Slate Money — The Oh Sh*t Edition

Date: November 12, 2016
Host: Felix Salmon, with Kathy O’Neill and Jordan Weissmann

Overview

This “Oh Sh*t” edition of Slate Money, recorded in the immediate aftermath of Donald Trump’s surprise victory in the 2016 presidential election, focuses on the unexpected result’s political and economic fallout. Hosts Felix Salmon, Kathy O’Neill, and Jordan Weissmann candidly unpack the market’s reaction, expectations for Trump’s economic policy (especially infrastructure), and the polling failures that misled pundits and the public. They also reflect on coping strategies for the Trump era and end with a tribute to Leonard Cohen, whose passing happened the same week.

Key Discussion Points and Insights

1. Market Reactions: What Really Happened After Trump’s Win (00:46–06:57)

• Pre-Election Market Fears:
  Analysts, based on regression analyses (notably by Justin Wolfers), predicted a steep market drop if Trump won. For example, a 10–20% crash was feared due to Trump’s perceived unpredictability and supposed market unfriendliness (01:33).

  • Quote: “If Trump wins, we’re going to see the stock market crash by 10%. I know Bridgewater thought that was like, low.” — Felix Salmon (01:33)

• Election Night Volatility:
  Futures plunged as results came in, the Mexican peso hit an all-time low—but markets rebounded quickly, even rising in some sectors by week’s end (03:27–03:54).

  • Quote: “I did tweet for a timestamp that I felt like markets were way overreacting... and then actually the S&P 500 was up at the end of yesterday.” — Jordan Weissmann (03:27)

• Why the Turnaround?

  • Dow Jones (old-economy stocks) surged; Nasdaq (tech-heavy) lagged.
  • Bond market declined (yields rose), suggesting expectations of inflation due to anticipated fiscal stimulus.
    • Quote: “The bond market, which is the one which really matters, is down.” — Felix Salmon (04:49)

• Sector Winners:
  Banks, private prisons, fossil fuels, healthcare, and sectors expecting deregulation/privatization saw massive gains.

  • Quote: “The eight biggest banks had added $53 billion in market cap alone.” — Jordan Weissmann (06:28)

2. Trumpian Fiscal Policy: Infrastructure, Deregulation & Inflation (07:17–22:51)

• Expectations of Inflation:
  The market started pricing in higher inflation, tied to Trump’s promise of massive spending and indifference to deficits.

  • Quote: "People are expecting Trump to spend like a motherfucker. That's like...no heeds for deficits." — Jordan Weissmann (10:06)

• Infrastructure Plans—Not New Deal 2.0 (13:09–16:58):
  Contrary to popular belief, Trump’s plan centered on privatization, using ~$200 billion in tax credits to incentivize private construction of infrastructure (toll roads, bridges, etc.), rather than direct government spending.

  • Quote: "It's a privatization. It's private roads, private bridges, private toll roads, things like that. And it’s not what a lot of people probably have in mind." — Jordan Weissmann (14:33)

• Implications & Criticisms of Privatized Infrastructure:

  • May not target needs of low-income or rural areas; projects likely to favor wealthy users.
  • Possible inefficiencies: higher borrowing costs for private sector, possibly leading to more expensive infrastructure and “white elephants.”
    • Quote: "The mechanism actually does matter...the answer might very well be roads that rich people use, not roads that poor people use.” — Kathy O’Neill (16:14)

• Political Feasibility:

  • Potential hurdles in passing infrastructure plans through the Republican-led Congress.
  • Trump’s ability to control Congress and unite the GOP remains an open question.
    • Quote: “It’s not clear...I have not seen a sign from Paul Ryan that he really wants even this private infrastructure bill.” — Jordan Weissmann (20:17)

• Privatization Beyond Infrastructure:
  Anticipation of a broader push toward privatization (prisons, healthcare, education), with concerns about future social safety net reductions.

  • Quote: “This is going to be a heyday for...private prisons, private for-profit colleges, private roads. You're going to see cuts to healthcare for the poor.” — Jordan Weissmann (22:51)

3. Market Risk & Uncertainty (23:34–25:15)

• Higher Tail Risk:
  While indices rose, Trump’s unpredictability increased the risk of catastrophic scenarios (“downside tail risk”). Markets may seem calmer, but derivative markets reflect this heightened uncertainty.

  • Quote: “Much higher downside, tail risk...There’s a bunch of crazy apocalyptic things which have become more likely now.” — Felix Salmon (24:03)

• Winners in Uncertainty:
  Derivatives traders benefit from volatility and unpredictability; robust markets for out-of-the-money options.

  • Quote: “Derivatives traders love uncertainty. That’s where they make their money.” — Kathy O’Neill (24:48)

4. Polling: Misfire and Misplaced Faith (25:15–34:58)

• Disdain for Polling’s Obsession:
  Kathy O’Neill denounces the endless man-hours spent on polls and analytics instead of substantive issues.

  • Quote: “What a fucking waste of time.” — Kathy O’Neill (25:48)

• Clinton’s "ADA" Algorithm:
  The campaign’s secretive polling and analytics machine, built to allocate resources, failed to predict the outcome—but polling’s failure was broader and systemic.

  • Quote: “ADA is...used to decide what, you know, where Clinton should go...which swing states were at risk.” — Kathy O’Neill (26:48)

• Root Causes of Polling Failure:

  • Sampling biases: Trump supporters less likely to speak to pollsters or admit their preference.
  • National polls were closer than state polls; state-level errors in the Midwest proved decisive.
    • Quote: “Polling on the state level is what was so truly bad. That's what we missed.” — Jordan Weissmann (30:08)
    • Quote: “People coming out of the polls and saying that they voted for Clinton when they voted for Trump [exit polls].” — Felix Salmon (37:04)

• Factiness vs. Truthiness:
  Overreliance on data (“factiness”) missed the unique, unprecedented nature of Trump’s candidacy.

  • Quote: “What you want to predict is unpredictable with data science, because what they always want to predict is something that has never happened before and Trump has never happened before.” — Kathy O’Neill (32:27)

• Silver Lining:

  • Hope for future elections with less focus on polling minutiae, more on substantive policy debate.
    • Quote: “Maybe next election we can talk about issues rather than stupid poll numbers.” — Kathy O’Neill (35:35)

5. Coping in the Trump Era: Direct Action and Charity (38:54–40:52)

• Hosts Share Coping Strategies:
  Each contributes to organizations/action plans they feel are most vulnerable under Trump:
  • Felix donated his stock market profits to the ACLU and Planned Parenthood.
  • Jordan increased support to local food banks, expecting SNAP (food stamp) cuts.
  • Kathy emphasized supporting journalism and legal defense funds.
  • A call to listeners: share what you’re doing, build community resilience.

6. Notable Quotes & Memorable Moments

• “[Trump’s] not a market friendly candidate... but [markets] rose.” — Felix Salmon (02:29, 03:51)
• “He’s going to do a giant infrastructure bill of some kind, which we will get to... The Republicans in the House are talking about these massive, massive tax cuts.” — Jordan Weissmann (08:48)
• “The mechanism actually does matter... you really are incentivizing these private companies to look at which roads will give them the biggest profit.” — Kathy O’Neill (16:14)
• “We should have just fessed up and said, let's just wait and see.” — Kathy O’Neill (32:27)
• "Derivatives traders love uncertainty. That's where they make their money." — Kathy O’Neill (24:48)
• “Maybe next election we can talk about issues rather than stupid poll numbers.” — Kathy O’Neill (35:35)
• “You're going to see America inked, you know... that's kind of the Republican vision for the country: private market solutions, quote unquote, for everything.” — Jordan Weissmann (22:55)
• “Please tell us what you’re doing right now to try and make the world a little bit of a better place and we’ll sum it up and put it up on the show page.” — Jordan Weissmann (40:16)

Timestamps for Important Segments

• Market reaction & analysis: 00:46–06:57
• Trump’s economic policies & inflation: 07:17–13:09
• Infrastructure privatization deep-dive: 13:09–18:58
• Policy feasibility & GOP dynamics: 18:58–22:51
• Meta-risk, market volatility: 23:34–25:15
• Polling & analytics critique: 25:15–34:58
• Hope for substantive debate, future elections: 35:35
• Numbers round & charitable responses: 38:54–41:03
• Leonard Cohen tribute: 41:53 (see closing)

Closing Tone & Leonard Cohen Tribute

The episode closes on a somber but resilient note, both mourning and finding solace in community, charity, and shared culture—echoed in the tribute to Leonard Cohen, who passed the same week (41:53). The hosts encourage practical action and mutual support during unsettling times.

This episode is an honest, at times cathartic, take on unprecedented political-economic shock. It mixes market analysis, policy wonkery, soul-searching, and activism—with the wry, conversational Slate Money tone intact.