War cannot be ruled out

Polymarket as of 6/17/2025 is giving a 58% chance of “US military action against Iran before July,” where this is defined as:

For the purposes of this market, a “military action” will be considered to be any use of force executed by the US military on Iranian soil, airspace, or maritime territory (e.g. if a weapons depot on Iranian soil is hit by an the US missile, this market will resolve to “Yes”) that is officially acknowledged by the the US government or a consensus of credible reporting. This includes, but is not limited to, airstrikes, naval attacks, or ground invasions. Cyber attacks, sanctions, or diplomatic actions will not count towards the resolution of this market.

For the past 2-3 days, the price of the contract has been fluctuating between 40-60 cents after surging last week. This sounds about right. If you asked me the odds of intervention in the short-term, I would say it’s 50-50. This is as close to a perfectly efficient market as exists, in which the probability represents the totality all publicly known information. So I would not bet on this contract either way, as I am not privy to any special information, nor possess any ‘edge’ in regard to forecasting or trading strategy. My guess is as good as yours.

But if the stock market falls on war-related news, then I can say with conviction to buy the dip, as the stock market has exhibited a recurring tendency to recover from war-related losses. War does not affect tech companies, consumer spending or other aspects of the economy.

Same for shorting Bitcoin. My previous method involved shorting during market hours, but I have modified it to short continuously, without the specified window. This way I am able to hedge any bad Middle East news as it arises. But if the stock market surges, Bitcoin will lag on the upside, so I come out ahead either way. Bitcoin has lagged QQQ. This is much better than prediction markets, in which I have no edge. With my method, I cannot lose unless Bitcoin exhibits a lot of strength relative to tech stocks, which is short-lived and uncommon anyway.

It’s possible this whole thing may blow over in a week. Iran and Israel may back down or reach some sort of stalemate, similar to Russia vs. Ukraine, in which the US assists Israel without attacking Iran.

The notion that Trump is somehow an ‘anti-war president’ or will reject pressure to intervene, is unfounded. This sounds like an example of people projecting their own values on him. People want to believe he is, or want him to be. Consider how he caved to pressure regarding the tariffs, as I predicted. Why would he not cave here? Trump has exhibited a tendency to be easily manipulated or persuaded by powerful people or if his popularity is in jeopardy.

Of course, Trump may not cave. I was more certain about him caving about the tariffs two month ago, than now about war, because the growth of the economy and level of the stock market are obvious, and the arrow going the wrong way indicates crisis and is ammunition for the left. Recessions and bear markets are never popular, whereas war is popular. Fixing the stock market crash Trump himself caused was as simple as pausing the tariffs.

Second, attacking Iran will not hurt his legacy or popularity, at least not initially. People who make this claim are clueless about politics or being willfully ignorant for engagement:

And

The ‘anti-war right’ is a vocal fringe among Republican voters. The majority of his voters would support intervention, and those who are initially skeptical may come around due to peer pressure. Bush got a 10% approval rating bump after the invasion of Iraq. There is little reason to think Trump would not also get a bump. (In this case, we’re talking about the US only attacking Iran, such as airstrikes, instead of invading.)

Bush was hurt much more by the financial crisis and consequent recession and severe bear market, than the Iraq War becoming a quagmire. Republican support for the Iraq War remained stable during Bush’s entire presidency, well after it became unwinnable:

There was a small dip, but this came two years later, when media coverage became worse and the situation had clearly deteriorated. Republican support remained elevated though. The same was seen during the Gulf War, which was also popular. So I am not sure what evidence people on Twitter are basing it on to say attacking Iran will hurt Trump or destroy his legacy. Unless somehow it leads to an unwinnable war, his support will not fall.