Two Types of News: Elections vs Crashes

Some events are like elections: it was obvious that some big political news would break on Election Day, we just had to wait to find out what exactly would happen. Others are like market crashes: you might know in principle they’re a thing that can happen, but you don’t really expect any particular day to be the day one happens, so they seem to come out of the blue. As it turns out, for one of the largest crypto exchanges the day of the crash also happened to be Election Day.

FTX.com is facing a bank run sparked by competitor Binance tanking the price of the token that backed some of their assets. Customers are having issues withdrawing their money, Binance has withdrawn its offer to bail out FTX by taking them over, and bankruptcy seems likely. Supposedly this doesn’t affect Americans using FTX US, but I’d be nervous about any funds I had there, or indeed with funds in any centralized crypto exchange or stablecoin (Tether and even USDC seem to be having issues holding their pegs). All this was especially shocking because many considered FTX founder Sam Bankman-Fried one of the most trustworthy people in the often sketchy world of crypto. He was always meeting with US regulators and lawmakers, and seems not to be motivated by greed; he had already begun to give away his fortune at scale.

After any surprising event like this, some people claim it was actually obvious and they saw it coming (despite usually never having said so beforehand), while others start looking back for warning signs they missed. The most interesting one is something that shocked me when I first heard it March, but I never considered the risk it implied for FTX until the crash:

Going forward, red flags to watch out for seem to be topping a list of youngest billionaires (as Elizabeth Holmes also did) and buying naming rights to a stadium.

In contrast to this crash, the election happened right when we all expected, and at least largely how I expected. Like markets, I underestimated Democrats a bit; polls overall were impressively accurate this year, though they of course missed on some particular races. Votes are still being counted, and as of now we don’t even know for sure which party will control Congress (PredictIt currently gives Democrats a 90% chance in the Senate and a 20% chance in the House). But here are some early attempts to assess forecast accuracy. As I said, some polls were quite good:

Some polls weren’t so good, which means its important to weight better pollsters more heavily when you aggregate them. Some attempts at that were also quite good:

Oddly, some no money (Metaculus) / play money (Manifold Markets) forecasting sites seem to have done better than the real-money prediction sites:

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