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Gamblers pick Obama
October 31, 2012 - Harry Eagar
For the past week or so, I've been following the betting on the presidential election at Intrade, the Irish futures market, and to a lesser extent, the Iowa Electronic Markets. (IEM limits bets to $500, which presumably chases the big rollers away and, perhaps, distorts that market.)
The last week as been very volatile, although the plungers are uniformly leaning Obama-wards. The price of a $10 bet was about $6.10 when I first stopped in to look, fell as low as about $5.40 (for reasons I cannot guess), then bounced back to around $6.10.
This morning, it's taken a largish jump and is around $6.60 -- that is, you pay $6.60 to win $10. No limit, although judging by the number of shares offered at different prices, few bettors are placing bets over $1,000.
Conversely, it costs around $3.40 to bet to win $10 with Romney. A lot of the horse players I know won't bet on short odds. Dunno if political bettors act the same way. Is money flowing toward R. because the payoff potential is better? Or, as seems more likely, are bettors putting their money on the man they want to win?
Either way, I tend to think the so-called predictive power of a free market is oversold by the free-marketeers. (The IEM is set up as an educational tool to teach college students how markets work; I don't believe it is capable of doing that. I don't believe anybody knows how markets work.)
I prefer the kind of bet where the loser says he'll push a peanut down Main Street with his nose, but nobody seems willing to make those bets any more. Politics was more colorful in the old days, but the influx of money has made it duller in some ways.
In case it wasn't clear the first time, the reason I am skeptical of markets in general and this market in particular is that it is hard to match the violent swings in the gamblers' odds with anything likely to be happening among the electorate.
The Obama wager is now over $6.90, a rise of nearly 8% in a day and of close to 15 points in a week.
Even if you argue that the outcome of the election (the wager) is on a knife's edge because it depends on the results in 7 or 8 closely divided states, it seems hard to believe that anything happened in those states so dramatic in a week that the odds should have shifted from 55% to nearly 70%.
Or perhaps once the odds in Obama's favor shifted past a certain point -- say, for the sake of discussion, when it passed 67% or 2:1 -- there was a rush of hot money to get in (late) on an almost sure thing.
I can imagine gamblers acting that way, but the way Intrade works, there has to be a counterseller on the other side of every buy. So there's still Romney money in the mix; the book hasn't just seized up.
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