Content summary

Introduction to the report / core points

This election may lead to a variety of controversial results by mailing votes, but the essence is that Trump may refuse to accept the potential defeat and take advantage of the political risks. Gold will have a pulsating phase under the risk of an election.

After Trump's diagnosis, the election situation deteriorated sharply, and the possibility of the Democratic Party sweeping both houses increased.

The election situation deteriorated rapidly after Trump's diagnosis, and the "real gold and silver" election forecasts, such as odds and fundraising scale (the caliber of committee fund-raising counted by FHC), have fallen sharply recently.

At the congressional level, the probability calculation of FiveThirtyEight also shows that the possibility of the Democratic Party sweeping both houses of Congress in the general election is gradually increasing. Among them, the Democratic Party has a significant advantage in the House of Representatives, and there is little doubt that the Democratic Party will continue to control the House of Representatives after a smooth re-election; in the Senate, the Democratic Party may gain control by 51:49 in the proportion of seats, the seat advantage is not yet obvious, and the outcome is still uncertain. There is a good chance that the final election result will be consistent with the presidential election result.

Postal voting is only a clash of appearances, and the essence is that Trump refuses to accept the result of the election and then takes advantage of the issue.

Although the proportion of mailed ballots has increased sharply this year, some key swing states also have a higher proportion of mailed ballots in the actual 16-year election. The essence of mailing votes this year is that Trump may refuse to accept the result and take advantage of the issue. There are indeed many operational risks in the process of mailing votes, which may be exploited if the candidate refuses to accept the result of the election, and many controversial scenes may be magnified by Trump and become a tool for campaign profit. While mailing the vote will help Biden take full advantage of the election, it could also be a life extension for Trump's refusal to accept a potential defeat.

Dispute 1: mailing ballots delays election results (or benefits Trump)

Trump may take advantage of mailing votes to benefit his own election through judicial means, which in turn leads to a policy stalemate and delays or dystocia in the election results. The first is to further question the validity of mailing ballots. Republicans may eventually gain a marginal advantage in the ballot lawsuits appealed by judges, and may give Trump an advantage by invalidating some of the Biden votes.

Second, it is possible to delay the release of the election results until December 8 (the safe harbor date) through judicial disputes, and then appoint an electoral college in favor of Trump by virtue of the legislative advantages of the six swing states. But the controversial move could trigger opposition from some ruling governors (the Democratic governors of the four swing states) and then bring the controversy to Congress. After the change of Congress, the controversial outcome will be decided, and in the standoff between the two parties in Congress, Pence may make a decision in favor of Trump by virtue of his capacity as president of the Senate. But whether Trump can gain this judicial advantage will greatly depend on the outcome of the change of Congress.

Dispute 2: there are operational and delivery risks in mailing ballots (or in favor of Trump)

At the operational level, mailing ballots may fail due to problems such as filling and binding. At the delivery level, the United States Postal Service may not be able to load a large number of votes, and the delivery process may lead to the expiration or loss of votes. Democratic voters far outnumber Republicans in favor of mailing ballots, a risk that will give Trump a marginal advantage.

Dispute 3: Congress also faces election turmoil (neutral, exacerbating uncertainty)

The result of the congressional election will greatly affect the trend in the "dispute 1" scenario, which in extreme cases may lead to prolonged dystocia of the election result. In addition, since the presidential and congressional elections share a single vote, if the result of the presidential election is controversial because of the ballot, it means that a similar situation may also exist in the congressional election. In this scenario, the United States may face a judicial crisis.

Under the political stalemate, gold may have a phased market and return after uncertain events have calmed down.

The controversial results of the general election are essentially political risks caused by Trump's possible refusal to accept the outcome of the election. There are two extreme risks: one is that if Trump could be re-elected through judicial means when the election situation is at a substantial disadvantage, it could lead to domestic demonstrations and even riots and political instability in the United States. Second, if the result of the presidential election continues to be difficult to give birth, it will lead to a lack of real "leaders" in the United States and lead to a long-term political stalemate. Under the circumstances of political uncertainty in the United States, gold may surpass the US dollar as the best tool for phased risk hedging in this election, which will be accompanied by a pulse of risk events such as election disputes or parades and return after the risks have calmed down.

Risk hint

The higher-than-expected risk of the general election led to a sovereignty crisis; the mutation of the virus led to a second outbreak of public health events.

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After Trump's diagnosis, the disadvantage of the election situation expanded rapidly.

With Trump's diagnosis of the election black swan incident, the gap between the two presidential candidates widened sharply again. From the odds data, the odds gap between Trump and Biden has widened sharply, surpassing the end of June (health events superimposed black life campaign spread) to a new high of the year, and Biden campaign funds (the caliber of committee fund-raising counted by FHC) has also recently surpassed Trump. A number of "real money" election forecasts show a marked deterioration in Trump's recent election situation, especially after Trump's diagnosis.

As for Congress, the probability calculation of the pollsters also shows that the possibility of the Democratic Party sweeping both houses in the general election is gradually increasing. Among them, the Democratic Party has a significant advantage in the House of Representatives, and there is little doubt that the Democratic Party will continue to control the House of Representatives after the re-election; in the Senate, the Democratic Party may gain control by 51:49 of the seats, the seat advantage is not yet obvious, and the outcome is still uncertain. There is a good chance that the final election result will be consistent with the presidential election result.

Less than 30 days before the general election, 17 states, represented by California, have started the voting process, and Trump's current election window is running out. Despite the obvious disadvantages, it is still too early to say that Trump has lost the election. In terms of the election situation, Trump may still launch tough diplomacy and other means to improve the election situation; in terms of judicial disputes, the Republican Party is still making a final sprint for the appointment of judges, and if the appointment process is successfully landed before the election, Trump may gain a marginal advantage in judicial disputes after the election.

How does the judicial dispute in the American election evolve?

"mailing votes" is a double-edged sword in Trump's election, and its shortcomings may be magnified and exploited.

According to the regulations, if the election goes ahead normally, the process of the US presidential election is as follows:

The counting of votes will begin on November 3, election day. If there is a dispute in the election, the dispute will be resolved before 8 December (Safe Harbor Day, safe Harbor Day) and the electors will be formally appointed on that day and a six-day buffer time will be set aside for the subsequent electoral college vote; the electoral college vote will be held on 14 December; and the new United States Congress will hold a vote count on the electoral college vote on 6 January. On January 20, the president of the United States will officially change office.

In the special context of this year, there may be a greater election controversy in the election, the apparent source of controversy comes from this year's unprecedented high proportion of postal ballots due to health incidents. the actual source is that Trump may refuse to accept the political risk caused by the result of the election, and mailing votes merely provides an excuse for Trump to deny the result and initiate a judicial action. While mailing the vote will help Biden take full advantage of the election, it could also be a life extension for Trump's refusal to accept a potential defeat.

There are no legal defects in mailing ballots, and their large-scale use can be traced back to the American Civil War. At that time, Lincoln called for mailing ballots to protect the voting rights of soldiers who left their homes. as a result, 19 federal states amended their laws to make mailing ballots officially appear on the stage of history. Since 1996, the proportion of postal ballots in US elections (including congressional elections) has increased year by year, rising to 21% in 2016. Postal voting is likely to jump to nearly 60% this year, affected by health incidents, according to opinion polls.

In terms of proportion, in fact, in the past, many key swing states (such as Arizona, Florida, Michigan, etc.) had a higher proportion of mailed votes, but the election results could basically be announced around election night without obvious conflict. The essential reason why mailed votes have hit the top spot this year is that Trump may refuse to accept the result and take advantage of the issue. Under normal circumstances, candidates who have lost in the past will give defeat speeches to admit defeat. The proportion of mailed votes has increased significantly this year, and the process of mailing votes itself has more operational risks (which will be detailed below), which may be exploited if the candidate refuses to accept the losing result. many controversial scenarios may be magnified by Trump and become campaign tools. Some of the potential controversial scenarios and extreme risks are detailed below.

Dispute 1: mailing ballots may delay election results or give birth (or benefit Trump)

Mailing ballots will delay the release of the statistical results of the ballots. Congress Zeng Mingwen pointed out that states have the right to make their own rules to ensure the normal conduct of elections, so there are some differences in the current regulations on postal voting. One of the main differences is the way ballot deadlines are defined. The voting deadline for all states in the 2020 US presidential election is no later than November 3, but the current definition of the deadline for mailing ballots is divided into two main ways:

First, with the actual delivery time as the deadline, the actual receipt of ballots at polling stations will be later than November 3, and this part of the ballots cannot be fully counted on election night (some ballots submitted in advance can be counted). According to the current regulations, there are 26 states with a postmark as the deadline, corresponding to 353 electoral votes.

The second is the date on which the polling station actually received the ballots. After receiving the ballots, the ballot stations still have to carry out the process of counting and verifying ballots with a heavy workload. If the vast majority of states need to sign and verify ballots, Alabama, Alaska and other states also require notaries to testify. Some votes may also not be counted on election night. According to current regulations, there are 25 states with a postmark as the deadline, corresponding to 185 electoral votes.

In this case, since the delivery of most mailed ballots may be delayed, the phased election results on election night may mainly reflect the will of the voters who cast their votes on the spot (and some of them cast their ballots in advance and arrive smoothly on election day). According to opinion polls, Trump voters are far more likely to vote on the spot than Biden's Democratic voters, in other words, Trump will have a clear advantage in the election results on election night. If Mr Trump has an advantage in the results announced on election night, Mr Trump may delay the counting of votes and direct the results in his favor in two ways to ensure that he maintains his advantage on election night.

First, it is possible to further question the validity of mailing ballots. Mailing ballots have their own operational risks. According to the American Association for Electoral Assistance (EAC), nearly 320000 ballots in the 2016 election were rejected because of doubts about their validity, accounting for 1 per cent of the total number of mailed ballots. In the 2020 primaries, the number of rejected postal votes has risen to 550000. In this election, with the further increase in the base of votes, this figure may be further enlarged, and the overall share of postal voting may further increase. In addition, Trump and his team's focus on the validity of votes will further magnify this proportion. In extreme cases, disputes over the validity of some votes may eventually go to court. If the Republican Party can send conservative justices to the High Court before the election, it may eventually gain a marginal advantage in the ballot lawsuits that appeal at various levels. If the final verdict is invalid, it could leave a large number of Biden votes empty and give Trump an advantage.

Second, if the ballot papers enter the judicial process due to disputes over validity and the election results are suspended and cannot be counted before the safe harbor on December 8, in accordance with the provisions of the Constitution of the United States and the existing precedent of the Bushgore case in 2000, electors will be elected by the state legislature (state legislature) in an appropriate manner. All six swing state legislatures are fully controlled by Republicans and are likely to make decisions in favor of Trump (appointed as the elector to vote for Trump) in controversial situations.

According to Chapter 3 of the United States Code, if the electoral vote is elected in disputed circumstances, the governor needs to finally confirm the state's electoral vote and send it to Congress. For areas such as Michigan, where the governor is still a Democrat, there may be controversial votes because the governor does not approve the congressional resolution. Also under Chapter 3 of the United States Code and the Election Counting Act ("Electoral Vote Act"), Congress will meet on January 6 of the year after the general election to count ballots. If the Senate and House of Representatives cannot agree on the ownership of the electoral votes mentioned above, it may be up to the President of the Senate (Vice President of the United States, still Pence at that time) to decide the ownership of the disputed ballots. In other words, even if the electoral votes are disputed, Vice President Pence still has the potential to characterize the votes with separate checks and balances in both houses of Congress. Given that Mr Pence is a Republican, it is also possible to steer the election results in Mr Trump's favour (controversial votes against Mr Trump may be deemed invalid).

It needs to be emphasized that whether Trump can have this advantage will depend on the outcome of the congressional election. The reason is that the process will take place after the change of Congress on January 3rd, which could lose that advantage if Republicans lose both houses in the general election.

Dispute 2: there are operational and delivery risks in mailing ballots (or in favor of Trump)

Mailing ballots may be risky at the operational and delivery levels. First, at the operational level, the lack of on-the-spot guidance for the voting method completed by the electors may lead to the failure of ballot verification due to problems such as filling and binding. As noted above, there are already 310000 invalid postal ballots in the 2016 elections, which are likely to increase significantly as the voting base increases. Second, at the delivery level, the United States Postal Service may not be able to meet a large number of ballots, and the risks in the delivery process may delay or even expire the delivery time of ballots, or even the loss of ballots in extreme cases. The House of Representatives tried to pass a separate bill in September to fund the postal service and ensure the smooth conduct of the election, but the bill failed to land.

As mentioned above, the proportion of Democratic voters who support mailing ballots far exceeds that of Republicans, and if the ballot fails or is lost due to manipulation or delivery, the marginal damage to Biden's election situation may be far greater than Trump's (the damage will intensify when the invalid votes are concentrated in swing states).

Dispute 3: Congress also faces election turmoil (neutral, exacerbating uncertainty)

The current congressional election is also likely to be controversial. On November 3rd, in addition to the presidential election, both houses of Congress also face re-election. On January 3rd, Congress will formally change its term based on the results of the election. The result of the election will greatly affect the direction of the final vote in the "dispute 1" scenario. If the Democratic Party can successfully capture both houses of Congress, it will reverse the judicial disadvantage to a great extent. If the two parties continue to split, the uncertainty of the general election will continue to be magnified, and Pence and Congress may be deadlocked over the characterization of the votes. in extreme cases, it could lead to a prolonged delay in the election results (even if the then Speaker of the House of Representatives takes office after January 20, the scene will still be a temporary arrangement, waiting for the election results to be announced and the winning president will take office).

In addition, since the presidential and congressional elections share a single vote, if the result of the presidential election is controversial because of the ballot, it means that a similar situation may also exist in the congressional election. In this scenario, the United States may face a judicial crisis.

Under the political risk, gold may have a pulse market.

The controversial results of this election are ostensibly caused by mailing ballots, but they are essentially political risks caused by Trump's possible refusal to accept a potential defeat. Any problems or flaws in the election process may be magnified and controversial. In this regard, we suggest the following:

In terms of time, we should first pay attention to the election situation on November 3. If Biden had taken the lead that day, there would be less room for Trump to subvert the election through various subsequent actions, and uncertainty would be reduced. If Trump takes the lead that day, it is more likely that he will retain the advantage by various means, and the uncertainty will increase. According to the current composition of the electorate, the latter is relatively high. In the case of Trump taking the lead on that day, we need to pay real-time attention to the convergence rate of his advantage, and the rapid convergence or even deterioration of advantage may lead to judicial disputes. If the election results are still pending due to judicial disputes on December 8, the complexity and uncertainty of the election situation will further increase.

In terms of large categories of assets, gold may become the best tool for phased risk hedging during the judicial controversy of this election, and gold may appear in a pulsating market. First, if Trump is forced to be re-elected through judicial means when the election situation is at a substantial disadvantage, it may cause strong dissatisfaction among Democratic voters, especially black voters. in extreme cases, it may lead to demonstrations and even riots leading to political instability in the United States. Second, if the result of the presidential election continues to be difficult to give birth, it will lead to a lack of real "leaders" in the United States, and a long-term political stalemate may greatly boost risk aversion. Under the circumstances of political uncertainty in the United States, gold may surpass the US dollar as the best tool for phased risk hedging in this election, which will be accompanied by a pulse of risk events such as election disputes or parades and return after the risks have calmed down.