Neel Gets A Brief Surge Before Falling
Wednesday was a very interesting day for the Fed prediction market because Neel Kashkari made his debut. This was spurred by Jeffrey Gundlach’s interview on CNBC where he named Neel as his non-consensus pick. The ironic part of this is that his non-consensus pick became the consensus pick because of his statement. I am very familiar with Neel’s opinions because he’s active on Twitter. He is in favor of deregulating the small banks and he has been a dove lately. He has been called the most unpredictable Fed Governor so Gundlach calling him a dove was a poor assessment. Either way, Gundlach drove Neel to about 30% in the prediction market before Steve Liesman reported that Trump hasn’t interviewed Neel. Now he’s at 8%. Being above 0% makes sense to me because he’s a good fit. At this point, I think Warsh and Powell are the frontrunners. Neel could become one if President Trump interviews him. While there are no reports yet, that doesn’t mean it isn’t possible. We all know President Trump pays close attention to the news. Gundlach could inspire him to consider Kashkari
The chart below lists the top 5 contenders with their odds. I think Neel is priced reasonably because he’s a good fit, but hasn’t been interviewed. I think Yellen is too expensive because she is strongly against deregulating the banks. She was only interviewed because she holds the position currently. I only thought she was a slight contender back a few months ago when we didn’t know if Trump could find someone who fits his needs. I also think Cohn is too expensive at 12% because he has no experience. President Trump can’t just put someone he likes in a position if they don’t fit well. Plus, the President criticized Cohn over the handling of the Charlottesville riots. I think Powell is underpriced because he has met with President Trump, is a dove like Yellen, and has private sector experience. He might not deregulate the banks as much as the President wants, but the status quo monetary policy has worked for the first 9 months of Trump’s presidency.
