underperforms and the percentage of voters is on the low end of her range and the Republican outperforms and

ates a higher margin of error, and a large number generates a lower margin of error. The margin of error changes by the square of the increase in the sample size.

For example, a sample size of 500 has a 4.4% margin of error, a sample size of 1,000

That’s why it’s important for a voter inter preting a poll to look at its confidence inter val and sample size—and for politicians to be humble about their chances.

Tom Preston, Luckbox contributing editor, is the purveyor of all things probability-based and the poster boy for a standard normal deviate. @thetompreston

The larger the sample, the more accurate the poll. But the cost of pursuing a much larger sample outweighs the benefit of reducing the margin of error.

trends

life, luxury & the pursuit of happiness

FESTIVALS

Back to Burning Man

A former floor trader shares sights from his 18th visit to Burning Man

Images and commentary by Alan Matthew

November 2022 | Luckbox 39 The Silver Statues, by Michael Benisty Continuing his tribute to the sexes, artist Michael Benisty wooed burners with The Silver Statues.

BURNING MAN, which bills itself as “the place to find out who you are and then take it a step further,” showcases human ingenuity and inspiration for nine days each year. An estimated 80,000 artists, cultural iconoclasts and Silicon Valley icons meet annually in Nevada’s Black Rock desert to find themselves.

NOTES FROM THE PLAYA

Burning Man, the annual head trip in Nevada’s Black Rock Desert, seemed especially gratifying this year. After the extrav aganza was cancelled twice because of COVID, artists and artisans bounced back this time by multiplying the number and size of installations and vehicles.

Burners went big—but so did the weather.

Project builders coped with wicked windstorms and far too much micro powder dust. In the many whiteouts, production and traffic slowed to a crawl. Daytime temps topped 100 degrees. The dust wreaked havoc upon cell phones and sent electrical and mechani cal equipment into spasms of erratic behavior. With cooler temps, the nighttime ruled.

The extreme conditions separated the self-starters from the posers. Naked partygoers seemed to fade away when the situation required real work.

But the event came together just the same.

Dusk to dawn from Aug. 28-Sept. 5, Burning Man showcased fire, sound, lasers and lighting technology. Nightly drone shows were a big hit. The changing shapes and colors of synchronized drones danced above our heads, including a gigantic image of Burning Man founder Larry Harvey walking across the sky.

And once again, The Mayan Warrior art car (a perennial favor ite) displayed an amazing blend of laser art and sound technology.

One night, a stranger walked up and asked me if I’d like to photo graph nightclubs. I said yes. He told me that Above and Beyond, my favorite electronic music group, was playing at The Opulent Temple, my favorite nightclub on the playa.

Cameras in tow, I raced over. Surprisingly, they remembered me from past Burns and ushered me behind the curtain. And so began another chapter in my Burning Man 2022 experience.

The Face Project, by TITHOREA X NAE Collaged from Earnst Haeckel’s biotic illustrations, the sculpture seduced passersby with a contemplative, audiovisual tango.

Alan Matthew, a former floor trader, is CEO of the venture capital firm Tribal Ventures, LLC

GAIA, by Marco Cochrane with Julia Whitelaw GAIA graced the playa this year at Burning Man. Cochrane’s earlier playa projects included Truth is Beauty, R-Evolution and Bliss Dance

Diver UP, by Victor Spinelli Created in Ibiza 17 years ago, Diver UP, The Rising Of The Feminine Goddess, rose five meters above the desert.

Elektra Dragon, by Sean Orlando

Mayan Warrior, a collaborative project

At night, the Mayan ruled the playa and provided an example of blending the mechanical and the artistic.

A fire-breathing dragon with hydraulic rotating wings was covered in thousands of synchronized LEDs.

The Church of El Pulpo Magnifico, by Duane Flatmo and Jerry Kunkel The Church of El Pulpo Magnifico, a reimagining of the playa favorite El Pulpo Mecanico, came to Black Rock City sporting a new tin sheathing.

ROCKHOUND

Brandi: Best at Bourbon & Beyond

By Kendall Polidori

Singer-songwriter Brandi Carlile displays the heart of her music: community, vulnerability and love

Brandi Carlile sauntered on stage at Bourbon & Beyond in an exuber antly colorful and wildly patterned outfit. A toothy smile was plas tered across her face.

Carlile is not new to the industry. She’s released seven studio albums and has earned 18 Grammy Award nominations, winning six times. She’s a gifted singer-songwriter who has spanned various genres over the years, with a focus on strings and a signature twangy voice.

Despite an extensive discography and playing the second headlining spot at the September festival in Louisville, Kentucky, Carlile is incred ibly humble—nearly blown away by the throngs of people standing in awe below her.

Carlile’s words are pure poetry. There’s a touching vulnerability to her songs. Playing tear-jerking compositions, like The Joke and The Story, she had attendees who had never heard her music before that night nearly ripping at the seams—feeling emotion, inspiration and connection. And it doesn’t hurt that her vocal range is nothing short of excellent.

The Beatles, Stones and Zeppelin were awesome—but rock lives on. Why not break out of the classic rock cocoon and give new rock a chance? Rockhound is here to help. Think of it as a bridge from 1967 to today and beyond.

Brandi Carlile

Brandi Carlile

But she doesn’t just sing sad songs. Carlile celebrates the beauty of an imperfect life, with uplifting and grateful songs like You and Me on the Rock, a story about her peaceful life with her wife and two daughters.

A Carlile live performance is made for any music lover, touching on influences from pop, rock, alterna tive, country and folk. She can’t quite be compared with anyone else, except maybe her close friend Joni Mitchell.

About an hour into her set, Carlile and her band performed their version of Radiohead’s song Creep, luring the crowd to sing along in unison.

Bourbon & Beyond is a festival for music lovers who appreciate instru ment-driven big bands. Carlile’s string section delivered just that and more, with an aggressive, fast-paced,

and elongated string solo, including guitars, violins and cellos. It surely got the crowd going.

START WITH Carlile’s The Story and you might notice her vulnerability in songwriting, as well as her range in vocal and chord progressions.

PAY ATTENTION TO how the song builds in tempo, adding more and more instruments as it continues. But her voice remains the point of interest.

For more from Bourbon & Beyond and the festival’s intimate Rocks Room sessions, check out Beyond Bourbon, In The Rocks Room online at luckboxmagazine.com.

Kendall Polidori is The Rockhound Luckbox’s resident rock music critic. Follow her reviews on Instagram and Twitter @rockhoundlb.

B&B’S

SONG’

The Rockhound has been asking musical artists, “If you could only listen to one song for the rest of your life, what song would it be?” See more on Instagram @rockhoundlb.

Matilda Marigolds

Brandi Carlile

In a period when pop-punk was perhaps losing steam, The Menzingers formed in 2006 to produce a more classic punk sound for their debut al bum. Over the years, they’ve morphed into a more straightforward rock band, softening their drums and setting a slightly slower vocal pace. At Riot Fest Chicago in September, they performed their 2012 album On The Impossible Past in its entirety. The album occupies a place in the band’s progression toward more traditional rock, easing up on the typical punk tones with less-aggressive shouting and a slightly smoother tempo. Nota ble songs from the album are Good Things and Casey, which stand out from the rest with a more unusual vocal structure and chord progressions.

Readers looking for some of the band’s bigger hits can find them on the 2017 album After the Party, including the title track—an ideal rock anthem to belt out in the shower.

Read the full review at luckboxmagazine.com

FIVE QUESTIONS

WHISKEY MASTER FRED MINNICK AT BOURBON & BEYOND

WHAT’S HAPPENING THESE DAYS IN THE SPIRITS INDUSTRY?

F red Minnick : People are seeking out spirits endorsed by pop culture. For example, the old beer brand Coors Banquet is experiencing a resurgence because of Netflix’s Yellowstone series. The trend in movies and TV is that people aren’t having cosmopolitans on the screen anymore. Instead, they have high-end whiskey, specifically bourbon or nice tequila. And so you see this cultural shift from drinking stuff just to get you messed up to drink ing something that you can appreciate later on. So it’s a completely different world today compared with in the ‘90s.

WHICH DISTILLERIES SHOULD PEOPLE BE PAYING ATTENTION TO?

Cedar Ridge Winery & Distillery in Iowa and Old Forester Distilling Co. in Louisville, Kentucky.

SMASHING PUMPKINS Homecoming at Metro

While the Smashing Pumpkins have played Chicago’s Metro 40 times over their 35-year career, the 1,100 attendees for this September performance knew they were witnessing something special. The venerable alt-rock act was celebrating the 40th anniversary of the iconic Chicago venue by return ing after 10 years’ absence to the stage it first graced in 1988. With a 23-song performance spanning two and a half hours, William Patrick (Billy) Corgan and company showcased a portfolio of hits from albums with global sales exceeding 30 million units. Surprises included a dark and deranged, seem ingly improvised cover of Talking Heads’ Once in a Lifetime. Notably absent from the setlist was fan favorite Mayonaise—a song with an intentionally misspelled title inspired by a look inside Corgan’s refrigerator.

The Smashing Pumpkins will begin touring with Jane’s Addiction in the Spirits on Fire tour covering North America beginning in October. On No vember 15, the band will release the first of three acts to its new, 33-song rock opera, Atum

WHAT’S THE MOST UNDERRATED BOURBON?

Evan Williams Bottled-in-Bond. It’s under $20, and it’s got a lot of bang-for-your-buck flavor.

FOR SOMEONE WHO PREFERS TO DRINK BEER, WHAT’S A GOOD DRINK TO START WITH IN THE SPIRITS CATEGORY?

You can have a bourbon cocktail or some kind of cocktail with grapefruit that’s hoppy like an IPA but has a great fruity note. If you like porters, which have chocolate, I recommend a Scotch with a sherry finish and some chocolate notes.

IF YOU HAD TO PICK ONE BOTTLE TO DRINK FOR THE REST OF YOUR LIFE, WHAT WOULD IT BE?

I would probably say 1969 Old Crow Kentucky Straight Bourbon Whiskey. I had it for the first time 15 years ago, and I can close my eyes today and still taste it.

—JAMES BLAKEWAY

—JEFF JOSEPH

PHOTOS: (THE MENZINGERS) ANTHONY LINH NGUYEN; (FRED MINNICK) COURTESY OF MINNICK MEDIA INC.

Fred Minnick

Patriotic Spirits

By Mike Reddy

These whiskeys are inspired by the House and the Senate, but they’re far more palatable than most political punditry

In even the most contentious election cycles, political foes can agree on the value of great whiskey. And with bottles named after prominent political offices, Proof and Wood’s DC Collection epitomizes the best of both worlds.

The collection originated in time for the 2016 election, according to Proof and Wood founder Dave Schmier, who previ ously launched the Redemption brand of

ryes and bourbons. Schmier’s Washington, D.C., distributor and longtime business part ner reached out about sourcing 4-year-old and 8-year-old whiskeys meant to symbolize one-term and two-term presidencies.

The resulting 4-year-old rye and 8-year-old bourbon were collectively called “The Presi dential Drams” and were originally available only in the D.C. area. But after almost imme diately selling out, Schmier decided to release

The Representative Aged a minimum of two Congressional terms, or four years, The Representative is a barrel proof straight bourbon whiskey with a sweet cherry and vanilla nose complimented by a warm, spicy and full-bodied palate.

57.8% ABV, $55

them nationwide every four years.

From there, the DC Collection expanded to include one-off whiskeys, such as The Ambassador and The Justice, and its two midterm-appropriate mainstays pictured above, The Representative and The Senator.

“The Senator and The Representative are always for sale,” Schmier said, “cynics might say, much like their namesakes.”

The Senator

The Senator, aged at least six years (equal to one senatorial term), is a barrel proof straight rye with a complex fruit and leather nose and a smooth, creamy tobacco and orange peel palate. This venerable statesman has Luckbox’s vote.

57.4% ABV, $75

LIQUID ASSETS

PHOTO: GARRETT ROODBERGEN

Ruck Off Excess Weight

Carrying weight on your back or chest helps shed pounds

By Jim Schultz

You want to get into shape? Like really, really good shape?

To get there, nutrition has a job, weight training has a job and cardio has a job. More specifically, cardio has only one job: to burn calories—that’s it.

So, give cardio a boost by taking up ruck ing—walking or hiking a set distance while carrying a weight on your back or in a vest.

In physique sports, the goal isn’t to improve your mile time, maximize cycling speed or just get really good at doing cardio. The goal is to burn more calories, so that you can increase or extend your caloric deficit to make the softer stuff not so soft and the harder stuff rock solid. To that end, mixing some version of rucking into your cardio training can really pay dividends.

Early in any weight loss journey, everything is pretty easy. With just a little effort, you can produce big returns. Eat a little less, and your body weight starts moving south. Get to the gym a few times a week, and your muscles return from hibernation. Start a light and easy cardio routine, and your energy increases, over all mood improves and the drops on the scale start to accelerate.

Unfortunately, there comes a point where the scale won’t budge and your cardio routines are no longer fun.

Enter the ruck.

As your body gets lighter and lighter, it becomes easier and easier for your body to move. There’s less of you to haul around town,

might have burned 160 calo ries, but now that you’re 205 pounds, it might only burn 120 calories. Not a huge difference, but remember this is not only happening on that midday walk. It’s also happening across all activities through out each day, every single day of the week.

Wearing a weight vest loaded with 15% of your body weight can help you burn 12% more calories during a workout.

Source: acefitness.org

So, one solution is to ruck your way through and displace the weight you’ve lost with a weight vest. As you lose more and more weight, you simply add more weight to the vest, so during your walks, you’re always 220 pounds and your body will burn calories as if it were 220 pounds.

At 220 pounds, that 30-minute stroll might have burned 160 calories, but now that you’re 205 pounds it might burn only 120. The solution? Carry some weight.

so your body becomes more efficient at taking itself from point A to point B.

As a result, you’re not burning what you once were on that post-lunch walk around the neigh borhood. At 220 pounds, that 30-minute stroll

The caloric deficit your cardio sessions produce remains unchanged, and if you wanted to take it a step farther, you could just wear the weight vest all day. Sure, normal activities like cooking, work ing, or showering might be a little tricky, but for the extra 88 calories you’ll burn, it will all be worth it.

When it comes to intensifying training by adding some ruck-style cardio into the mix, secondary benefits accrue, too, like a stronger

heart, looser joints, lower blood pressure and even a smaller chance of dying.

But in the words of Dan John— the elite-level weightlifting coach who’s also an All-Amer ican discus thrower, and who holds the American record in the Weight Pentathlon and has competed at the highest levels of Olympic lifting and Highland Games—let’s keep the goal the goal. This is about getting diced, and avoiding an early death is just a bonus.

In any event, before you get one, do your self a favor. Be strategic with how you start rucking. Your body is smart. In fact, it’s a lot smarter than you are. If you let the euphoria of Day One cloud your judgment and you start with a stacked vest, then it will quickly adapt.

Your weight loss efforts will stall. You’ll lose all motivation. You’ll have no choice but to shower with no less than 40 pounds on your back just to keep the caloric burn constant.

Jim Schultz, Ph.D., a derivatives trader, fitness expert, owner of livefcubed.com and the daily host of From Theory to Practice on the tastytrade network, was named North American Natural Bodybuilding Federation’s 2017 Novice Bodybuilding Champion. @jschultzf3

NOVEMBER

2-15 HeadCount at Harry Styles’ concert Inglewood, CA

5-6 Punk In The Park Orange County, CA

5 National Donut Day

6

Daylight saving time ends

6-18 The United Nations Climate Change Conference (COP27) Sharm El Sheikh, Egypt

8 Midterm Elections

9-13 Pitchfork London

11 Veterans Day

15-16 G20 Summit Bali, Indonesia

21-Dec. 18

The FIFA World Cup Doha, Qatar

24 Thanksgiving Day

25 Black Friday

26

28

Small Business Saturday

Cyber Monday

Sugar in the Morning

Donuts. The best excuse for adults to justify eating dessert for breakfast. It’s basically cake but in the shape of a bagel, so the sugar and calories don’t necessarily count, right? The delectable treat is so good it has to be celebrated twice in one year, with another National Donut Day observed on the first Friday of June.

The story of donuts in the United States began in the 1700s with the Dutch settlers’ olykoek, or oil cake. It’s commonly referred to as the “grandpa of the donut.” Donuts began popping up in American cookbooks in the early 19th century, and the rest is history.

As of January 2020, more than 18,000 donut shops dotted the landscape across the U.S. The largest chain, Dunkin’ Donuts, operates 11,000 stores in 33 countries. But beware: Burning off the calories consumed by eating one glazed chocolate donut requires 57 minutes of walking, 31 minutes on a bicycle, 23 minutes of jogging or 17 minutes of swimming.

Keeping It Local

The American Express payment network started Small Business Saturday in 2010 to encourage shopping in person at locally owned stores. It takes place on the last Saturday of Novem ber. Last year, U.S. consumers spent an estimated $23.3 billion on Small Business Saturday, an increase of 18% from $19.8 billion in 2020, according to the American Express 2021 Consumer Insights Survey.

Going Cyber Black Friday—the day brick-and-mortar retailers go “into the black” and start showing a profit for the year—comes the day after Thanksgiving. It’s also the day when stores begin discounting merchandise for the Christmas season. But consumers who can’t stand long lines and crowded aisles can wait until they’re back at their desks after the Thanksgiving holiday weekend and do their shopping online. That interferes with work, but the boss doesn’t have to know. The resulting November internet spending spree became known as Cyber Monday as early as 2005. Online purchases spike that day, partly because Amazon and other internet retailers begin posting some of their deep est seasonal bargains. But the term “Cyber Monday” could become obsolete. The online shopping craze is expanding into what could become “Cyber Week.”

Our very own financial think tank shows their work when they offer up concrete trade ideas, solid strategies, and tactical management for however the market moves.

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A T H I N K TA N K FO R D O E R S

Covered Strangle

Covered Strangle

By Eddie Rajcevic

A bullish bet with some added protection

By Eddie Rajcevic

IInvestors often hear they should “buy low and sell high.” But when the opportunity arises they can feel reluctant to commit capital. The inverse is also true. They may hesitate to sell stocks because they fear they’ll miss out on profits.

nvestors often hear they should “buy low and sell arises, they can feel reluctant to commit capital. The inverse is also true. They may hesitate to sell stocks because they fear they’ll miss out on profits.

Luckbox, call is

low and sell high. With covered strangles, they can do both.

As discussed in the August Luckbox, a covered call is an excellent strategy for counteracting the second situation. However, there’s still the question of how investors can buy low and sell high. With covered strangles, they can do both!

A covered strangle combines strategies that when used together lead to limited upside profit potential and the capacity to generate income. The first component is a covered call, a two-part strategy consisting of long shares of stock and short calls. For more information, refer to the Cheat Sheet from the August Luckbox. The second component, a short naked put, increases the initial credit collected, decreasing cost basis and/ or increasing possible income.

can lead to limited upside profit potential and the capacity to generate income. The first component is a covered call, a two-part strategy consisting of long shares of stock and short calls. For more information, refer to the Cheat Sheet from the August Luckbox. The second component, a short naked put, increases the initial credit collected, decreasing cost basis and/or increasing possible income.

Investors use a covered strangle when they have a bullish bias on an underlying. The short call component of the covered strangle provides an upside cap to the potential returns but does reduce the cost basis for the long shares, providing some downside relief.

Investors use a covered strangle when they have a bullish bias on an underlying. The short call component of the covered strangle provides an upside cap to the potential returns but does reduce the cost basis for the long shares, providing some downside relief.

The short put component also reduces the cost basis for the long shares because of the additional premium. The short put acts as a place to “double down” on an existing position, so if the underlying drops to the strike price of the put and then the investor buys 100 more long shares.

The short put component also reduces the cost basis for the long shares because of the additional premium. The short put acts as a place to “double down” on an existing position, so if the underlying drops to the strike price of the put, then the investor buys 100 more long shares.

Consider an example of a covered strangle in Exxon Mobil Corp (XOM). Assuming Exxon has a share price of $95, it would cost $9,500 to buy 100 shares and an investor could sell a call with a strike price of $105 for approximately $1.35 per share.

Consider an example of a covered strangle in Exxon Mobil Corp. (XOM). Assuming Exxon has a share price of $95, it would cost $9,500 to buy 100 shares and an investor could sell a call with a strike price of $105 for approximately $1.35 per share.

To turn this covered call into a covered strangle, the investor would then sell a put that has a delta similar to the call, such as the $85 put for $1.60 per share. This would then make the effective purchase price $92.05 per share for Exxon, while providing a profit target and an opportunity to double down on this position.

To turn this covered call into a covered strangle, the investor would then sell a put that has a delta similar to the call, such as the $85 put for $1.60 per share. This would then make the effective purchase price $92.05 per share for Exxon, while providing a profit target and an opportunity to double down on this position.

Eddie Rajcevic, a member of the tastytrade Research Team, serves as co-host of the network’s Crypto Corner and Crypto Concepts. @ERajcevic11

Eddie Rajcevic, a member of the tastytrade Research Team, serves as co-host of the network’s Crypto Corner and Crypto Concepts. @erajcevic11

Stock movement Resulting profit/loss

Stock movement Resulting profit/loss

Stock goes up If stock price goes past the strike price, the profit/loss (P/L) would be strike price - cost of shares + net premium from the options

Stock goes up If the stock price goes past the strike price, the profit/loss (P/L) would be: strike price - cost of shares + net premium from the options

Stock goes sideways, doesn’t change in price

Stock goes sideways, doesn’t change in price

Stock goes down but stays above the put

Stock goes down but stays above the put

Stock goes down below the put

Stock goes down below the put

P/L would simply be the net premium from the options

P/L would be the net premium from the options

P/L would be the final price - cost of shares + net premium from the options

P/L would be the final price - cost of shares + net premium from the options

P/L would be the cost of shares - (100 x (final price - strike price of the put)) + net premium from the options

P/L would be the cost of shares - (100 x (final price - strike price of the put)) + net premium from the options

The table P/Ls assume 100 shares, 1 call, and 1 put. So the resulting P/Ls should be multiplied by 100 when trying to work out the numbers.

Risk and reward

Covered strangles lower the effective purchase price of a stock, while giving investors both an exit point to capture profits if the stock rallies and a double down point if the stock falls.

Stock Price

A bullish bet with some added protection.

The table P/Ls assume 100 shares, 1 call, and 1 put? So the resulting P/Ls should be multiplied by 100 when trying to work out the numbers.

Data courtesy of

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THE PREDICTION TRADE

The Murky Future of Political Futures Markets

A prediction market insider asks regulators for leniency in the battle over wagering on political outcomes.

By Flip Pidot

The sometimes sleepy world of political prediction markets has found itself, rather suddenly, in a straight-up frenzy.

In August, the Commodity Futures Trad ing Commission (CFTC) revoked PredictIt’s no-action relief and ordered it to shut down by February over alleged but unspecified fail ure to comply with the conditions of its 2014 exemption.

It will let the popular political prediction platform’s 2022 midterm markets play out, but the even larger 2024 presidential markets (with over $10 million in open interest) will have to be unwound. Somehow.

It remains to be seen whether this marks the untimely end of a worthy experiment or the point when a fledgling asset class ascends into the pantheon of fully regulated products. Either way, this cottage industry’s future is in the hands of federal policymakers whose inscru tability is these markets’ own stock in trade.

To understand where we are now, an abridged history of prediction markets is in order.

1992: The University of Iowa’s Tippie College of Business asks the CFTC to allow it to operate small-scale, real-money markets on presidential and congressional election outcomes. The CFTC granted no-action relief to the “Iowa Electronic Markets” (IEM),

OF POWER IN

WILL BE THE

AFTER THE

HOW PREDICTION MARKETS WORK

Prediction markets allow real money wagering to forecast the outcome of political events. Contracts trade between 1¢ and 99¢, and the price reflects the market’s consen sus forecasted probability of an event occurring. When an outcome is determined, correct contracts pay out $1 and incorrect contracts settle worthless, at 0¢.

Regulators have ordered the PredictIt exchange to shut down by February.

meaning it would allow them to operate with impunity (and with out submitting to the typical over sight of futures exchange) within the narrow confines of the research-fo cused project.

1999: Ireland-based Intrade is founded. The trading platform offered binary contracts on various events but became best known for its markets on U.S. elections. While it never acquired regulated status or no-action relief in the U.S., regula tors were relatively hands-off with Intrade over the next decade.

By 2012, however, Intrade was a borderline household name, with a large and predominantly U.S.-based user base and widespread major media coverage as a favorite barom eter of the Barack Obama-Mitt Romney presidential race.

Regulators went from hands-off to gloves-off.

Weeks after the election, the CFTC sued Intrade for listing unregulated futures products. The company closed its U.S. customers’ accounts, and within months had stopped trading altogether, against a backdrop of allegedly misappropriated client funds and the death of its founder atop Mt. Everest.

Only months earlier, the regulated futures exchange Nadex had formally applied to list election outcomes on its plat form. The CFTC replied with a swift and hearty hell no. The colorful late Commissioner Bart Chilton blasted the idea of “politi cal poker,” which he feared would turn regulated markets into “some entertain ment gambling orgy endeavor.”

2014: Victoria University of Wellington, New Zealand, is granted no-action relief by the CFTC to operate a market similar in struc ture and purpose to IEM’s.

Just in time for Obama’s second midterm elections, the overtly U.S.-focused PredictIt (at predictit.org) was born.

With operational support from Washing ton, D.C.-based Aristotle Inc. (including yours truly, under contract as a market curator until 2019), PredictIt went on to list many thousands of political contracts tied to election outcomes, legislation, regulation, court decisions, execu tive orders, opinion polling and even President

Donald Trump’s Twitter tempo.

Last but not least, in 2021, the world met Kalshi. The prediction market freshman stormed onto campus waving something none of the upperclassmen had: full CFTC approval as a designated contract market. It was the first DCM organized specifically to list “event

third rail of U.S.-regulated futures markets), it did wade into several of the political arenas where PredictIt had been making markets for years, including judicial confirmations, passage of legislation and approval polling.

Little by little, more operators were offering more products to more market participants. For once, an industry perpetually hamstrung by regulatory obstinance seemed to be making slow but steady strides toward a future of not quite unfet tered innovation but at least less arbitrary obstruction.

CFTC flips the game board

Only a few days after the CFTC announcement that it was revoking Predictit’s no-ac tion relief, government filings showed Kalshi had recently applied to list markets tied to the outcome of the 2022 midterms, specifically which party would win control of each house of Congress.

That prompted the CFTC to undertake a stat utory review, scheduled to conclude just days before the election, during which it has invited the public to comment on whether and how these contracts differ from those they rejected a decade ago when Nadex sought to list them.

Meanwhile, PredictIt and Aristotle have filed a federal suit against the CFTC, asking the court to reverse the “arbitrary, capricious” revocation of permis sion to operate its markets.

futures” (in theory, a sprawling superset of the sort of markets offered by Intrade, PredictIt, Polymarket, IEM and others).

Wielding the DCM superpower of self-certifi cation—wherein an exchange may deem its own novel products in compliance with federal law and CFTC rules, putting the burden on the regu lators to rule otherwise—Kalshi went to work.

It listed all kinds of wild and wooly products never seen on regulated markets in this coun try: Whether and when COVID dining restric tions would be lifted; whose album would be most downloaded this week and how many passengers TSA would screen today.

And while Kalshi wasn’t listing markets tied to election outcomes (by now manifestly the

The decisions by both the CFTC (whether to allow elections on regulated exchanges) and the court (whether to overrule the CFTC and allow PredictIt to continue to operate its unregulated market), will determine whether this fledgling asset class will be relegated to its 20th century status, a plaything of European punters and VPN-wielding scofflaws. Or, on the contrary, whether it will be made a full-fledged citizen of American financial regulatory society.

While the request for public comment encompasses some 17 questions, the CFTC has three main areas of concern, as briefly dispatched below via excerpts from my own public comment in support of the markets’ approval.

Joe Biden

Gavin Newsom

Kamala Harris

Pete Buttigieg

1. Is this gaming?

In its 2012 rejection of Nadex’s proposed elec tion contracts, the CFTC relied on a definition of gaming that includes any outcome of “a contest of others.” But this aggressive interpretation plainly does not reflect the Commission’s own criteria.

If a political campaign, in which multiple candi dates vie for the “prize” of election to public office, qualifies under this definition, surely contests such as the Oscars, Emmys and Grammys (in which candidates vie for literal prizes) likewise qualify.

Yet Kalshi has previously self-certified and listed numerous contracts tied to these contests without objection by the CFTC.

As for whether the CFTC should let the potential existence of state-regulated casino offerings tied to elections dictate that they are indeed gaming products, federal law grants the CFTC exclusive and preemptive jurisdiction over futures transac tions. The Commission should resist any tempta tion to cede its explicit federal jurisdiction to state law or regulations.

2. Do these markets serve an economic purpose?

The CFTC wonders whether electoral outcomes have sufficiently meaningful or quantifiable economic effects as to be plausible hedging tools.

It is true that economic actors large and small

(taxpayers, small-business owners, global corporations, households, sharehold ing retirees and healthcare patients) are in many cases predictably exposed to vari ous election outcomes. Their efforts to measure and (albeit without reliable tools) manage their economic exposure to those outcomes is so evident as to have become cliche.

The top 50 interest groups had by June of this year donated nearly a billion dollars to Congres sional candidates for this midterm cycle alone. Not only does every major business sector have a demonstrable financial interest in (and hedge able exposure to) the Congressional balance of power, but that exposure is nicely asymmet ric, making electoral outcomes especially wellsuited to the risk reallocation function of futures markets.

3. Might these markets interfere with election integrity?

A common argument against offering electoral contracts on exchanges holds that such markets are somehow corrosive to election integrity. But that amounts to little more than a knee-jerk reac tion to any novel intersection between money and politics.

Ironically, the wholly uncon troversial idea that money is a corrosive force in politics is one of the strongest argu ments in favor of listing elec toral outcomes on regulated exchanges. So universal and overwhelming is the exposure of virtually every commercial concern to electoral outcomes that countless commercial entities shovel as much money as legally permissible (at times, perhaps more) at the candidates and parties they feel pose less threat of enact ing adverse policy changes.

What better way to reduce that pernicious imperative than to offer a more sanitized, trans parent, duly regulated mechanism through which market participants can offset

such unwanted exposure, with no attending influ ence over candidates and elected officials?

Two steps forward… another step forward?

Big leaps in accommodative financial regu lation tend to come about once the public, then later the regulators, finally get over some initial revulsion. Life insurance, after all, was long decried as a morbid, obscene tool to gamble on your own (or someone else’s) mortality. And thanks to one chap who managed to corner the onion market briefly back in the 1950s, Congress decided no American may ever again enter into an onion futures contract, and we’re still waiting for that one to be remedied.

It can take decades, but once we turn to a dispassionate analysis of the merits and risks of a new product or structure, we tend to arrive at reasonable (if overdue) expansion of what flavors of financial innovation we as a society will allow.

Despite their byzantine rules, futures markets are simple things. They are risk transfer mechanisms—trading posts where we can standardize and swap exposures with one another.

For centuries, participants have been using these markets to manage their exposure to a dizzying range of external financial factors— everything from agricultural prices to interest rates to the price of bitcoin.

Political uncertainty is undeniably the largest category of external financial risk you’re helpless to manage. It’s well past time we allow futures market operators and participants to blaze a trail across this final frontier.

Flip Pidot, managing partner of Sharp Square Capital and CEO of American Civics Exchange, focuses on event-based futures. He formerly served as market curator at PredictIt and as a forensic accountant for Arthur Andersen. @flippidot

Political uncertainty is the largest category of financial risk you’re helpless to manage. Prediction markets can change that.

Markets and Midterm Elections

Stock

By Tim Knight

Plenty of elections

With

Post-midterm surge

Lots of investors are convinced that a four-year U.S. presidential cycle governs some of the ups and downs of stock and options prices. They say it happens because presidents institute marketfriendly policies in the third year of their terms to boost the economy and hold onto office for themselves or their party.

To show the idea has merit, let’s view stock prices from a long-term perspective. The first figure shows the past 70 years of price fluctu ation in the stock market, as represented by the S&P 500 cash index (SPX).

Horizontal lines representing election years are overlaid on the chart, the blue ones indicate presidential elections and the red ones mark midterm elections.

At first, the lines might seem like little more than noise, but examining the sections they demarcate can yield interesting ideas.

Powerhouse post midterms

When only the red lines are displayed, it’s clear the stock market tends to rally for many months following the midterm elections.

That trend aligns nicely with the theory that the third year of a presidential election cycle is the strongest.

In fact, the strength of the stock market on the heels of midterms is nothing short of remarkable. This chart highlights the elec tions from the 1960s, 1970s and 1980s for reasons we’ll examine shortly.

Post-election hangovers

The period following presidential elections is extraordinarily weak. Perhaps one reason is the party in power throws everything it’s got—colloquially speaking—at the market in a last-ditch effort to maximize its chances at retaining power.

Once the election is over, the political party in question has not only “spent” its political capital to improve the economy and the stock market, but it also instantly loses its main incentive to do so. In other words, there isn’t a point in trying to “feed” a market in the shortterm once the election has already passed.

The line chart of the S&P 500 following the horizontal blue lines shows the stock market has often been tremendously weak almost instantly after presidential elections.

A nearly perfect example

Zooming in on a perfect example of these events, take a look at the period from the late 1960s through the mid-1970s. As can be seen in the chart:

• Following the 1968 election, there was an extremely strong bear market

• Before and after the 1970 midterm elec tion, the market was quite strong

• In 1972, only weeks after Richard Nixon was elected president in one of the largest landslides in United States history, the stock market commenced one of its worst bear markets on record

• In the wake of the 1974 midterm elec tions, the two-year bear market ended and a very powerful rally began Thus, with clockwork precision, this “midterm-up, presidential-down” phenom enon played out beautifully.

Predictable weakness

Stocks typically suffer after a presidential election.

$SPX: S&P 500 3,986.16

1963 1965

03/08/1967

87.68

89.10

87.34 C: 88.27 Y: 146.69

140 135

slopecharts.com

The Nixon bear market

Stocks rallied between the 1970 midterms and 1972 election of Richard Nixon. They plunged into negative territory after his election, only to rally again after the 1974 midterms.

$SPX: S&P 500 3,986.16

Inorganic modernity

The examples highlighted have been from an era preceding the modern age of finance. The reason is that in the 1960s, 1970s and 1980s, the accommodations by the Federal Reserve were much smaller than in recent decades.

By way of example, this chart shows the presidential elections over the past decade. As is plain to see, the election might as well have not been held as far as the stock market was concerned. There wasn’t even the tini est “blip.”

Instead, the market more or less went reso lutely higher, not concerning itself with polit ical parties or actions.

Why would such a tremendous change take place? After all, for decades it seemed that the elections had profound and quite predictable effects on the equity markets.

It seems most likely the Federal Reserve’s injection of trillions of dollars into the stock market has had a “smoothing-over” effect.

Elections and politics are still very real, and

the effects of the policies from the political parties still have economic import. Recent election dates, however, seem to have virtually no meaningful influence on direction.

It will thus be interesting to see how the markets react to the the 2022 midterms. If the long-term reaction takes place, as seen from 1960-1980, stocks will probably exhibit meaningful strength in the weeks and months that follow.

slopecharts.com

On the other hand, if the market continues to drift listlessly in whatever direction it had been going before the midterms, it may well be that the Fed’s influence is so great that the election cycles are a relic of a bygone era.

Tim Knight has used technical analysis to trade the equity and options markets for decades. He founded Prophet Financial Systems and created the website Slope Charts which offers free access to his charting platform. @slopeofhope

The Federal Reserve’s injection of trillions of dollars into the stock market has had a “smoothing-over” effect.

Do U.S. presidents institute marketfriendly policies in the third year of their terms to boost the economy and hold onto office?

The Fickle Influence of Politics on Stock Prices

Elections affect the markets, sometimes in unpredictable ways

By James Blakeway

Two years ago, as America geared up for the show down between incumbent President Donald Trump and former Vice President Joe Biden, this column analyzed the potential impact of the election on stocks and exchange-traded funds (ETFs). The focus was on clean-energy ETFs and manufacturers of firearms and ammunition.

Now, as President Biden’s second year comes to a close and a crucial midterm election nears, let’s exam ine how those stocks and ETFs have performed since the 2020 election.

Perhaps counter to what many might have expected, the two fire arm stocks under scrutiny—Sturm, Ruger & Co. (RGR) and Smith & Wesson (SWBI)—have not performed that well since the 2020 election of now President Biden.

Both stocks saw positive returns in 2021 but grossly underperformed the broader S&P 500. (See “Guns, ammo and green energy,” opposite page.) This year, Sturm, Ruger & Co. shares are down over 18%, with Smith & Wesson shares down 21%. Despite this year’s market difficul ties, the S&P 500 ETF (SPY) is still up over 19% from the election.

But the price action of shares

doesn’t always tell the whole story of how a company has performed. Many assumed firearm stocks might rally if the Biden administration and a Democratic Congress tried to curb gun violence by limiting access to firearms. They thought that might lead more Americans to run out and buy guns before it became more difficult.

In fact, Sturm, Ruger & Co.’s financials suggest that’s exactly what transpired. In 2020, revenue for the firearm maker totaled $568.9 million. In 2021, that number grew to $730.7 million, a 28% increase. What’s more, the company’s sales and marketing expenses stayed the same year to year, meaning the company sold more firearms without expending more effort.

Meanwhile, Smith & Wesson saw 2021 revenue leap to $1.06 billion, up 55.8% from $680 million in the previous year. It happened while the company was slashing the cost of selling and marketing to $40 million last year, down from $70 million the year before.

Another company discussed in the 2020 article, Olin Corp. (OLN), manufactures ammunition and owns the Winchester firearm brand. Stock in Olin, which also produces chem

71%

Growth in sales for Winchester from 2020 to 2021

icals, rose a truly dramatic 198% since the 2020 election. Winchester sales grew from $927.6 million in 2020 to $1.58 billion in 2021, an increase of 71%. The company’s annual report attributed the growth at Winchester mainly to increased ammunition sales.

Interestingly enough, on Jan. 6, 2021—the day protestors stormed the Capitol—stock in all three companies rallied well above the S&P 500’s 0.6% rise. Smith & Wesson soared 18% that day, while Sturm, Ruger & Co. climbed 12% and Olin increased by 8%.

But reactions to the Biden admin istration haven’t been limited to the small arms business. The president campaigned on a pledge to work toward a greener future, and he began to make good on that prom ise by arranging for the U.S. to rejoin the Paris Climate Accords on his first day in office.

Yet, even before that move, the effects of the administration’s energy policies were manifested on Wall Street. iShares Global Clean Energy ETF (ICLN) rallied 40% between election day and Biden’s inaugura tion. The S&P 500 ETF climbed 12% in the same time frame.

The Invesco WilderHill Clean

Stocks in firearm companies have not performed that well since the election of President Joe Biden—despite increased sales and higher revenue.

Guns, ammo and green energy

Despite the expectation the Biden administration would be good for firearm manufacturers and the clean energy ETFs, most have underperformed the broad market.

FIREARM MANUFACTURERS

Symbol RGR SWBI OLN ICLN PBW SPY

From election to inauguration

-7% 1% 35% 40% 53% 12%

2021 return 9.3% 1.6% 138.5% -24.2% -29.8% 28.7%

2022 return -19.7% -23.4% -7.3% 3.1% -22.9% -17.1%

From election to present -18.2% -21.2% 198.5% 9.7% -17.3% 19.2%

Data as of Sept. 6, 2022, courtesy of

Energy ETF (PBW) rose a stagger ing 53% between Biden’s election and inauguration. But by Septem ber of this year, the fund gave back all of its gains and was down 17%, losing nearly 30% last year and 23% this year.

Up or down, these stocks and ETFs show how sentiment may shift in certain industries when changes occur in Washington. Spending on firearms and ammunition rose at a

18%

Increase in Smith & Wesson stock price on Jan. 6, 2021

dizzying pace in 2021, even if stocks in the manufacturers didn’t reflect the surge. Clean energy got an imme diate boost when it became clear Democrats were coming to power but it has ultimately lagged behind the broader market.

Politics can drive markets, but betting on their impact can prove challenging.

James Blakeway, Luckbox technical editor, serves as CEO of Quiet Foundation, a data science-driven subsidiary of tastytrade that provides fee-free investment analysis and trade ideas for self-directed investors. @jamesblakeway

On Jan. 6, 2021—the day protestors stormed the Capitol— stock in all three firearm companies rallied well above the S&P 500’s 0.6% rise.

CLEAN ENERGY ETFS

Name Sturm, Ruger Smith & Olin Corp. iShares Global Clean Invesco WilderHill S&P 500 ETF & Co. Wesson Energy ETF Clean Energy ETF

FUTURES A SAVVY FUTURES TRADER’S TAKE ON THE MARKETS

Down with the Dow

Investors who still track and favor the Dow can trade the value of the index

By Pete Mulmat

Headline writers love describing the daily movement of the Dow Jones Industrial Average in melodramatic terms. Classics like “Dow surges 600 Points” and “Dow tumbles more than 1,000” dominate newspaper financial pages, scroll across the screen on cable news or arrive as a push noti fication from a financial outlet.

The higher the Dow has rallied over the past decades, the more sensational the numbers naturally became. The 1,000-point quote has only been a recent phenomenon because the Dow fell more than that for the first time in February 2018, dropping 1,175 points or 4.6%.

The largest point drop in the recession of 2008 was only 777.68, though that was a drop of 7% on Sept. 29 of that year. Two weeks later, the index dropped 7.87% but at lower price levels that was a decline of only 733 points.

But let’s take a step back from the sensation alism: What even is the Dow Jones Industrial Average? It’s a stock market index that tracks 30 of the largest publicly traded companies in the United States.

The Dow is a price-weighted index, meaning the impact of each stock on the overall value of the index is based on each stock’s price. Unlike newer indices like the S&P 500 or Nasdaq-100, which are capitalization-weighted, smaller companies have a larger weighting in the Dow, simply because they have a higher-priced stock.

Combined with following only the 30 stocks, this means that the highest-priced stocks can represent 5%-10% of the index. As it currently stands, UnitedHealth Group (UNH) is the top stock in the index, priced at over $500 per share (See “Pursuing stats”)

UnitedHealth is by no stretch of the imagi nation a small company. With a market capi talization—meaning its total value—of $484 billion, it would be worthy of a top spot in most indices. Plus, it’s the eighth largest company in the S&P 500.

Pursuing stats

The Dow Jones Industrial Average tracks 30 of the largest publicly traded companies in the United States. Here’s a look at how the top 15 are positioned.

Company

UnitedHealth Group Inc.

Ticker % of the Dow Index Market Capitalization (millions)

UNH 10.9% $484,229

Goldman Sachs Group Inc. GS 7.0% $111,449

Home Depot Inc. HD 6.1% $296,410

Microsoft Corp. MSFT 5.4% $1,888,711

McDonald’s Corp. MCD 5.4% $187,159

Amgen Inc. AMGN 5.1% $129,571

Visa Inc. Class A V 4.2% $418,616

Honeywell International Inc. HON 3.9% $125,037

Caterpillar Inc. CAT 3.8% $95,372

Johnson & Johnson

JNJ 3.4% $429,030

Travelers Companies Inc. TRV 3.4% $38,416

Chevron Corp. CVX 3.3% $307,552

Apple Inc. AAPL 3.3% $2,483,413

Salesforce Inc. CRM 3.2% $90,491

Boeing BA 3.2% $151,720

Source: dowjones.com; Data as of Sept. 6, 2022

However, because of the price-weighting of the Dow, the two largest S&P components Apple (AAPL) at $2.4 trillion and Microsoft (MSFT) at $1.8 trillion are relegated to the 13th and fourth spots in the Dow.

Luckily, for those who still track and (for whatever reason) favor the Dow, there are ways to trade the value of the index, placing a directional assumption as to whether the 30 stocks rise or fall.

Enter the CME Dow Jones Index Futures (/YM). Buying or selling Dow futures enables active investors to post a fraction of the contract’s total value to open the trade.

Trading futures gives investors access to the overnight market, participating in newsdriven swings that never happen during the stock market’s open session.

For example, during the 2016 election, the Dow futures closed their session at 4 p.m. Central

Downsizing Dow exposure

While the Dow Jones Index Futures give direct access to trade the index, Micro S&P 500 Futures give traders a smaller and more manageable way to trade the overall stock markets.

Symbol /YM /MES

Contract Unit $5 x Dow Index $5 x S&P 500 Index

Approx. contract value $162,500 $20,650

Approx. margin required $10,000 $1,400

time on Nov. 8 at 18,287. After the futures reopened at 5 p.m., the Dow contracts rallied up to 18,394 before dropping to 17,418 by 11 p.m.

By the time the stock market opened the next day at 8:30 a.m., the Dow futures had climbed all the way back to 18,121. Active investors only trading in the open market session completely missed any oppor tunity to trade the overnight, event-driven action.

However, the Dow futures are valued at $5 x index price. That means if the Dow is 30,000, the total contract value is $150,000. If the index moves 1,000 points, the profit or loss on one future is $5,000. The current margin to open a trade in the futures is approximately $10,000, which is likely too much for most investors to commit to a single position.

Those looking for a broad market futures prod uct to trade events, such as elections, may be betterserved looking to the CME Micro S&P 500 futures (/MES).

The Micro S&P futures, like the Dow futures, are worth $5 per index point. But the S&P 500 is a much lower numerical index value than the Dow Jones. With the S&P 500 trading at 4,000, the total value of each contract is $20,000.

Active investors can open a long or short position in the Micro futures for $1,400 per contract. That makes them far more accessible to a wider range of investors. At the index price of 4,000, a 1% move in the index of 40 points would be a $200 profit or loss on one /MES contract.

While the Dow is an interesting and historical barometer of the overall U.S. stock market, it may be time to relegate it to the history books, favoring capitalization-weighted indices like the S&P 500.

This is especially true with active investors consid ering a move into futures trading and looking for smaller, efficient trading products they can use to express market opinions, especially around elections where much of the action will go down while Wall Street sleeps.

Pete Mulmat, tastytrade chief futures strategist, serves as host for Splash Into Futures on the tastytrade network. @traderpetem

While the Dow is an interesting barometer of the U.S. stock market, it may be time to relegate it to the history books.

Product Dow Jones Index Futures Micro S&P 500 Futures

Proof-of-Work Purge: The Merge

Ethereum, the second-biggest cryptocurrency network, has sliced its energy use and is preparing for higher volume and lower prices

By Mike Martin

n one of the most highly anticipated events in the history of cryptocur rency, the Ethereum network has successfully merged its execution layer with that of the Beacon chain.

I

This combination of execution layers, which took place in September, is known as the “Merge,” and it changed the Ethereum protocol’s consensus mechanism from proofof-work to proof-of-stake.

Let’s look at three reasons why the Merge has excited the crypto universe.

1

Ethereum now uses less energy

Proof-of-work networks, like Bitcoin, rely upon miners to validate transactions. This model involves thousands of miners racing to solve a cryptographic puzzle. The winner earns a reward.

The computational power Bitcoin miners use to work out one puzzle requires more energy than all of Argentina.

But proof-of-stake networks rely on “valida tors” instead of miners to authenticate trans actions and add blocks to the blockchain. It’s based on a lottery called “staking.”

The more coins validators stake, the greater the odds the network will call upon them to validate a block. If they’re chosen, they’re rewarded in cryptocurrency.

Ethereum’s new proof-of-stake model oper ates with 99.95% greater energy efficiency than its previous iteration. Besides being better for the environment, the upgrade may help Ethe reum comply with ESG, which stands for envi

Bitcoin mining uses more energy than all of Argentina.

ronmental, social and corporate governance standards. The ESG narrative could attract investors and help usher in much-needed regulation.

2

Ethereum offers two ways to stake

When investors stake coins in a proof-of-stake network, they can earn yield. That’s accom plished either by running their own “node” or delegating coins to a protocol that does the validating.

Today, they can earn ~5.13% in interest by staking ether coins on their own computers, or ~4.50% in interest by delegating coins to a protocol that stakes them on their behalf.

Ether chasing bitcoin

3Ethereum will be deflationary

Since the Merge was completed on Sept. 15, the circulating supply of ether (ETH) has already begun to decrease. This is accom plished partly by moving away from the proofof-work model, which required the network to pay miners in ether to validate blocks.

Before the Merge was complete, Ethereum was paying out ~5 million ether annually; the network in its present state will only be paying ~1 million. This reduction in rewards, combined with the network’s burning of transaction fees, will help to make ether a deflationary coin.

Many investors believe a lower supply of ether will be bullish for the coin long-term.

Over 90 days, the value of ether rose relative to bitcoin but then dipped. Take note of the activity on Sept. 15, the date when the merger occurred.

Data as of Sept. 25, courtesy of

CRYPTO CURRENTLY THE STATE OF DIGITAL ASSETS AND DECENTRALIZED FINANCE

Buy the rumor, sell the news

The Ethereum Merge went exactly as planned. So why did ether sell off greater than relative cryptocurrencies post-upgrade?

This latest sell-off can most likely be attributed to the Wall Street adage, “buy the rumor, sell the news.”

In the months leading up to the Merge, ether outperformed bitcoin, which has been in consolidation around the $20,000 for some time. The chart “Ether chasing bitcoin,” left, quoting bitcoin in ether, shows ether’s dominance through much of 2022.

Ethereum 2.0

Though the Merge introduced some immedi

ate upgrades to the Ethereum network, none of the improvements were substantial.

Ethereum is already the second-biggest cryptocurrency, surpassed only by Bitcoin. But for Ethereum and its smart contracts to become truly scalable, two things need to happen: Transactions need to increase, and fees need to decrease.

The Merge opened the door to “sharding,” which will break up the Ethereum networks into smaller chains while maintaining unifica tion. It’s poised to happen sometime in 2023.

After sharding is introduced, Ethereum will be able to process 100,000 transactions per second, according to Vitalik Buterin, the network’s founder. That’s a far cry from the

current transaction rate of ~15 per second.

Ethereum has a long way to go before it becomes Ethereum 2.0. Besides the risk that will come with the adoption of sharding, Ethereum investors now have to worry about Gary Gensler, chair of the U.S. Securities and Exchange Commission, who could very well turn all proof-of-stake coins into securities.

For now, ether tokens are treated as commodities and thus aren’t subject to much regulation. But if the SEC begins to view them as securities, tighter regulatory control will follow.

Mike Martin is head of content for digital assets at tastytrade.

The Merge will help Ethereum process 100,000 transactions per second. That’s a far cry from the present 15 per second.

THE UNLUCKY INVESTOR A MATHEMATICIAN’S GUIDE TO SUSTAINABLE TRADING—NO LUCK REQUIRED

The Risks of a Budding Market

What active investors need to know about trading marijuana stocks and exchange-traded funds

By Julia Spina

Cannabis has come a long way. Once a focal point of America’s war on drugs, it’s now legal for recreational use in 19 states and for medical use in 37 states.

Lifting restrictions has had momentous results. U.S. marijuana sales reached a stag gering $17.5 billion in 2020, as reported by Forbes, and the cannabis industry has become a promising emerging market for investors.

But the sector faces significant obstacles. Marijuana remains illegal under federal law and is still classified as a Schedule 1 drug, alongside heroin. That reduces the size of the market, hampers supply chains and limits investment in the industry.

This legal obstacle also casts a shadow over cannabis stocks and exchange-traded funds (ETFs), which this article will contextualize with examples of liquid cannabis assets that also have liquid options markets.

The first statewide legalizations of recre ational marijuana began in 2012 with Colo rado and Washington, followed by waves starting in 2015. But legalization didn’t trigger a noticeable or consistent rise in asset prices for marijuana stocks and ETFs in the shortor long-term.

Consider the performance of the ETFMG Alternative Harvest ETF (MJ) following state recreational legalizations shown in Prices and legalization Stiff stats, opposite page, also shows an analysis of how prices for MJ and a collection of marijuana stocks have responded to legalization in the short term (the average 30-day price change) and in the long term. All of these assets have dramatically underper formed compared with the market since 2016.

Prices and legalization

Over the years, the ETFMG Alternative Harvest ETF (MJ) hasn’t exactly soared to new heights on news of legalization in yet another state.

Performance of MJ following state legalizations (2016-2022)

price change

―― ETFMG Alternative Harvest ETF (MJ)

Legalization date

Data as of Sept. 15, 2022, courtesy of

Both Prices and legalization and Stiff stats demonstrate that despite increasing legal, political and social acceptance of marijuana in the United States, the market has not yet fully embraced the industry. Marijuana assets, such as those under Dubious volatility, right, remain highly volatile compared with a market ETF, like SPY, and carry significant risk for investors.

Stiff stats

Dubious volatility

Data as of Sept.

Options opportunity

Despite higher implied volatility, marijuana assets may not compensate options sellers enough to justify the greater risk, relative to the broad market.

CGC

Data

of Sept.

Because many of the marijuana assets are fairly inexpensive, opportunities for options traders are also limited despite the highly implied volatility. Options opportunity, above, illustrates how to gain long exposure to mari juana assets by trading short 25Δ puts, a bull ish short option trade with a roughly 75% probability of profit.

Because of buying power requirement minimums, or the capital needed to open and maintain a short premium trade, the mari juana asset put options collect roughly the same initial credit per unit of buying power as the SPY put, which has a much less volatile underlying.

The political developments of the last 10 years have resulted in a wide variety of liquid cannabis stocks, ETFs, and derivatives for the retail market. While the cannabis sector is an exciting emerging market with a promis ing future, trading assets in this sector remains highly speculative because of its pervasive legal obstacles.

Julia Spina, a member of the tastytrade research team and author of The Unlucky Investor’s Guide to Options Trading, holds degrees in engineering physics and applied mathematics and a master’s in physics. @financephoton

TACTICS: INTERMEDIATE

Managing Volatility Around the Midterms

The market expects this election cycle to cause large price moves

By Eddie Rajcevic

Midterm elections often cause volatility, and the markets are acting accord ingly. Volatility futures (/VX) show the possibility of lots of price fluctuation throughout the rest of the year.

Whether it’s because of inflation, reces sion, geopolitical issues or something else, the market expects this election cycle to cause large price moves. While that may sound like a bad thing, options traders look forward to greater volatility.

Volatility overstatement occurs when implied volatility is greater than realized vola tility. Implied volatility is the forecasted move, within one standard deviation from the under lying price in a given period of time.

It’s common to examine implied volatility over 30 days or one year. A low implied vola tility means that the market isn’t expecting prices to move much, whereas a high implied volatility is the opposite.

In the past five years, implied volatility has overstated realized volatility 77% of the time in the S&P 500.

Premium sellers—who are defined as choos ing to sell options contracts instead of buying them—profit from the passage of time or being directionally correct when realized volatility is lower than implied volatility.

It’s difficult to be right consistently on direc tion, and the passage of time can be forecasted. Some premium sellers have opted to trade based on the assumption that realized volatil ity will come in lower than implied volatility.

Recurring trend

Realized volatility increased by an average of 4.3 points leading up to the past seven midterm elections since 1994.

Approaching midterms

Realized volatility change

Average (in points)

4.30

Implied volatility change 0.30

Volatility overstatement 0.19

Because implied volatility is a key variable in options pricing, options prices are high when implied volatility is high. The higher the price of an option, the farther a trade’s breakeven is from the market price.

If the market is pricing in a 10% move in the underlying via the implied volatility, but the actual move is only 5%, that’s a volatility over statement that potentially enables premium sellers to realize a profit. For context, in the past five years, implied volatility has over stated realized volatility 77% of the time in the S&P 500.

For premium sellers looking to place a trade for the midterms, it’s valuable to look into what happens to volatility in November during a year of midterm elections. Going back to 1994 and looking at the past seven midterm elec tions, realized volatility increased by an aver age of 4.3 points leading up to the election.

In the months before November of each of those years, realized volatility was 4.3 points lower than in November. The same trend can be seen in implied volatility, but to a smaller degree, with implied volatility 0.30 points higher in November than it was before the midterms.

More than 50% of the time, realized and

Data as of Sept. 18, 2022

implied volatility were both higher in Novem ber of a midterm election year than before the elections. Active investors who are day-trading futures or stock around election day should be cognizant of the increased volatility.

In terms of volatility overstatement, implied volatility was higher than realized volatility in 57% of the previous midterm elections. The average overstatement was 0.19 points, mean ing the market had priced in higher volatility than was actually realized. For premium sell ers, that’s the ideal scenario, and it means they could sell options that priced in larger price changes than actually occurred.

Although realized and implied volatility historically increased coming into midterm elections, it’s difficult to draw a conclusion from this data with confidence. With only seven previous occurrences, the sample size isn’t large enough to say confidently that one thing will or will not happen.

Regardless, if investors are using stocks, options or futures, it’s important to be mind ful of potential volatility around events like elections.

Eddie Rajcevic, a member of the tastytrade research team, serves as co-host of the network’s Crypto Corner and Crypto Concepts. @erajcevic11

MEET

Chicago Age

20 Years trading

3

How did you start trading?

In high school, I ran a high-end street wear and sneaker reselling business, which taught me how to assess invest ment risk and led to my interest in capi tal markets. Soon enough, I purchased a course on fundamental investing and technical analysis, only to grow over whelmed by the seemingly infinite number of indicators and subjective financial ratios. After traversing many more books, I learned some costly lessons by actually “trading.” (If you could even call it that.) I was ready to close up shop—until Reddit saved me. After scouring the internet for hours, searching for a more objective way to trade, I stumbled across an options-selling subreddit. I was intrigued by the idea of being able to profit from a trade even if I was wrong on the directionality of an underlying. My research intensified during the pandemic, and soon enough I was spend ing half my day learning the ins and outs of volatility arbitrage strategies. As I learned, the markets continued to slide and options premi ums exploded. I was learning the right strategy at the right time with ample liquidity.

Favorite trading strategy?

Double diagonals during earnings season. This is an iron condor on steroids. There is no better feeling than reducing the cost basis of your trade by 20%-40% in just a few days. Derisk ing is the name of the game and I believe it’s

3

5

an important equation that many traders over look because they want to hit home runs.

Average number of trades per day? 1 to 2

What percentage of your outcomes do you attribute to luck?

About 10%. I focus on objective trading strate gies and don’t care much for luck. Given that I focus on delta-neutral strategies (which often times give me room to be wrong), I focus more on protecting myself from unlucky moves instead of making money from lucky moves.

Favorite trading moment?

When I realized the power of simplicity. Too many traders complicate too many variables.

Worst trading moment?

In fall 2021, natural gas futures doubled. In the

midst of this move, I decided to sell additional strangles every time volatility expanded. After about a month, I had a five-lot position open and quickly realized how oversized I was after waking up to a $30,000 loss on the day. Luck ily, this trade ended in the green but could have easily been a widow maker.

Favorite trading book

The Missing Risk Premium: Why Low Volatility

Investing Works by Eric Falkenstein

Want to be featured as the next issue’s trader? Have story ideas? Let us know: tips@luckboxmagazine.com

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A Pretty Safe Prediction

U.S. Treasury Secretary Janet Yellen isn’t the only one seemingly in the dark about inflation. The whole world’s wondering when the pain will end and what’s next.

But intrepid prognosticators thrive on conquering uncertainty, and thus Luckbox is forging ahead with its annual report on forecasting. Look for it in combination with the annual gift guide in the December issue.

Once again, readers can match their prediction skills against our curated panel of market pros and prognosticators. See how much you agree with the experts’ expectations for outcomes in the worlds of business, finance, markets, politics and sports in 2023.

despite the current consensus that her job is safe if the Democrats retain control of the Senate.

In the face of President Joe Biden’s low approval ratings (36%) on his handling of the economy and with persistent inflation at 40-year highs, Yellen’s confession to CNN’s Wolf Blitzer presages her departure.

“I was wrong about the path inflation would take and that inflation only posed a small risk,” Yellen told Blitzer.

A likely (if not inevitable) confirmation of an official recession in 2023 would be the final blow.

Make your 2023 forecasts here!

Yet, there’s no need to wait until the next issue. To get into the prediction spirit, let’s go on the record early. We expect Yellen to resign her post after the midterm elections

A guaranteed outcome? Hardly. But forecasting isn’t for the timid. In fact, it’s fraught with risk. Take the example of the Luckbox readers who predicted a year ago that the NFT market would grow in the first quarter of 2022 and the Tampa Bay Buccaneers would win Super Bowl LVI.

Still, Luckbox respects the wisdom of the crowd, so let’s hear from you. Scan the QR code on this page or visit luckboxmagazine.com/ survey to submit your 2023 forecasts.

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