Democrats warn of massive GOP turnout in November

This week's top politics stories, handpicked by Yahoo editors. ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

September 23, 2022

Welcome to Yahoo News’ Politics Briefing: Midterms Edition. Every week between now and Election Day, our team of political journalists will pull together everything you need to know about the November midterm elections. And it will all be in one place: your inbox.

THE BIG IDEA Democrats warn of massive GOP turnout in November

‌ Getty Images STATE OF PLAY: A major Democratic group is warning party donors to expect a “MAGA surge” in the midterms that will benefit Republicans, Yahoo News Chief National Correspondent Jon Ward reports. “Democratic consultants are telling party donors that while the shifting political landscape will give their candidates a fighting chance this fall, they are likely facing a huge increase in Republican turnout,” Ward writes. ‌ “The ‘MAGA Surge is real,’ said a presentation for donors by America Votes, a Democratic group that coordinates get-out-the-vote efforts. ‌ “Democrats know that they are competitive in many races that might have been blowouts a few months ago, for a few reasons: The Supreme Court’s decision eliminating the constitutional right to an abortion, as well as ebbing gas prices and a string of legislative accomplishments by Democrats. ‌ “‘BUT,’ warned the presentation, which was provided to Yahoo News, ‘what we’re up against: GOP turnout will be very high.’ ‌ “Democrats expect this ‘MAGA surge’ largely because turnout in Republican primaries so far this year has been sky-high, just as it was in 2021.” The term “MAGA surge” might be something of a misnomer — the presentation didn’t specify whether the GOP’s votes would be coming mostly from hard-core supporters of former President Donald Trump or more moderate Republicans. The presentation also didn’t delve into why Republicans have been turning out in droves. It did, however, warn that Democrats will need to embrace traditional means to get out the vote, such as door-knocking, and not just rely on an improving national environment. As Ward notes, “In 2020, Democrats stopped meeting voters in person at their homes, out of concern over the spread of the coronavirus. Republicans did not, and in states like Texas, Democrats concluded afterward that Republicans turned out more voters than they had in part because they had not been going door to door. “In the 2022 cycle, Democrats know that college-educated supporters who are engaged with politics are likely to vote and don’t need much help,” Ward writes. “But lower-income voters who often don’t pay as much attention to politics, if any, need that face-to-face visit. And in an election they expect to be close in many key states, those votes could be the difference.”

POLLS, POLLS, POLLS Georgia Sen. Raphael Warnock (Getty Images) Three polls this week highlight how Georgia’s high-profile Senate race could still break either way. Marist College found Democratic Sen. Raphael Warnock leading his Republican challenger, Herschel Walker, by a 47% to 42% margin, with Libertarian candidate Chase Oliver taking 4% of the vote. But a University of Georgia/Atlanta Journal-Constitution survey has Walker leading Warnock by 2 points, 46% to 44%, and Oliver netting 3% of the vote. The Cook Political Report rates the Georgia Senate race as a toss-up. FiveThirtyEight currently gives Warnock a 55% chance of holding on to his seat. The Marist poll and the University of Georgia/AJC survey also found Georgia Republican Gov. Brian Kemp with a healthy lead over Democratic challenger Stacey Abrams. Marist found Kemp at 50% support, with 44% going for Abrams. The University of Georgia/AJC also has Kemp at 50% and Abrams stuck at 42%. A CBS News/YouGov poll also found Warnock doing better than Abrams. Their survey showed Warnock (51%) leading Walker (49%), and Kemp (52%) running ahead of Abrams (46%). FiveThirtyEight gives Kemp an 85% chance at reelection, while the Cook Political Report says the race Leans Republican.

SOUND LIKE A NERD Pennsylvania Democratic Senate candidate John Fetterman (Getty Images) In Georgia, Republicans hope that a strong showing for Kemp can help carry Walker across the finish line. In Pennsylvania, Democrats have their fingers crossed that their nominee for governor, Attorney General Josh Shapiro, who is facing far-right GOP state Sen. Doug Mastriano in November, will be a boon for Democratic Lt. Gov. John Fetterman, who is running for an open Senate seat against Republican nominee Dr. Mehmet Oz. If Kemp and Shapiro win big in November, it stands to reason that that will benefit their parties’ respective Senate candidates. But it’s also not unheard of for voters to split their votes, supporting a Republican gubernatorial candidate and a Democratic Senate candidate or vice versa. Back in 2018, for example, Arizonans easily reelected GOP Gov. Doug Ducey. But that wasn’t enough to save Sen. Martha McSally, the other big Republican name on the Arizona ballot, who lost her race to Democrat Kyrsten Sinema.

AD OF THE WEEK Pennsylvania Republican U.S. Senate candidate Mehmet Oz (Getty Images) Speaking of ticket splitting, a new ad from the Oz campaign is looking to win over Shapiro voters. To do this, it highlights a supposed 2019 spat between Shapiro and Fetterman, when both men were on Pennsylvania’s Board of Pardons. ‌ Whatever their past disagreements, Fetterman and Shapiro have embraced each other on the campaign trail this year. We know of at least one person who may be supporting both Oz and Shapiro, however: Sheryl Bartos, who co-hosted a fundraiser for Shapiro this week, according to Politico. Sheryl Bartos is the wife of Oz campaign co-chair Jeff Bartos.

WHAT TO WATCH Texas Gov. Greg Abbott (Getty Images) Debate season kicks off in earnest next week when Republican Texas Gov. Greg Abbott squares off against former Rep. Beto O’Rourke, his Democratic challenger. Abbott has been leading in the polls for months, but Beto is known for his fiery debate performances.

SLEEPER RACE ALERT Oregon GOP gubernatorial candidate Christine Drazan (Associated Press) Christine Drazan has a fighting chance to become Oregon’s first Republican governor in a generation this November. Polls show her in a dead heat with Democrat Tina Kotek, and the Cook Political Report moved the race to its “Toss-Up” column this week. Oregon last elected a GOP governor in 1982, but Drazan is likely benefiting from an independent run by Betsy Johnson, a former Democratic state lawmaker who is polling just a few points behind her and Kotek. Still, even if Johnson acts as a spoiler, a Drazan victory might help solve a conundrum for Republicans nationwide: Now that Roe v. Wade has been overturned, how does an anti-abortion candidate win over a pro-abortion-rights electorate? Drazan’s answer, in so many words, is that while she is against abortion, she wouldn’t be able to outlaw the practice in Oregon if she tried. And somewhat like Joe O’Dea, Colorado’s GOP nominee for Senate, she’s argued that her views on abortion are basically moderate and in keeping with public opinion on the issue.

GAMBLE OF THE WEEK Senate Minority Leader Mitch McConnell (Getty Images) Senate Minority Leader Mitch McConnell’s PAC has canceled the ads it purchased to support struggling Republican Senate candidate Blake Masters in Arizona. According to Axios, which first reported the news, McConnell expects outside Republican groups and major GOP donors like Peter Thiel to step up and help narrow the big fundraising gap between Masters and his opponent, Democratic Sen. Mark Kelly. But Thiel has so far appeared reluctant to invest more of his personal fortune on Masters, his former employee, who has been hammered on the airwaves by Kelly.

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Are commission-fee brokerages ripping you off? The SEC doesn't think so

A huge question that isn't just for the meme-stock crowd. ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

Web Version

Friday, Sep 23

Today's newsletter is by Julie Hyman, anchor and correspondent at Yahoo Finance. Follow Julie on Twitter @juleshyman. ‌ Who else is sick of talking about the Fed? Of course, the Federal Reserve and its battle against inflation using higher interest rates is vitally important. But I need a break. ‌ So, on to another crucial question: Are zero-commission brokerages ripping you off? ‌ The Securities and Exchange Commission is apparently deciding they are not — or at least that the SEC isn't going to do anything about it even if they are. Bloomberg reports the agency has decided not to ban payment for order flow, known as PFOF. That’s a practice in which brokerages process customers’ trades through wholesalers, in a way that critics say saddle individual traders with hidden fees. ‌ The argument against PFOF is that the practice poses a conflict because, in theory, brokerages should be aiming to make money for their customers — not market makers like Citadel Securities. In reality, it's tough to find many in favor of an all-out ban on PFOF aside from meme stock aficionados who populate Twitter and Reddit. Rather than banning PFOF, the SEC would be wise to focus on price transparency and requiring brokers to execute trades at the best price possible at the time. ‌ “The SEC does not have to ban payment for order flow or other specific anti-investor, conflict-ridden market practices if it requires best execution to be the best available price at the time given order characteristics and market conditions," Dennis Kelleher, head of investor advocacy group Better Markets, told Yahoo Finance in an email. "If it does that, the SEC won’t have to play whack-a-mole with an industry that is relentless in creating new wealth extraction practices that avoid yesterday’s rules and require new rules tomorrow." ‌ A crucial revenue stream for commission-free brokerages ‌ In a PFOF model, a commission-free brokerage like Robinhood or Schwab processes an investor’s order for a stock purchase and passes it on to a wholesaler, like Citadel Securities or Virtu Americas. These market makers then execute the transaction and pay brokerage firms for routing the trade through them. ‌ When the market maker can purchase a stock at a lower price than the customer asked for, the brokerage and the market maker split the savings. The money pocketed by the brokerages, the "payment for order flow," can finance its commission-free business. ‌ In a PFOF model, a commission-free brokerage like Robinhood or Schwab processes an investor’s order for a stock purchase and passes it on to a wholesaler, like Citadel Securities or Virtu Americas. These market makers then execute the transaction and pay brokerage firms for routing the trade through them. ‌ When the market maker can purchase a stock at a lower price than the customer asked for, the brokerage and the market maker split the savings. The money pocketed by the brokerages, the "payment for order flow," can finance its commission-free business.

Robinhood Markets, Inc. CEO and co-founder Vlad Tenev arrives on Wall Street after the company's IPO in New York City, U.S., July 29, 2021. REUTERS/Andrew Kelly This an important revenue stream for Robinhood, which popularized the practice in 2020 when US households were flush with stimulus checks and ready to play the market. Since then, trading on Robinhood has declined — along with its stock price — and it has tried to diversify revenue streams. ‌ According to analyst Devin Ryan of JMP Securities, PFOF made up 9% of Robinhood's equities revenue last quarter, 36% of options revenue, and 18% of crypto revenue. Shares of the company surged on the report that the SEC wasn’t planning to institute a ban. However, then Robinhood then erased that gain and closed down 2.72% at $9.65 a share — far less than this time last year, when it was trading for five time as much. ‌ Still, it's clear the Bloomberg report on the SEC's decision regarding PFOF is good for Robinhood. Is that gain coming at the expense of small investors? Trading firms, predictably, think there’s no issue with the current system, and argue that retail traders already get good prices. SEC Chair Gary Gensler has largely taken the other side, saying in June that payment for order flow “can distort routing decisions.” ‌ Watch: How does payment for order flow work? ‌ The solution to that problem isn't to get rid of PFOF, according to Christopher Schwarz, a professor at the University of California Irvine, who co-authored that study. Instead, he said, brokerages should be more transparent about prices. ‌ The debate over banning PFOF “is the shiny thing in the room that is distracting everyone from the issue of market centers giving very different execution to different brokers. And that execution is not related to PFOF," Schwarz wrote Yahoo Finance on Thursday. ‌ Jared Dillian, editor and publisher of the Daily Dirtnap and investment strategist at Mauldin Economics, argued last month for Bloomberg Opinion that regulation of PFOF could backfire. ‌ "The US has the deepest, most liquid capital markets in the world, but we might not if regulators start getting too involved," he wrote. "As long as competition exists, things will get better and trading costs will come down even further.” ‌ Undoubtedly, many on Wall Street agree with Dillian, and papers like those from Schwarz may have swayed the SEC to look at the issue differently. Of course, the agency might end up banning PFOF or restricting it. In the meantime, it's tough to say whether investors are mad at PFOF or just wary of the market these days. ‌ The number of people trading via Robinhood has fallen this year, to 14 million monthly transacting users by June 2022 from 17.3 million last December. As Robinhood's user base has shrink, alternatives have cropped up — including Public.com, which is commission-free, doesn’t offer payment for order flow, and allows users instead to offer a tip to brokers that execute their trades. The company says its users grew from 1 million in mid-2021 to 3 million in early 2022. ‌ Ultimately, PFOF might fall out of favor, regardless of whether the SEC steps in to police the practice.

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What to watch today Economy 9:45 a.m. ET: S&P Global U.S. Manufacturing PMI, September Preliminary (51.1 expected, 51.5 during prior month) 9:45 a.m. ET: S&P Global U.S. Services PMI, September Preliminary (45.0 expected, 43.7 during prior month) 9:45 a.m. ET: S&P Global U.S. Manufacturing PMI, September Preliminary (46.0 expected, 44.6 during prior month) ‌ Earnings Carnival (CCL)

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