Trading The Election

The start of the biggest election in 80 years begins Thursday. Not since 1928 has there been an election with neither a sitting president or vice president running.

The polls have the leading candidates in a statistical dead heat. But on Fast Money, we don't follow polls. We follow money. And the money is telling a different story.

According to Intrade, an online prediction market that correctly called each Senate race the past two elections, Obama and Huckabee are clear favorites.

But more important, the smart money is betting on a Democratic sweep, with the Dems taking not only the White House but also the Senate.

What's the trade as America heads to the polls? We find you the green in a blue state romp.

Guy Adami

Regardless of who wins, investors believe defense stocks will be sold-off as the new president begins to pull America out of Iraq. But I don’t think spending on defense will slow down under a new administration says Guy Adami. I’d buy Lockheed

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[LMT  Loading...      ()   ]. And in healthcare look at either Merck (MRK) or Pfizer (PFE).

Tim Seymour

Great call on Lockheed says Tim Seymour. Also investors might want to look at Boeing

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[BA  Loading...      ()   ]. In addition, Fannie Mae (FNM) and Freddie Mac (FRE) could be in play around election time.

Jon Najarian

I agree with Adami if Hillary Clinton wins the election. But if any other Democrat takes the lead than I think defense sector stocks are a sell.

Also I only think healthcare is a buy if Obama wins.

If you get Edwards look for the automakers to catch some wind. And as a trade I’d short the iShares Emerging Market Index

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[EEM  Loading...      ()   ].

Jeff Macke

It’s way too early to predict who is going to win let alone how to trade it!

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Following are the latest results from Intrade:

Democratic Iowa Caucus '08: Chance of Winning
Obama:        52%
Clinton:        39%
Edwards:      25%

Republican Iowa Caucus '08: Chance of Winning
Huckabee:    62%
Romney:    42%
McCain:    3%

'08 Presidential Election Party Winner
Democrats:      60%
Republicans      37%
Independents:    3%

Leading Presidential Candidates: Chances of Winning in '08
Clinton: 40%
Obama: 17%
Giuliani: 12%
Romney: 9%

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Trader disclosure: On Jan 2, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Macke Owns (INTC), (DIS); Jon Najarian Owns (AGU), (CSIQ), (AMZN), (BG), (DE), (DPTR), (GFI), (GS), (GT), (MON), (MOS), (MRO), (POT), (TSO), (UBS), (VLO), (CME), (GM),(UA); Jon Najarian Is Short (KLAC); Seymour Owns (CSCO), (INTC), (BX); Seygem Asset Management Owns (EWT), (TSM), (X), (PKX)