We enjoy following the political betting markets because they reflect actual money trading hands, rather than pundits telling us what they think will benefit their preferred party candidates. Today, we start a new series: our top 3 takeaways and our top 3 bets for those who want to make money on politics.
First, let’s start with the takeaways. #1 takeaway is that Biden has failed to get a bounce from the first night of the DNC convention or his selection of Kamala Harris as his running mate. Oddly, PredictIt shows that his chances of winning has decreased over the past several days, continuing a month long trend. A Biden win traded back in mid July at 63 cents and now trades at 57 cents. It’s not a disastrous slide, but still it’s a noticeable change. Likewise, a Trump victory has moved from 39 cents to 45 cents. Our second takeaway is that there are a lot of very close senate races. Whether it’s North Carolina, Maine, Iowa, Montana, Georgia or Arizona, there are a lot of competitive races where both the Republican and Democratic candidates have a reasonable chance of winning. Control over the Senate is clearly up for grabs and the betting markets have it as 59 cents Democratic and 44 cents Republican. Our third takeaway is that the range of electoral outcomes in the betting markets is surprisingly wide, suggesting considerable uncertainty. PredictIt has a question “What will be the electoral college margin in the 2020 Presidential election?” and the answers are striking. Democratic win by 280 electoral margin trades for 9 cents, which would be a true landslide comparable to a Reagan win over Carter or Nixon over McGovern. We note that neither Obama or Clinton won by such a large margin in either of their wins. The most popular prediction is Democrats by 100-149 electoral votes, which trades for 15 cents. Democrats by 150-209 electoral votes also trades for 13 cents. However, on the Republican side, the Republican wins by 280+ trades for a surprising 6 cents, an outcome that we feel is quite unlikely. How about a repeat of 2016? A Trump win by 77 electoral votes trades for 9 cents. Bottom line is that there is no consensus about the outcome!
So what are out top political investment ideas. Trade #1: Well, if you want to play it safe, we would sell the extremes of the electoral college. You can buy a no on Democrats win for 91 cents. We don’t think Obama will do better than Bill Clinton did in 1996 against Dole or Barack Obama did against John McCain in 2008. It’s not a huge pick-up, but we think the likelihood that Trump does not win Texas, Ohio or Iowa is pretty low. Similarly, we think there is no way that Trump will win by a margin of 280 electoral delegates. Trade #2: If you’re looking for a big pick-up, we think betting on the Republicans to take back the House is more likely than the odds suggest. You can currently buy a yes for 17 cents. Remember that 2018 was a Democratic wave election. We think Republicans will do better than 2018 and while they may not win the House, they will pick up seats. Anyway, this has a high payout and one that we think it worthwhile buying. Trade #3: “Which presidential candidate will place fourth in the popular vote?” We think it’s fairly certain that it will be Howie Hawkins, the Green Party candidate. To get a lot of votes, you need to be on the ballot in many states which means it’s almost certainly going to be the Libertarian or Green Party candidate. The Libertarians have placed third for several elections, with the Greens fourth. We don’t think Kanye West will be on the ballot in enough states to make a difference. Accordingly, we think the Greens are going to be fourth. You can buy a Green/Hawkins fourth place finish for about 73 cents, giving you a 27 cents pay off.
So there you have it: a tighter race, a lot of uncertainty, a Senate up for grabs and some interesting trade ideas.
NewEnglandPolitics.com 