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Keith Thomson

Keith Thomson

Posted: November 2, 2008 02:56 PM

The Most Accurate Election Forecast? Hardcore Gamblers


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Recently I was in Kentucky, reporting on horseracing for Garden & Gun. A "whale" (bettor of thousands of dollars per day) I interviewed, Mike Maloney, successfully traded securities, options and futures, but chose to go to the track every day instead because it offered him a greater challenge. "There are many, many, many more factors to consider in betting horseraces," he said.

Maloney is a youthful fifty-two, with alert, light blue eyes and a cheerful demeanor. He doesn't chomp on a cigar. He's in no way a Damon Runyon character. I have reason to believe he's a sort of mathematical genius.

I asked him: "Do you think handicappers can forecast the outcome of the presidential election better than polls?"

He didn't hesitate. "Polls can be inaccurate. People may say what is politically correct, the questions may be leading, the pollsters may be biased. A pollster can still bill for an inaccurate poll. Bookmakers must make an accurate line or they lose -- period."

For a second opinion I went to Ray Paulick, who was a protégé of notorious oddsmaker "Jimmy The Greek" before becoming a handicapper for the Daily Racing Form. Now he's editor of the thoroughbred industry insiders' must-read Paulick Report. "Gamblers have more experience with cheaters," he said. "They take voter fraud into their metrics. Polls don't. Nor do polls take into account how each state's secretary of state factors in, or systems within a state designed to eliminate voters; Jimmy the Greek called these 'the intangibles.'"

The multi-billion dollar online gaming industry offers evidence that Maloney and Paulick are, as usual, on the money.

Michael Robb, political expert for the British bookmaking site Betfair.com, lets the record speak for itself: Halfway through Election Day in 2004, when a CNN poll showed Kerry taking the lead, Betfair had Bush with a 91% chance to win.

Of course that's just one election. Probably hundreds of fifth-grade social studies students correctly predicted Bush's margin of victory to a decimal place, right?

Betfair also had all 50 states right in 2004.

As did rival site Intrade.

Koleman Strumpf, a University of Kansas economics professor who tracks betting trends, believes wagering is an incomparable barometer of an election. Among the reasons he gave me:

Relative to the polls, the betting markets have to think hard about what they're saying since they are putting their money at stake. 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.

With University of Arizona economist Paul Rhode, Strumpf authored a study -- "Historical Presidential Betting Markets," published in Journal of Economic Perspectives -- that demonstrates that the betting market's forecasting superiority is nothing new.

They begin with America's long history of wagering on political outcomes, which boomed in the 1880s when betting moved from poolrooms to the Curb Exchange, the predecessor to the American Stock Exchange. Betting on political outcomes often drew huge crowds to Wall Street and exceeded trading in stocks and bonds.

"In presidential races such as 1896, 1900, 1904, 1916, and 1924, the New York Times, Sun, and World provided nearly daily [betting] quotes from early October until Election Day," write Rhode and Strumpf.

The papers' sources were betting firms, which had men present at speeches made by the candidates in order to make "unbiased reports of the psychological reactions of the audiences."

In the fifteen elections between 1884 and 1940, the betting firms were wrong just once, in 1916, when Wilson upset Hughes. And the gamblers might have had a perfect record had the Curb Market stayed open long enough to take into account late-breaking news from the West.

The advent of polls marked the end of an era. "Prior to Gallup's introduction in 1936, newspapers had little else to report about the election horserace other than the betting markets," Strumpf said. "When scientific polls came along, newspapers had something to report other than markets they were oftentimes uncomfortable with."

Responding to such discomfort, state laws increasingly limited organized election betting. Betting persisted, but in the shadows. Accordingly little data exists from 1940 through 1984, though it's enough that Strumpf concludes gamblers were more accurate than the pollsters in that period too.

The advent of internet wagering offers a clearer picture: "Since 1988, the betting markets have definitely been more accurate," Strumpf said.

It's still illegal for United States citizens to wager on the presidential election; Betfair and Intrade try to bar American bettors. Several newer off-shore sites are more lenient, however.

Currently, Betfair lists Barack Obama as an overwhelming 1-7 favorite (paying $8 for a $7 winning bet). A John McCain win would pay $6.80 for every dollar bet.

"On Election Night I'll look at the movement on the betting sites to see what's going on," Strumpf says. "I watch CNN too, out of the corner of an eye, but it's not necessary."

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Recently I was in Kentucky, reporting on horseracing for Garden & Gun. A "whale" (bettor of thousands of dollars per day) I interviewed, Mike Maloney, successfully traded securities, options and futur...
Recently I was in Kentucky, reporting on horseracing for Garden & Gun. A "whale" (bettor of thousands of dollars per day) I interviewed, Mike Maloney, successfully traded securities, options and futur...
 
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09:55 AM on 11/05/2008
Today is a great day, President elect Barack Obama has become a reality. This is a victory not only for African Americans but for all minorities­, the United States and the world. Lets be patience and not forget that Barack Obama is just a man with a very important job. He has a extremely difficult task at hand as he tries to solve many of the problems Bush and the politician­s have left behind. Racism, sexism, classicism­, discrimina­tion and injustice still exist in this country and around the world. We must continue to stand strong together and fight against these atrocities­. Lets enjoy this victory but we all still have work to do. Lets start by stopping the violence, drugs in our communitie­s and unwanted pregnancie­s. Lets focus on improving the school system, being respectful of each other and taking care of our responsibi­lities.
06:19 PM on 11/04/2008
But with Diebold voting machines the game is rigged.
03:36 PM on 11/04/2008
Hey everyone! I just watched a hysterical video by some guys from Scranton, PA who thought making a satire about Palin would be a good idea! Heres the link if you want to watch it:

http://www­.youtube.c­om/watch?v­=1exiyBYnJ­00

Its called ANYONE CAN BE VP, you can search it on Youtube!

VOTE OBAMA 08'
02:24 PM on 11/04/2008
One of the best political short film ads of the campaign!!
The Thinking Man
http://www­.youtube.c­om/watch?v­=9KzbJtG9V­2E
02:08 PM on 11/04/2008
Hardcore gamblers know the elction better than the pundits?

So why don't all the teevee chanels book Bill Bennet all day long?
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ssgman
My micro-bio is not empty
01:41 PM on 11/04/2008
Intrade has McCain at about 13 to 1. Buy a contract for $8 and get back $100 if he wins. Those of you who have traded in the options market know how trades like that usually work out!
04:17 PM on 11/04/2008
Usually, but not always. I backed Hillary Clinton to take the New Hampshire primary at 14-to-1, and found no cause to regret it!
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HUFFPOST SUPER USER
MainSpark
08:29 AM on 11/04/2008
"Currently­, Betfair lists Barack Obama as an overwhelmi­ng 1-7 favorite (paying $8 for a $7 winning bet)."

So, let me get this straight. I have to spend $8 in order to get back (win?) $7? That's considered winning?

Continuing the thought...

If I bet on Obama to win, I actually lose money. But in the long run, with Obama as president, I win.

If I bet on McCain to win, and he does, I make money. But in the long run, with McCain as president, I lose.

I don't know if I'd refer to the odds of Obama winning as an overwhelmi­ng favorite. As far as the betting goes, I'd call it a prohibitiv­e favorite, because losing money to win the bet prohibits me from making the wager.

Probably haven't had enough coffee this morning. Just as well. If the line is long at the polling station, I doubt that anyone would hold my place in line while I went to the restroom. Because this precinct is largely Republican­, this would be more accurate if they (the line holders) knew that I was voting for Obama. To play it safe, I'll wear a red shirt.
11:09 AM on 11/04/2008
You have to bet $7 to win $8, if you bet $70,000 you get $80,000 back. McCain is a risky but better bet for small amounts.
03:04 PM on 11/04/2008
You bet $7 and win $1 plus get your original bet of $7 back. Bottom line, you come out $1 ahead for every $7 you wager (if, of course, you win).
08:18 AM on 11/04/2008
I hadn't checked out intrade before, they have Obama at 364, definitely higher than some like the RCP "no toss up" map.

I hope they're right, I'd love to see not just a win but a landslide.
10:01 AM on 11/04/2008
Yeah- I want a "win", of course, but what I really, really want is a win so spectacula­r that it amounts to nothing less than a clear mandate.
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01:11 PM on 11/04/2008
Naomi Klein's argument is that Obama will need HUGE citizen pressure, to ensure that he is forced to implement the needed changes. So the election effort needs to carry on and morph into a "rebuild the country" movement.

"FDR did not voluntaril­y implement the new deal." "It was a compromise that became acceptable because of massive grass roots pressure. FDR could then turn round to those in power and say "See, I have no choice." "

For this, movements like Moveon.org need to return to citizen activism from Obama support. Clever woman, and a terrifical­ly motivating speaker.

- Naomi Klein at Stanford University­, 10/16/08

http://aur­oraforum.s­tanford.ed­u/event/a-­conversati­on-with-na­omi-klein#­related_ev­ent_inform­ation
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01:25 PM on 11/04/2008
Correction - Naomi Klein at Stanford 10/16/08. Audio link - direct - http://www­.kqed.org/­epArchive/­R810310200
12:06 AM on 11/04/2008
Bet $1,000 on McCain and you win $6,800--no­t bad. If Obama wins and you support him then you win either way. A real win-win situation. I don't think Obama will live up to all his promises, but I did vote for him mostly because I want to hear the #@$%&& at Fox News if he wins.
07:36 AM on 11/04/2008
Good enough, we'll take it!!!
10:46 PM on 11/03/2008
As a backgammon player--"t­he game of kings and the king of games"--I regularly interact with 'smart money' sorts who also tend to neo-Nazi or otherwise Republican leaning POV's. Several such cronies have gleefully accepted my 2:1 odds on candidate Obama's victory. Of course, we wager nothing tangible, so as to remain within the bounds of the statutes.

Truthfully­, an acquaintan­ce of mine suggested that bookies' main job is a 'balancing act,' that the line is less about any oddsmakers own money--the­y thrive on the rake alone, for the most part--than about making sure that, whatever the outcome, they do not have a catastroph­ic position in either direction.

Thus, a football game between "Behemoth U." and "Bambi State" might generate a forty point spread, if enough 'Bambi State' fans support the old alma mater, when the more realistic gap between the teams is eight touchdowns instead of five and a half. This worries me, even given the 'nothing tangible' at stake. I've got my pride for God's sake.

I stand with the respondent­s here. If Barack doesn't emerge victorious­, what are we going to do? Then again, I'd say the query is equally apt inasmuch as he puts his hand on Chief Justice Roberts' Bible twelve weeks hence.
04:14 PM on 11/04/2008
Your acquaintan­ce is right. No sensible bookie backs his beliefs. He has to exercise that kind of judgment to set an opening position, but from there he varies the odds to attract similar volumes of money wagered on opposing outcomes.

At a finer level he calculates the various odds so that the 'punters' receive an unfavourab­le rate – it works something like the small difference between 'we buy at' and 'we sell at' rates in a currency exchange. Though the mechanism is different, the result is indeed somewhat like the house rake in a poker room or the house edge at roulette.

On a betting exchange such as Betfair, there is no bookie. It's more like a computer dating service, but it introduces gamblers to one another's propositio­ns rather than introducin­g lonelyhear­ts. And in this case, there is a clearly visible rake – in Betfair's case, levied on the winner of every completed wager. Either way round – bookie or exchange – the odds are determined by what the gamblers themselves are prepared to make a deal at.
10:25 PM on 11/03/2008
Let's BEAT THE HOUSE! And hope Obama wins the WHITE HOUSE, and we sweep out the REACTIONAR­Y party garbage in both HOUSES of Congress!
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Bobrobert
Go God... Jesus rocks... the Spirit is very cool..
08:33 PM on 11/03/2008
roflmao

roflmao

Me thinks ya lose if ya bet on republican­s...

hee hee hee
08:18 PM on 11/03/2008
And the MOST "inaccurat­e" election factor would be the Voting machines, hmm?

The Republican are clearly artificial­ly manipulati­ing the outcome of this Election!
If the issue in the below Video was truly a "cCalibrat­ion” Error, pointing to mccain SHOULD have result in a similar mis-regist­ration of a "wrong" vote. What in fact did NOT happen in case of Mccain!!!

Watch and then video, take a picture of your Vote with your ID or drivers license and makes sure what you voted is visible with it all: It might become very important in the next few Days and Weeks

http://www­.youtube.c­om/watch?v­=0Q9NSVUu8­nk
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Hare
One day closer to Utopia
07:19 PM on 11/03/2008
Obama is the clear winner because so many people are and continue voting for him. Do not, I repeat do not be fooled to think otherwise, if for some weird act McCain is declared the winner ya'll know they stole the election again.I suggest we all participat­e in a civilize way to let them know NOT THIS TIME, NOT AGAIN NO MORE. I will vote tomorrow, I'm ready to give Obama my vote though I hope he uses more open minded people in his administra­tion and those whose world view is in tune with reality as it is 2008. Good night and the best to all.
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rayinprague
08:26 PM on 11/03/2008
If McCain wins we know it was a fraud, and not the first one. People need to turn to the First Amendment (the same one Sarah Palin never read):

Congress shall make no law ... abridging ... the right of the people peaceably to assemble, and to petition the Government for a redress of grievances­.

Note the important word peaceably.
Several people have pointed out that it worked in Ukraine, and the votes there were finally counted.
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Nebris
Auteur and Guru
10:37 PM on 11/03/2008
If McCain 'wins' I suspect the issue will be better resolved through exercising our Second Amendment rights. That's why police depts nationwide are on Tactical Alert.
06:40 PM on 11/03/2008
Well, Chicago is getting ready for a HUGE party tomorrow night..
Will be closing lot of loop offices early because traffic will be a mess.

Tomorrow is finally the V-Day we have been waiting for and will be glad it is finally over.

However, haven't heard that lady sing yet so don't know who will be doing the Victory lap.

No matter which side wins, we will be hearing for the next several months from the losing side
that the winning side cheated, so this should keep the media outlets busy for awhile with their
very important input about why the winner won and the loser lost....