Tuesday, July 10, 2007

Alternate Income Streams: Betting Against Zealots

I've been exploring whether to start investing money in the political futures market, sites like Iowa Electronic Market and Intrade offer people the opportunity to "invest" in a bet which functions like a stock on certain political candidates or parties winning elections or primaries.

The great thing about these markets is that they are populated by partisan hacks of both sides, who cause tremendous inefficiencies which can be exploited for profit.

For instance, based on fundraising totals it seems pretty clear to most people that the Democratic primary will be won by either Hillary or Obama. Sure you could make an argument for Gore or Edwards, but the former seems disillusioned with politics and the latter seems hopeless, despite his popularity with the Daily Kos.

If I bet on those two candidates to win the primary (placed bets on both of them), and one of them won, I would make a 25% return on my investment. If I wanted to temper my risk by also betting on Gore, I would make a 15% profit.

Unfortunately, the same inefficiencies don't seem to exist on the GOP side, as a bet on Fred Thompson, Giuliani, and Romney would only return 16%. A bet on John McCain (whose campaign is in freefall) would return a healthy 1,983%, which despite McCain's freefall seems a bit exaggerated.

1 comment:


Sounds like the major money center banks getting bailed out by uncle sam. Alternative income streams alright.