Between the 1929 stock market crash and the 1932 election there was a small matter intervening, called the Great Depression. It is not controversial to say that the crash was not its cause, but rather a symptom of the developing broad economic collapse. More to the point of my post, Hoover received a very strong challenge from Coolidge and Blaine and his candidacy was heavily bruised going into the ballot.

In 2008, the market went into bear territory a good 6 months before McCain’s bounce, nor was he the sitting president.

Grant that it is impossible logistically for Greece to exit the Euro by November, but rather that the probability that they will exit in the near term goes up.

But that probability has been approaching 100% for many months: certainly since the second austerity round, in which it became clear that Greece would have to sell off its revenue-producing assets at fire sale prices to get through the (rather long) short-term liquidity problem.

As soon as “clearly illiquid” became “likely insolvent,” the game was over, and everyone who matters from a financial markets perspective knew it. (Look at the cash flows of the HNW Greeks.)

Greece leaving the Euro won’t be a non-event, but it’s not going to cause a European recession. (Germany is quite capable of doing that themselves, with a bit of help from the Brits.) Let us not confuse which is cause and which is effect.

A Greek exit–and, more importantly, a Greek exit plan–would be an indication that Europe in general and the EU in particular sees a way out of their fiscal crisis.

It won’t save Obama–see GHWB in 1992, though without his predecessor’s clear Desire to Do Other Things–but an exit plan that looks as if the light at the end of the tunnel isn’t owned by SNCF or Deutche Bahn would be a positive prospect.

‘While (Felix) the cat is (holidaying) away, …’ – why not stage a micro-coup d’etat today?

Does anybody (besides me) have any lingering thoughts about this piece? – http://blogs.reuters.com/felix-salmon/20 12/05/22/how-gawker-wants-to-monetize-co mments/?utm_source=dlvr.it&utm_medium=tw itter&dlvrit=60132

Here are the relevant high-points of it –

“at most other popular sites, the number of people reading the comments is vastly greater than the number of people writing them. But the way they’re presented, they’re not easy to read, …

“the fact is that even though there are many more readers than there are commenters, there are also many more commenters than there are posters. And collectively, those commenters are faster and funnier and more knowledgeable than the staff of any website….

“forums have been around on the internet since the 90s, and no one’s managed to reinvent them yet….

“editorial product is very much moving towards comments and away from posts, … Expect … blog posts to get shorter, in future, and sometimes just be a headline, at least in the first instance, so that the conversation can get going before a pretty post can be put together.”

And KenG adds this – “Speaking of comment systems, can you guys update the one Reuters uses? It’s kind of outdated, ya know.”

With you there, Ken – the archive system is archaic, and not having any search or edit functions at all is a pain. Which raises the question – what’s the right direction for this blog to go?

I sort of like the idea of going semi-forum format, as Felix describes the trend, but the big question is – will Felix be the only one who writes OPs? I kinda hope so on one level. Having seen what happens to formerly intelligent sites that grow in membership (like INTJf) – the quality level suffers a fatal dilution. So, bells and whistles and the ability to write OPs to attract more commenters – I hope not. Felix is half of what makes this blog special, but the character/quality of the commenters is the other (fragile) half.

How to make it better without jeopardizing what makes it special? IDK. You?

How to make money from it? That’s Reuter’s problem.

Well, .. um.. yeah – but it’s a Friday piece ahead of a long weekend, so, just about anything ….

It seems to me likely the 1932 election was rather strongly influenced, maybe even swung, by the stock market drop 3 years before.

And what about the 2008 election? Before the bottom fell ut of the stock market, McCain was enjoying a nice post-convention bounce, he and his mavericky VP choice seemed all the rage, lipstick on the pitbull and all.

the blow torch of higher gasoline prices showed he miscalculated

clinton has gone quiet and iran is back at the negotiation table

grexit is only a transitional side dish – eurozone fiscal reform is the main menu

However, in general I don’t think it matters. There are simply far more variables to an election than you note, and you’re simply pulling selected probabilities out of thin air. If it’s possible to model election results, I would suggest starting with either a discriminant analysis or a time series. But I don’t think what you’re trying to do is even remotely possible.

As you and everyone else has pointed out, they are just not that big a player. If between now and Grexit election the market internalize the risk and factors the discount, the final event will not be significant. Spain and Portugal are a larger canvas that will allow for other options. Greece, in the embrace of chaos, has lost its seat at the table, not so Spain and the rest.

F actually depends solely on the result of the June 17th Greek elections. Either there will be a pro-austerity government after the elections and a Grexit will not happen (or if it ever happens not before the US elections), or the Grexit will happen before the US elections.

A cannot influence F since any serious changes to A won’t happen until after the 2nd round of the French parliament elections, which is also on June 17th (and Hollande is e.g. in his demands for Eurobonds currently vague enough for allowing him to claim later that all he wanted was common EU debt for a few billion Euro in additional EU infrastructure projects).

The Greek have an interesting feature in their elections that one sixth of the seats in parliament are additionally given as bonus to the party that gets most votes. Current polling sees a head-to-head race between ND and SYRIZA, so I’d give ND a 50% chance of getting most votes.

If SYRIZA gets most votes, I don’t see any chance of a government that would avoid a Grexit.

If ND gets more votes than SYRIZA, and PASOK and other parties who might join a coalition don’t have too disastrous results, there will be no Grexit before the US elections. If ND gets more votes than SYRIZA, I’d assume a 90% probability of avoiding a Grexit.

Everyone in the EU is busy using the 6 weeks between the May elections in Greece and the June elections in Greek for planning the case of a Grexit. No matter if it is about the effects on banks in other EU countries or about delivering medication to the Greek people (it would be inhuman not to give medication to a EU citizen only because he and/or his country is bancrupt), the EU planning of the details for coping with a Grexit is already pretty far today. And since the French elections will end on the same day as the Greek elections, Hollande will also be able to act more freely then. I’d therefore assume an 80% probabilty that there will be a a credible, coordinated and constructive pan-EU response to a Grexit.

H is the number I care about here in Europe, I and X are much less relevant for me (and when talking about “something which is pretty much entirely out of Obama’s control” an Israeli attack on Iran has IMHO a higher probability than a big European crisis).

E: ND gets more votes than SYRIZA
My guess: 50%

F: Overall probability of Grexit before the US elections
My guess: 1 – (90% * E)) = 55%

G: If we have Grexit, what are the chances of it eliciting a credible, coordinated and constructive pan-EU response?
My guess: 80%

H: This is the probability of a big European crisis before the election, it’s F * (1-G).
My guess: 11%

So you really want to know the probability the response is CCC *conditional on* grexit happening prior to the election, which is probably lower than G.