Election Shenanigans
This is either the trade idea of the century, or we're all getting rugged
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A couple of very uneventful days in markets to start the week, set against an exciting macro backdrop.
The election is 2 weeks away, and everyone I know is frantically trying to figure out what’s going to happen there.
Betting markets have priced Trump as a significant favorite. Of the various betting sites Polymarket is the most bullish Trump, but the others are not far behind.
Interestingly, the betting odds have differed substantially from the major forecasters. Nate Silver from the Silver Bulletin, and formerly Five Thirty Eight (which sucks now since Nate left), has the election pegged as a virtual toss-up.
Recently, Nate’s forecast has lagged sites like Polymarket (in that it is slowly following Trump up the odds) so there is some chance they will match more closely by election day.
Meanwhile, Trump’s DJT 0.00%↑ stock has been pumping off the lows.
It’s a confusing slate of data for those of us who are trying to handicap what is undoubtedly the most important macro event on the horizon.
I want to flag something for you guys that is moving markets but isn’t widely understood.
Fredi9999
There are 5 accounts on Polymarket, all linked to one another based on their activity, who are absolutely mashing pro-Trump orders into relatively illiquid books. Combined, this person or conglomerate has bought up $50,000,000 of Trump-related shares on Polymarket.
$50,000,000 is a lot of money, but set against the backdrop of almost $2b in volume on Polymarket’s election markets, it’s not that much… right?
Wrong.
The total open interest on Polymarket, across all their markets, is only ~$225,000,000. Fredi and his associated accounts represent almost 25% of Polymarket’s outstanding share values.
To give you an idea of just how illiquid these books are, note the dip on the following chart that occurred on October 19th.
Something happened that night that sent the election odds from 60/40 Trump/Harris to 55/45. What was it?
Well, over the course of an hour, two accounts initiated about $1.5m in Kamala-related buys. That’s it. That’s all it took.
So then, how much signal is there in these markets? It’s hard to say.
On the one hand, when you look at how much that $1.5m set of orders moved the markets, you’d be inclined to say, “These have been horribly distorted by Fredi9999!”
On the other hand, look at how quickly the market bought that dip up and returned to some sort of equilibrium.
It’s a confusing situation, made more so by Fredi continuing to pump seven-figure clips into the market almost every single day lately.
As long as he continues doing this, it will be difficult to gauge the market's true equilibrium. We can assume Trump’s edge isn’t worse than Nate’s model, and we can assume it’s not better than Fredimarket (Polymarket). So that gives us a fair-value range of 53-63% Trump.
That’s a hell of a range to try to trade on.
Why, Fredi, Why?
The other big looming question is: who is Fredi? Is he just a Donald Trump super fan? Is he a campaign insider?
Supposedly, he’s French, a deduction I believe was made from looking at when he is most active in the markets and some other guesses about how he speaks English in his Polymarket comments.
Is he some giant French whale? Or is there something more sinister going on?
One theory is that Fredi is using this relatively illiquid market to move other real-world assets. There has been a lot of talk about the “Trump trade” in bonds, and the election odds influence tons of assets worldwide. Could he be using this relatively illiquid market to manipulate those?
It’s possible. One likely candidate for that would be DJT. It trades very closely to these Polymarket odds, but with way more volume. DJT trades as much volume daily as Polymarket has had in their entire election market.
And they trade very closely.
Did Fredi spend $50m on Polymarket to pump a stock he could get $50m/day in volume into, with the plan to rug (sell) it right before the election?
I couldn’t possibly say. If he did… DJT 0.00%↑ will be an incredible short at some point here, won’t it?
Trading the Election
I’ll watch the Fredi situation and keep you posted as it develops.
I’m also working on a post about election baskets for each candidate. That’s coming soon, but I’m waiting on something outside my control.
The clock is ticking.
Be sure you’re subscribed so you don’t miss any of these election updates.
Good luck out there.
Disclaimer: The information provided here is for general informational purposes only. It is not intended as financial advice. I am not a financial advisor, nor am I qualified to provide financial guidance. Please consult with a professional financial advisor before making any investment decisions. This content is shared from my personal perspective and experience only, and should not be considered professional financial investment advice. Make your own informed decisions and do not rely solely on the information presented here. The information is presented for educational reasons only.
https://open.substack.com/pub/billionairbear/p/trump-on-joe-rogan?r=1g5bw0&utm_medium=ios