Wednesday, October 20, 2004

The "Election Market " and what it has to say about W's chances

There are at least 3 online markets where you can "bet" on the outcome of the U.S. Presidential election. The bets are placed by buying futures contracts for either Kerry or Bush at a price between $1 and $100 determined by the market which fluctuates much as any futures market. When the president is determined (hopefully by Nov. 3) the winner's contract will pay $100 the losers contract will pay $0. Today for example you can buy a contract for Bush on October 19 at 11 o'clock EDT for about $59 or a contract for Kerry for about $41. This means the collective wisdom of the market favors a Bush win at the time cited by roughly 59%. I have been watching an internet market out of Ireland with the bank of Dublin holding the money and presumably dispensing the money to the individuals holding the winning contracts after election day . You can get in on the action or just watch at If like me you can't make head or tales of the polls being put forth or you don't trust the pollsters here is a way to tap the collective wisdom of the market where said wisdom is derived from people putting there money where there mouth is.

Perhaps more interesting than what the money on the overall race is saying is what the money bet on the State by State races reveals. You see, also lets you buy contracts State by State (only for W. not for Kerry) so if you think W will win New York you can buy a contract indicating that out come and if he does win NY you get paid $100. You may buy that contract for around $5 on Tradesports Presidential election market. A Bush to win contract for Indiana or Alabama will cost you over $95. I applied the collective wisdom of the market to the electoral college by giving W the electoral college votes of any State where the Bush to win contract costs over $50 and Senator Kerry the electoral college votes of any State paying less $50. As of 11 O'clock Oct. 19 W wins 286 to 254. (More later)

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