On Mandelson, money, and oil

I apologize for the light blogging as of late. I’m starting a new job next week and moving very soon thereafter, so I’m trying to get about a million things done before then.

Three thoughts. First, you’ve no doubt seen that Gordon Brown, in an attempt to shore up his eroding political position, has asked Peter Mandelson (his once arch-enemy) to join his cabinet. Mr. Mandelson was formerly the EU Commissioner for Trade (rough equivalent to the United States Trade Representative.) His departure is a serious blow to multilateral trade negotiations, and it makes it that much less likely that we’ll see a Doha deal in 2009. In my opinion, he understood how far he could successfully push the EU position to the inch, and he had no problems standing up to some of the more recalcitrant members. His departure also seriously diminishes the institutional memory of the major negotiators, which means quite a bit in trade talks.

Second, after tonight’s debate, we can probably start talking about the McCain campaign in the past tense. He looked worse than usual tonight: old, irritated and tired. Mr. Obama didn’t have a great night either, but you don’t need to shake things up when you’re in a commanding lead. Tonight was one of Mr. McCain’s last chances to do something, anything, to reverse that. Aside from proposing that the Treasury buy everyone’s mortgage (I’m pretty sure that was new) and simultaneously proposing a government-wide spending freeze, he didn’t do much. I think he’s toast, and I will argue, as I have done repeatedly in the past, that contracts for Mr. Obama winning the presidency are still undervalued on Intrade. Fivethirtyeight’s electoral projections give Mr. Obama a nearly 90% chance of victory, which strikes me as closer to the reality. His Intrade contract is trading for $7.20ish. Do the math. If you buy right now, and he wins on Nov 4th, you’re making a 39% return in less than a month. Did I mention that Intrade trades contracts worth Real Money?!? Now who said there weren’t good investment opportunities in today’s markets? It just depends on which markets you look in.

Finally, great post by my illustrious coauthor yesterday about the “black lining” (catchy!) of the current economic turmoil: oil prices closed below $90/barrel, although I think they went back above that mark today. Either way, they’re down nearly $60/barrel since July. The point is, commodities correlate well with economic growth: you need more oil, copper, and aluminum to make stuff when the economy is good and demand for ‘stuff’ is strong, so the prices of inputs (commodities) rise as well. Problem is, now that everyone thinks the economy is going to hell in a handbasket, commodities prices are tanking. Great if you want to buy into the market, not so great if you like strong economic growth. So while Nick is right that less oil revenue frustrates the plans of nasty petro-crats, I’d qualify this slightly by saying oil prices are low for the wrong reasons. We want prices to be low because a diversified energy portfolio means we’re demanding less oil, not because we simply can’t afford it. The foreign policy implications may actually be more, not less, dire than we imagined.