Political futures market: an interesting look.

[MallRat]

A company called intrade.com, headquartered out of Ireland, allows futures trading (read: gambling) on all sorts of unusual propositions. They do have a fantasy sports counterpart where you can bet play money, but intrade.com is the real deal: real money is changing hands between traders.

They have some rather eyebrow-raising propositions, though not quite as tasteless as that DARPA terrorism futures project that John Poindexter was overseeing. They are currently trading contracts on whether Rumsfeld will resign by June 30th, which Supreme Court Justice will step down first, and they even have contracts on the capture or death of Osama Bin Laden by June, September, or Election Day.

Perhaps most interesting are the Election 2004 contracts. Contracts are priced from $0-$100. If the contract succeeds, it expires at $100. If it fails, it expires at $0.

Therefore, if you short Bush re-election contracts at $50, and he loses the election, you get to "buy-back" at $0, essentially doubling your money. If you buy Kerry victory contracts at $50 and he wins, you get to "sell-back" at $100, doubling your money.

Here are some examples of the more interesting propositions and their latest trade prices. Remember: for the Bush propositions, anything >50 means the market thinks he'll win, <50 means the market thinks he'll lose.

Bush to win election: 58.3, down from about 74 at Saddam's capture.

Democratic VP Nominees:
Edwards 41.0 (essentially, this is 3:2 odds)
Gephardt 11.0 (8:1)
Clark 8.5
Richardson 7.0 (13:1)
Graham 3.0 (33:1)
H. Clinton 2.9
Nelson 2.0 (49:1)
Bayh 2.0

Bush to Win Individual States:
AR 70.0
CA 12.5
CO 78.0
FL 60.0
IL 12.0
IA 43.0
ME 19.0
MI 34.0
MN 30.0
MO 63.0
NH 51.0
NJ 20.0
NM 51.0
NC 80.0
OH 59.0
OR 45.5
PA 47.1
VA 81.5
WA 23.0
WV 63.0
WI 42.0

Bush Electoral Vote Total:
At least 150: 95.0
At least 200: 86.0
At least 250: 65.0
At least 300: 40.0
At least 350: 16.0
At least 400: 12.9


I still think the market is a little too bullish on Bush. Perhaps a good opportunity to go short on him!

-MR

[AndyTiedye]

1. They Seem to Be Betting that What the People Think Won't Matter

Minnesota at 30? They haven't gone Republican since 1972!

Do all contracts pay for Bush* if elections are cancelled?

If it isn't that, then everyone is betting on Diebold.

[MallRat]

2. Actually, MN at 30 is pretty good for Kerry.

Think of it this way: the market is saying that there's a 70% chance that Minnesota will go to Kerry.

-MR

[goodhue]

3. indeed

many here in MN think that it is much closer than that

[Awsi Dooger]

4. Extremely interesting, and real world political odds

My first DU post in fall 2002 dealt with how absurd media-created election odds are. They'll give weight and emphasis to guesswork odds from some guy at the Wall Street Journal, etc. that are not even close to offshore sportsbook reality.

In this case, intrade lists John Edwards as nearly five times as likely to become Kerry's VP choice as Wesley Clark. That ratio is hardly consistent with posts on this board or how the cable channels are depicting the likelihood.

My friends and I like to wait until the last week or so and load up on individual states or props, essentially short term interest. Even in sharp offshore sportsbooks, they'll list a state at 1/8 or 1/10 when really it should be 1/100 or worse.

The ideal scenario is when a respected pollster comes out with a late poll that is obviously garbage considering the state or candidates, but the offshore books and bettors accept the numbers and overreact. That happened in 2000 when Zogby's late polls had Bush within a few points of Gore in California and Lazio closing rapidly on Hillary. My friend and I pounced on Gore and Hillary at odds we never thought we would see.

In 2002, Zogby's final weekend poll had serious flaws that I'm still smacking myself for not exploiting more thoroughly. The best one by far was Colorado senate, with Zogby listing Strickland with a clear lead over Allard. It was glorified theft but I should have wagered much more. I doubt the offshore books will sway toward the final polls as much this time. All the late money in 2002 came in against Zogby's numbers and the books were burned. The offshore joints I use are much later and more conservative with their political postings this cycle.