Money talks, bullsh*t walks

Don’t bother listening to the pundits. For moment-to-moment updates on what’s happening, just watch the Iowa and Tradesports markets.

The easiest way to keep track of what’s happening in the election is to follow the markets. The Iowa Electronic Market has a contract on control of the House, one on control of the Senate, and one on the combination. Conveniently, they’re all available on a single screen.

As of this writing, Republican loss of control of the House is 82 bid, 84 offered. That’s been trending up over the past week: the average daily prices since Wednesday have been 73, 73, 79,79, 80.

Republicans losing the Senate is 30 bid, 32.5 offered. That’s been holding about steady.

Read those numbers as probability estimates: if you buy “Republicans Lose Senate” for 30 cents and the Republicans lose the Senate you get $1 back, so you should be willing to buy that contract at that price as long as you think the chances of a Democratic takeover are 30% or better.

As a consistency check, you can look at Tradesports, which currently has the Republicans holding the Senate at 68 bid, 68.8 asked and the Republicans holding the House at 16.5 bid, 17.8 asked, which is slightly more optimistic for the Democrats than the Iowa markets. (If there were more money at stake, those differences would quickly be arbitraged away.)

Tradesports also has a market on the size of the Democratic gain in the House 82.2-84 on picking up at least the key 15 seats, 73.4-75 on picking up at least 20, 50-55.4 on picking up 25 or more, 22-30 on picking up 30 or more, 15.6-18.0 on picking up 35 or more, and 8.8-14.5 on 40 or more. (Hmmmmm…better than 4-to-1 on a 35-seat gain? Might be worth a flutter.)

Those numbers will, obviously, move as news comes in. And they’ll move quickly, since making money on a news tidbit requires acting before anyone else does. So watching the numbers is a good way to watch for news; I first learned about the Bush DUI in 2000 when the Gore Iowa number suddenly spiked.

Update Dem House Control now trading at 85-86, Senate at 31-33. I read that as meaning no surprises so far; for Democrats on the House side, no news is good news.

Second update

Early exit polls look ok, especially given that the last Fox poll reported that 15% of the sample had already voted, and the Democrats had a 15-point lead among those willing to say how they’d voted. If we carry everything this poll shows us ahead in (Virginia and Missouri but not Tennessee or Arizona) we take the Senate by 1 vote. But the markets still show the Dems only about 30% likely to take the Senate.

Author: Mark Kleiman

Professor of Public Policy at the NYU Marron Institute for Urban Management and editor of the Journal of Drug Policy Analysis. Teaches about the methods of policy analysis about drug abuse control and crime control policy, working out the implications of two principles: that swift and certain sanctions don't have to be severe to be effective, and that well-designed threats usually don't have to be carried out. Books: Drugs and Drug Policy: What Everyone Needs to Know (with Jonathan Caulkins and Angela Hawken) When Brute Force Fails: How to Have Less Crime and Less Punishment (Princeton, 2009; named one of the "books of the year" by The Economist Against Excess: Drug Policy for Results (Basic, 1993) Marijuana: Costs of Abuse, Costs of Control (Greenwood, 1989) UCLA Homepage Curriculum Vitae Contact:

2 thoughts on “Money talks, bullsh*t walks”

  1. I've been watching tradesports. At a few minutes after 1 PM, somebody bought 2,980 contracts of HOUSE.GOP.2006 for 16.0, which represents about half of today's volume so far.

  2. If any major differences between the two markets will be arbitraged away in short order, how can they act as a consistency check on each other?

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