‘Smart Money’ Better than Polls?
We’ve talked about the fact that there have not been many state polls this year, and of course, national polls are worthless to figure out how individual states will go—and that’s all that matters at this point.
But there is another indicator—the betting table.
Fox’s Maxim Lott explains “prediction markets” in this old video—when Trump’s chances were only 5%.
Although betting on elections is technically illegal in the US, there are many sites in Britain and Europe. But is a prediction market reliable?
You may have heard that the stock market forecasts the economy. Generally, there’s a six-month lead time between a market rise or fall and the health of the economy as a whole. It’s not necessarily that investors are smarter, as individuals, nor that they have some kind of secret information. But all the bits of information of all the individuals add up to a movement.
Today, we’re talking about the “market” in politics. You can bet money on whom will win contests, and the result is a pretty reliable forecast. It failed in the GOP Iowa caucus, but it could be argued that dirty tricks gave us the wrong winner.
So. . .what do the gamblers say?
Hillary beats Bernie. Sorry. The real interest is in the GOP. Election Betting Odds is even picking state races, so let’s see how well they do in today’s report:
Note that these are chances of WINNING, not percentage of the win:
You can also see charts of how the candidate chances have moved over time, here.
As you’ll see, there really is only one candidate who can reasonably win—Trump, over 60%, with ALL other candidates in probability in single digits.
Fox News Opinion made an interesting point:
Betting odds have a better track record than polls or pundits. They come from people who put their own money on the line, rather than people who just mouth off. . .
These odds update every five minutes.
Prediction markets like Betfair are not run by sketchy bookies. They are businesses that operate the way stock markets do – people buy and sell “shares” that pay out based on whether a candidate is successful. Today, for about 10 cents, you can buy a share of Trump. If he becomes president, you win a dollar. . .
Part of the reason they’re good is the “wisdom of crowds.”
Some people betting may be fools making bad bets — but enough of them have good information that the whole group of bets is likely to be accurate. You see this on the TV show “Who Wants To Be A Millionaire.”
Contestants can ask the audience, or an expert. Experts do pretty well. They get the answer right 65 percent of the time, but the audience gets it right 91 percent of the time.
Despite “winning” so much, according to a lot of analysts, at the current rate of success, Donald Trump is unlikely to win a first-ballot win, leading to a possible “open” convention.
Also, as we noted elsewhere here, while Trump has won a lot of states, they were all “proportional,” meaning candidates only win based on the percentage of their votes. But the later states are all “winner-take-all,” so if any candidate “catches fire,” he could win the nomination, even if in third-place now.
At this point, Trump looks like a “sure bet.” It should also be noted that the odds change. If Cruz or Rubio start racking up winner-take-all states, the bet is off.