Betting on the Horse Race

As John Tierney points out in today’s New York Times, while instant and overnight polls gave John Kerry the edge after Friday night’s debate, and befuddled pundits punted by calling it a draw, there’s another group of bettors who called it for President Bush — and, unlike the rest of us, they’re putting cash on the barrelhead. (Plus, to date they have the best track record of all at calling the way the general public is going to lean in days to come.)

Tierney refers, of course, to speculators who bet on the Iowa Electronics Markets. Before Bush’s ill-advised performance in the first debate, those online investors were pegging the price of a Bush futures contract as high as 75 cents, meaning that they gave the president a 75 percent chance of winning re-election; in the wake of that debate, the price of a Bush futures contract nosedived to as low as 52 cents. During the first half hour of Friday night’s debate, as the president repeatedly raised his voice and waved his arms, the price of a Bush futures contract fell a penny farther, to 51 cents, but by the time the debate ended, it had been bid up to 55 cents, as investors apparently perceived Bush as coming on strong (or, perhaps, perceived Kerry as coming on weak.)

Who cares about a bunch of degenerate gamblers who would seem to be more at home talking horses than talking politics? Well, maybe us. Tierney notes that speculators in the Iowa market have historically been “more accurate than polls” at predicting elections, and they have been dead-on leading indicators this year. They correctly anticipated not only Kerry’s lack of a post-convention bounce, but also Bush’s bounce from his own convention and his tumble in the polls after the first debate.

Hmmm. Excuse us for a moment, please, while we call our “investment counselor” in North Jersey.


Postscript: A reader writes with a cautionary note: “Once you get past the lack of acuity [of] markets … in general, there are simply too many additional problems with these minute exchanges” such as the Iowa Electronics Markets. “They are too small, have too little money at stake, and are therefore readily susceptible to undue ‘influence’” by mischief makers. (Just as a little-traded stock on a small market can be driven into the ground by short-sellers seeking a quick profit.)

It’s a good point. Maybe we will stick to the racetrack when it comes to investing our hard-earned pennies. After all, as the immortal Fat Robert once noted, “the air is fresher, the odds are fairer, and the company is better.”

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Steve Lovelady was editor of CJR Daily.