Archive for November, 2007

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Is this another great arbitrage opportunity?

November 26, 2007

Why does the market give Romney a greater chance of winning New Hampshire than Iowa?

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One of the most puzzling things in the betting markets believe that Mitt Romney has a much greater chance of winning New Hampshire than of winning in Iowa. For instance, Intrade.com has him at 67-80 to win the Granite state but at only 43-49 in Iowa. Although this might be logical in a superficial way, after all he was the governor of nearby Massachusetts and he has a considerable lead in that state. However, Romney has emphasised a victory in Iowa so much that if he fails to deliver his campaign will be irreparably damaged and his lead. At the same time he faces strong challenges from both John McCain and Rudy Giuliani. Given that the former has to win this state, or face political oblivion, he can expect a vigorous campaign that won’t hesitate to tackle him head on with the issues. At the same time failure to win Iowa will mean that a resurgent Huckabee and even Fred Thompson will be snapping at Romney’s heels, siphoning off conservative votes from him.

Therefore, I predict that if Romney fails to win Iowa his chances of winning New Hampshire as well are pretty marginal. Even if Romney wins he will face an uphill struggle. This suggests both that betting against Romney in New Hampshire makes sense, but that if you are conservative you could think of betting on him winning Iowa as an arbitrage, although personally I prefer the bolder option of simply betting against him in both states.

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Filtered Polling Data: Hung Parliament

November 24, 2007

Adding the latest ICM poll to the YouGov poll, and assuming that the Lib Dem vote share is 21 rather than 23, produces a weighted average of Conservatives 39.46 Labour 31.61 and the Lib Dems 16.69. Putting this average into the collection of polls since the end of August produces a hung parliament when the data is put through Samplmiser. The predicted vote shares are Conservatives 39.51 Labour 31.7 Lib Dems 16.63. This produces a projection of 270 seats for Labour, 314 for the Conservatives and 35 for the Lib Dems. If the Conservatives can’t get a majority in the wake on the dire news about the Inland Revenue and the Lib Dems can only muster 35 seats, then this appears to confirm that the hype about a ‘Black November’ is unjustified.

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Filtered Polling Data: Conservative Majority of 30

November 23, 2007

Adding the latest YouGov poll to the previous polls produces a clear Conservative parliamentary majority. The predicted shares are Conservatives 41 Labour 32.13 Lib Dems 13.98. This produces a prediction of 256 seats for Labour (-40), 336 for the Conservatives (+25) and 24 for the Lib Dems (+10). The only good news for Labour is that the combined Conservative and Lib Democrat share of the vote only increased slightly to 54.98, suggesting that the voters who have moved away from Labour have not moved to the Lib Dems or the Tories. It should also be empahsised that the Channel Four polls suggest that voters still believe that 51% of the public believe Labour to be competant in handling economic matters (against 42% who believe them incompetant). In contrast only 46% of the public believe the Conservative economic team to be competant in economic matters (against 47% who believe that they are incompetant). This might not be as bad for Labour as people believe, especially if it pushes Northern Rock of the headlines.

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The gap narrows further

November 22, 2007

Good news for Huckabee and Thompson but bad news for Romney and McCain.

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Putting the latest Iowa polling data through Samplemiser produces the following figures: Romney 27.77 Huckabee 23.5 Thompson 14.45 Giuliani 13.01 McCain 6.15 Paul 5.86. This is good news for the former Arkansas governor, who sees the gap with Romney dwindling from 19.34 points as late as October 22nd to 4.27. The data also show Thompson overtaking Giuliani and pulling away from McCain. McCain’s campaign has now publicly abandoned Iowa, pledging to make only a ‘nominal’ effort. The problem with McCain’s strategy, apart from making a third place finish by Giuliani a possibility, is that he could very well be overtaken by Ron Paul, which would be a damaging blow to his credibility. It goes without saying that McCain needs to ‘throw the pigskin’ and start attacking Bush, and the Republican field, on economic issues, even if that loses him some of his conservative support. The only good news for the Arizona senator is that it looks like Michigan will be running a primary rather than a convention (though even this is a balanced by the fact that the gap between Iowa and New Hampshire will only be five days).

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Is it time to go long on Obama in Iowa?

November 21, 2007

Is the market momentum behind the Illinois Senator justified?

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Ever since Hillary Clinton turned in a poor performance in a debate in late October people have been looking for an excuse to believe that the contest for the Democratic nomination is still wide open. Although I believe that Hillary has her weaknesses, she is easily the most credible (and electable) of the current crop of Democrat candidates. The fact that a CBS poll has her behind Obama for the first time (though still within the margin of error) has meant that the price on Barack Obama winning the Iowa primary has risen, going above its fifty day moving average to its current price, with the last trade at 35.0. Does this mean that now is a good time to buy into the Senator from Illinois, either as a momentum play or a value bet?

There are several reasons why this is not the case. Barack Obama has not answered the central charge of his opponents – why should an someone with no foreign policy experience, only four years in national politics and demonstrable immaturity be put in the White House in a time of unprecedented international turmoil? Obama answer, that he has lived in Muslim countries, is risible and risks sounding a lot like the answer that Michael Foot gave about the foreign policy implications of a victory in 1983. After all, the ‘Cook County Project’ in 2004 was one of the key factors, that produced a Bush victory in that state. There is also the unanswerable criticisms that while Obama may alienate voters less than Senator Clinton, her campaigning and organisation skills make a victory, even if it a close one, more likely.

Finally, it is important to remember that the Iowa contests is a caucus rather than a primary. As such it depends upon the ability to get people to devote an hour of their time on a cold January evening. As Howard Dean found out, candidates who have a disproportionate amount of their support from the very young, such as Senator Obama, will fare less well. According to the 2004 exit polls, only 17% of voters were aged 17-29 while 41% were between the ages of 44-65. Indeed, according to the last Rasmussen poll, Obama is in third place among those aged 50-64 and over 65. Contrary to belief, Hillary’s support is more committed to her than Obama’s is, with an eleven point gap between Clinton and Obama when only people certain to vote for her are counted. There is also the possibility that anti-Clinton votes might go to Edwards instead. All of this makes the Obama Iowa contract overpriced.

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Betting Journal: SOLD 5 contracts on the GOP retaking the House

November 20, 2007

I have decided to partially liquidate my position on the GOP retaking the House of Representatives by selling 5 of my contracts at $2.00 each, raising $10.00 before trading fees. A longer analysis of my decision will follow shortly.

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Is there still value in betting against Romney in Iowa?

November 20, 2007

Why you should still short Mitt.

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One of the most interesting development in the race has been the extent to which Romney’s supremacy in Iowa has been challenged by Mike Huckabee. Although Huckabee is still, by my estimation, over nine points behind Romney, the fact that the governor of Arkansas has managed to get so close to Romney without spending any money on advertising, indicates that Romney’s support in the Hawkeye state is very thin. This has been reflected in the betting markets with the contract on Romeny winning Iowa falling from a peak of 69.3 in early October to the current level of 55.9. However, I think that the Romney contracts still have a way to fall as the fact that Huckabee is attracting enough money to begin airing some adverts in the Hawkeye state will boost his name recognition and make him seem a more credible candidate. I believe that once Huckabee has been perceived as the more credible candidate, a lot of the Evangelicals who were unsure about Romney and Thompson, or were opposed to Romney but were not decided about who was best able to stop him, will move to Huckabee. I firmly believe that Romney’s contracts are overvalued until they enter the low 40s.

What do you think? Add your thoughts below.