Smart money for Joe Biden, but punters back Donald Trump

Many Australian punters are backing Donald Trump, left, even as the big money favours Joe Biden. Picture: AFP

The money vote has been cast. The big money in both the US and Australia is on a clear Joe Biden win in the race to be the 46th president.

But many ordinary Australians have a very different view.

Joe Biden is expected to spend larger amounts than Donald Trump to restore the US economy so while the ballot was in progress US shares rose strongly as investors favoured hard assets.

Gold busted through the $US1900 an ounce barrier while 10-year bonds were friendless and the yield jumped to its highest level since June.

A Donald Trump clear win would surprise the share market but would not be a catastrophe.

On the other hand if the “smart money” is wrong and the election ends in a quagmire with no result for weeks, then the share market will fall sharply.

In following the “smart money” the place to start is the bookmakers. In Australia they are betting big on Joe Biden.

By contrast, many ordinary Australians have a love affair with Donald Trump and thousands upon thousands of them have “put their money where their mouth is” and gambled in the vicinity of $75 million on Donald Trump becoming a 46th president of the US.

We have had Melbourne Cup day (US time) US presidential elections before but 2020 has attracted a volume of Australian betting that rivals the classic horse race.

And almost all the money has been put on Donald to win.

Many Australians have ignored the US opinion polls and commentators and followed their heart.

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There is a long tradition of affinity between ordinary Australians and Americans and it will be fascinating to see if that affinity and similar values are reflected in the election result.

In the US Republicans say ordinary voters are too scared of physical attacks or home damage to tell pollsters that they are voting for Trump. I have no idea if that is right.

Of course also attracting Australians is the fact that the bookmakers in recent days were offering $2.50 for every $1 placed on Trump. On polling day the betting opened with even longer odds at $2.88 for a Trump win and $1.40 for Biden.

The Australian bookmakers believe the US opinion polls forecasting a Biden win are right and that ordinary Australians are betting with their hearts rather than their brains.

In that context it was fascinating this week to see the ABC head of news isolating the fact that there is an ” inner city left-wing elite” in Australia. He did not detail their views but we all know that for most “I hate Donald Trump” is one of their slogans.

Very few would place their money on Trump becoming the 46th US president.

What the ABC news chief has isolated is that there is a vast group of Australians outside the “inner city left-wing elite” who don’t hate Donald Trump and have very different views to those popularised in many sections of the media.

If ordinary Australians are going for Trump then by contrast US coal investors fear that Biden and his anti-coal policies will win. In the US the price of shares in the largest producer Peabody have collapsed spectacularly. At the start of the year prior to COVID-19 Peabody shares were above $US10. They were $US4 seven weeks ago but as the opinion polls made Biden look a certainty Peabody shares fell further. As US voters were voting they fell as low as $US1.26---down three per cent on the day. At that price the giant Peabody company, with major interests in Australia, is capitalised at just $US125 million. It has long-term loan debts of $US1.7 billion including some $500 million due in March 2022.

By contrast some of the big fracking oil producers fell sharply earlier in the year but have held the lower levels as the election approached.

Earlier in the year the Democrats were firm they were planning to ban oil fracking. But now they are having “a bob each way”. Investors reckon banning fracking would cause too much chaos in the US.

Meanwhile the 10-year bond market believes that Biden will win and spend vast sums which will help asset values but will squeeze the bond market. Accordingly, the yield has been rising. Three months ago 10 year bonds yielded 0.51 per cent. During the ballot they edged up to 0.88 per cent ---an increase of over 60 per cent during the election battle.

The greatest fear in all markets is that there will be no decision until late December/ January as the dispute gets bogged in the courts .

Former Australian treasurer Joe Hockey, in his excellent weekly comment in The Australian, alerted us to this possibility a month or so ago. Markets desperately want either Trump or Biden to have a clear win.