[Week 3 of 2026] Debt, Drama, and Delusion

Welcome back to Price and Prejudice with a few musings from Week 3 of 2026.

The Ghost of Onions Past

This article discusses how Polymarket served as the 2026 Golden Globes ceremony's exclusive prediction market partner and a deeper regulatory tension surrounding it. While betting on award outcomes took center stage ($250,000 wagered on Best Picture), Polymarket also listed contracts for film box office receipts, which is effectively banned in the U.S. under the 2010 amendment to the Onion Futures Act. To skirt this, Polymarket geo-fences these specific "box office" bets to non-U.S. users, creating a bifurcated market to dodge the CFTC.

This somewhat fragile regulatory arbitrage also highlights the two primary regulatory anxieties regarding prediction markets. First is the fear of insider information where the concern is moral and structural; retail participants are betting on outcomes that a granular few (producers, accountants, trade writers) may already know. It shifts the market from "prediction" to a transfer of wealth from the ignorant to the informed. The second is the fear of manipulation, which is the legacy of the Onion Futures Act. The regulator worries that the existence of a betting market will incentivize bad actors to manipulate the underlying event (e.g., sabotage a movie release or dump onions in a river) just to cash in on a derivative position. One is about betting on a rigged gamewhile the other is about rigging the game to win the bet.

Denominator Delusion

For decades, everyone from bond vigilantes to budget hawks has fixated on the debt-to-GDP ratio as the metric of fiscal doom. Japan’s is 260%, the U.S. is climbing, and yet nothing seems to break, which has been a bit of a puzzle. Recently, this new paper argues that it's because we've been measuring the wrong thing. One critique is that the debt-to-GDP compares a stock variable (total debt) to a flow (annual output). A better metric according to the authors would be debt-to-total national wealth or interest-to-GDP, which are concepts more familiar to actual corporate finance.

The broader idea in their approach is to treat governments like giant corporations with very unusual shareholders: no quarterly earnings, infinite lives, and the ability to conscript taxpayers. On one hand, you could say sovereign debt is just equity in disguise – it never really has to be repaid, just rolled over forever, and as long as the "firm" grows, the markets stay happy. On the other hand, most companies can't print their own liabilities and force customers to use them. This suggests that the ultimate limit on this "corporate" leverage isn't bankruptcy, but the patience of the bondholders watching their purchasing power dilute.

The Oligopoly of Influence

This article discusses a paper that shows how just five individual creators control the vast majority of engagement and advice in the retirement space on social media. Meanwhile, traditional news outlets and qualified institutions account for a less than a quarter of the content volume. The data suggests that for millions of future retirees, the primary source of truth is not a certified planner or a diversified media diet, but a handful of algorithmic darlings.

We often speak of concentration risk in portfolio, but rarely do we consider it in information flow. The irony is that the internet was promised as the great leveler but it has simply replaced the "Big Four" banks with the "Big Five" influencers. To the extent that these information influence people's actions, the retail capital flows can be expected to become even more correlated.

The potential concern here is that when the algorithm optimizes for engagement, not accuracy, the incentives tilt toward whatever is most clickable: fear, urgency, and promises of early retirement through dividend ETFs. And the problem is less that people trust influencers per se, but that the institutions they used to trust are too slow, too boring, or too busy compliance-checking to compete. In the absence of authority, charisma fills the vacuum.

Podcasts

• This episode (February 2025) briefly mentions an example of social media retirement advice where countless influencers promise "guaranteed" returns from various options.