I don't like uncertainty. The current presidential polls -- Gallup with Romney leading by three percent, CBS with Obama up by two percent, aggregators split on whose nose is ahead -- are a hotbed of uncertainty. Fortunately there are veritable election oracles I can turn to instead: gamblers.
In 2004, Gallup failed to forecast the winner of the popular vote for president -- for the second straight election. Halfway through Election Day 2004, various exit polls showed Kerry with the lead. Meanwhile 91 percent of bettors on Betfair.com had their money on Bush. The betting markets also were correct on the winner in each of the 50 states.
Before the 2008 election, I spoke to Koleman Strumpf, a University of Kansas economics professor who tracks betting trends. "Relative to the polls, the betting markets have to think hard about what they're saying since they are putting their money at stake," he said. "Also polls tend to reflect what people are thinking at a given moment, versus a forecast of what will happen on election day -- post-convention bounces, for instance."
Added Paulick Report editor Ray Paulick, one of America's top horseracing handicappers and a political prediction markets aficionado, "Gamblers have more experience with cheaters. They take voter fraud into their metrics. Polls don't. Nor do polls take into account intangibles like how each state's secretary of state factors in or systems within a state designed to eliminate voters."
In 2008, 90 percent of gamblers correctly forecast an Obama victory. They were also on the money with 48 of 50 states.
Gamblers' success in this arena is nothing new. In presidential races beginning in 1896, the New York Times, Sun, and World provided daily betting quotes. The papers' sources were bookies who had agents at every stump and whistle-stop to gather intel and quantify popular sentiment. Between 1884 and 1940, the bettors erred on just one of sixteen elections, Wilson's 1916 upset of Hughes.
Ironically, polls sent gamblers to the sideline. "Prior to Gallup's introduction in 1936, newspapers had little to report about the election horse race other than the betting markets," Strumpf explains. "When scientific polls came along, newspapers had something to report other than markets they were oftentimes uncomfortable with."
The same discomfort led to states relegating such gamblers to outlaws. The Internet has given rise to new forums, however. As of this writing, betting at the three biggest prediction markets is as follows: Betfair has Obama with a 64 percent chance to win to Romney's 36 percent; Intrade has the president at 58 percent; and the Iowa Electronic Markets have the president at 59 percent. Oddschecker shows bookmakers to be even more bullish on Obama.
Why are the polls and gamblers so far apart?
"The answer highlights one of the main differences between the polls and markets like Intrade," Intrade's exchange operations manager Carl Wolfenden told me. "The polls ask who you're going to vote for -- a question that requires an emotional response. Intrade asks who you think will win -- a rational question that requires someone to look at the facts and real world events, such as polls, debates, speeches, gaffes, scandals and crises. One of these facts is the Electoral College, which isn't accounted for in polls."
Why the big lead for Obama?
"Our markets recognize that Romney probably needs to win Ohio to beat Obama," Wolfenden says. "And so the price for Obama to be reelected has closely tracked his probability of winning Ohio. So while Romney may lead in the polls, and he may have flipped a number of other key states -- such as Florida, Virginia, Colorado -- to his side of the ledger, our markets appear to believe that without Ohio he can't get it done."
Strumpf adds: "I think the big message in this election cycle is that polls are giving conflicting answers, and unless you are willing to look at several state-level polls, it is hard to make sense of it all. The prediction markets like Intrade cut through all this and give us a single number to focus on."
Still, the consensus among gamblers isn't as strong as in the last two elections. At approximately 3-2 odds, is the outcome in this election any more certain than that of a horse race?
"I much prefer this kind of 60-40 probability than I would in a horse race," says Paulick. "In a match race between two horses over a course of one-and-a-quarter miles, a lot of things can go suddenly wrong. The election is more of a marathon, a four-year race. Short of a huge scandal, I can't see an outcome other than Obama's reelection."
Intrade's scoreboard, updated in real-time here:
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