October Surprise?

Osama Capture Dec08 contract has tumbled by 50% in past two weeks and yet the word on the Hill is for an October surprise.

Twice in the past few weeks, US helicopters have crossed the border only to
be turned back by gunfire from Pakistani troops. Scott Horton reports in Harpersthat Bush is hoping to deliver an "October surprise" for McCain.

What's up? There is one plausible explanation for the latest friction: the Bush
Administration has given orders to go all out–helicopter gunships, air strikes,
predator drones, and ground-based forces–through the end of the year in an attempt
to apprehend or kill Osama bin Laden and other senior Al Qaeda leaders.

He goes on to argue:

The Bush Administration is hoping for an "October surprise" that will lift
the tides of the Republican candidates just in time for Election Day.
That explains why the extraordinary effort is undertaken now, and why
the sensitivities of the U.S.-Pakistani relationship are being ignored.

Alternatively, Steve Coll, author of "The Bin Ladens: An Arabian Family in
the American Century," thinks bin Laden and pals may be planning their own 'October surprise,' as the 2004 October tape was such a market mover for them. Here from an interview for The Atlantic:

Jeffrey Goldberg: Do you think al-Qaeda is planning an "October surprise," an attack on an
American target, here or overseas, in order to influence the election?

Steve Coll: AQ leaders, maybe because they spend a lot of time trapped and bored
in safehouses, seem to be obsessed with calendars. They like anniversaries and
they pay attention to elections abroad. So I'm sure they have the American election in mind.
My last well-sourced conversation is a few weeks dated, but last I checked the US intel
system was very quiet in terms of "chatter" or other indicators of any attack in the U.S.
What seems more likely are more attacks against US-affiliated targets in the Pak-Afghan region,
coupled with media tape releases, similar to Osama's election-eve video of 2004.
They like to be heard at big moments in American politics, and this campaign is certainly such a moment.

Every time I turn on the news I see something going down at the Afghan-Pakistan border,
so I'm thinking the October 2008 Surprise might just be a big one -
making Osama.Capture.Dec08 seem tempting at only 8.

Over at Intrade.net, might be worth launching a market on October surprises.
No need to guess who would be helped by the capture or killing of Osama, but
who would it help if Osama were to release a scary video in October? Or how about a "who will Osama endorse" contract?

Anyway, over in President 08 market action on Tuesday (September 23) McCain's
price soared by just over 2 points, while Obama's price dropped by nearly 3
on the same morning. The two kissed briefly at 49 before McCain dropped back
to under 47 and Obama rallied to 52. While the financial turmoil remains center stage,
traders seem to be taking profits any time McCain gets above 47.

As the financial markets continue to react negatively to the Paulson bailout plan, Obama's numbers continue to hold steady. By a margin of 2-1 Americans (47-24), according to a CNN/Opinion Research Corporation Poll, blame Republicans over Democrats for the financial crisis that has swept the country.

While the economy may be swaying the President 08 market at this time, this might all change on
Friday when the first of the presidential debates are held. By that time, some sort of bailout
bill is meant to have passed into law. Furthermore, the first debate focuses on foreign
policy where McCain holds an advantage. But will McCain's foreign policy advantage trump Obama's economics advantage?

If the financial markets are taking the bailout plan more positively by the end of the week,
it could be a one two punch Friday for McCain. If not, he'll
have to wait for an October surprise.

In Electoral College trading, Virginia is looking good for Obama.
At least according to the latest polls that is. Two major polls are
placing Virginia in Obama's electoral college camp. SurveyUSA puts the race at O51-M45; ABC News/Washington Post puts Virginia at O49-M46. Rasmussen, however, puts McCain ahead by two at M50-O48, though this is within the margin of error.

Regardless of the positive Virginia polls for Obama, the Intrade Vrginia electoral vote
predictor is giving McCain a 53% chance to Obama's 45%. Punters are betting on history
as Virginia went to the Republicans in 2000 and 2004 by about the same percentage popular vote.

Onto New Hampshire. Traders are NOT buying the latest poll from University
of New Hampshire which gives McCain a 2 point lead, within the margin of error.
Over on the Intrade electoral predictor map, Obama is well ahead O60-M42

One state where Intraders opinion diverges from the polls is North Carolina
where punters are giving McCain a 75% chance of taking the state. In the latest Rasmussen Report poll of the state McCain is ahead only within the margin of error. Bush took 59% of the popular vote here over Kerry in 2004.

Finally, one more thing that might influence the President 08 market, of course,
is the price of oil. And, despite, September 22 being the biggest one day rally
in the price of oil, over at Intrade.net, punters are only placing a 25% chance of oil at over 135 by Dec 31st.