June 25, 2004, 8:54 a.m.
Good Money?s on W.
What the real professionals think about the presidential race.
President Bush’s job-approval rating is close to low ebb, if you buy into what the major polling organizations are saying. With even the most optimistic numbers barely reaching 50 percent, and falling as low as 42, the chances of Bush serving a second term seem to shrink with every passing day.
But polls aren’t infallible. As we have learned, many polls ? most notably from the Los Angeles Times ? have heavily overweighted Democrats and underweighted Republicans. The Washington Post poll of 1,201 adults contained only 1,050 registered voters, and the remaining 20 percent who are ineligible to vote undoubtedly weighted the entire sample with a pro-Democrat bias.
However, Bush is doing much better in one group’s opinion: the investor class. Look at the markets in Bush reelection futures:
The Iowa Electronic Market’s winner-takes-all presidential market (http://www.biz.uiowa.edu/iem/index.html) opened on June 1, and the outlook is good for Bush. The contract on George Bush’s reelection opened at a healthy 55 cents, and reached a high of 63. Even at its low for the day, the Bush contract was still worth more than Kerry’s, which never finished a day’s trading above 50 cents. In order to bet you have to pay to play ? but it only costs five dollars. After three weeks of trading, the Bush contract is still at 55 cents, while Kerry’s remains stuck at 45.
The Iowa Market isn’t the only market on which Bush election futures are bought and sold. There has been heavy trading on the popular online gambling website TradeSports (http://www.tradesports.com/) , a site featured in the pages of the Wall Street Journal and the New York Times as a leading market for political futures. TradeSports has offered the Bush contract since January of last year, 18 months before the Iowa Market opened. The outlook there is almost as cheery as the Iowa market’s ? the value of the contract has been hovering in the high 50s since the end of May, climbing to 58 this week.
After Saddam’s capture on December 13, the price skyrocketed to 75 dollars. But in recent months, despite the best economic news we have had in years, the contracts have been steadily losing value, as the news from Iraq worsens. With the abuses committed at Abu Ghraib and Bush’s ever-declining job-approval numbers, the contracts sank to a low of around 52 dollars. After Bush’s speech at the Army War College on May 27, the contract began moving back up, hovering around 56 dollars. On June 2, the price reached 57 dollars. As of today, it’s risen one dollar.
If you’re not interested in futures, there is always gambling, pure and simple. And online betting site William Hill (http://www.willhill.com/iibs/EN/sportsbook.asp) is offering a chance to bet on the outcome of the next presidential election. Even they, until recently, favored Bush ? he got odds of 1.72, while Kerry got 2, favored by roughly 30 percent; the odds have since equalized at 1.83 for both candidates.
The fact that the Iowa Market opened so strongly for Bush even after the hits he has taken in recent weeks shows how strong he is relative to his market. The Iowa Market has it slightly higher than TradeSports or InTrade, but the investors in all three of them see the probability of a Bush reelection standing in the mid 50-percent range, even with the months of bad war news. If Bush survives the past months, and it looks now as though he will do just that, it’s hard to imagine any event that could derail his chances of victory with relative strength like this, with the exception of total failure in Iraq or a wholesale economic collapse. Neither is likely.
Although the contracts bought and sold on the Iowa market don’t represent big money, don’t let that fool you ? as New Yorker staff writer James Surowiecki put it in his new book, The Wisdom of Crowds (http://www.amazon.com/exec/obidos/
ASIN/0385503865/ref%3Dnosim/nationalreviewon/102-6194377-6025756) , this group of “a few hundred amateur traders in the middle of Iowa” has done “a better job of predicting election results than the Gallup poll has.” How well has it done? From 1988 to 2000, the IEM was off just 1.37 percent in its election-eve prices for presidential elections. If this doesn’t prove that crowds and market wisdom are usually more accurate than expert pollsters or any media elite, I don’t know what does. Kerry’s promise to roll back tax cuts makes him unattractive to the investor class, or the gambling class, or whoever else plays these contracts, but if you care enough to place a bet, you’re probably going to vote. Apparently, a majority of these folks, whoever they are, think Bush is still a good bet. In terms of cents and sensibilities, let us hope they are right.