US Election Betting, Update II

Breeders Cup draw? Breeders Crown recap? Storm chatter? Nah. On this strange day I'll have a look at election betting and some trends. I had a couple of email questions yesterday asking about what's happening on betfair - one from a huge O supporter, one from an equally big R supporter - so why not. A lot of people are betting the race to the finish, too.

The Race

Betfair has a 67.37% chance of an O victory. This is higher than Intrade, but lower than Nate Silver's Five Thirty Eight blog. The discrepancy between Betfair and InTrade might be due to overseas money primarily working betfair, and more domestic cash at Intrade. I don't know for sure, but it is what it is.

The Fundamentals

Money has been swinging to O of late, despite a movement in the polls to Romney, where he leads by 0.9% at Real Clear Politics. You might be saying "if R is up by a point, why isn't he the favorite?"

Right now the polls themselves are not driving the price changes, the states are, primarily Ohio. The media narrative of "whomever wins Ohio wins the election" has caught on, and the Real Clear Politics average shows an Obama win in the Buckeye State. Bettors are laser-focused on Ohio.

So you might be saying "Pocket, why is Obama not closer to 80% or above with bettors like Nate Silver says, and do we have an edge?"

Answer: Because of biases, turnout battles and noise - a ton of noise.

This is one of the more confusing betting races I've watched since I have been betting them (in earnest since the year 2000).

The "Noise"

If you want to go long Romney for a nice score, you can hang your hat on a number of things.

• He's ahead in the popular vote averages, as noted above, and the polls are usually right
• The last two polls in Ohio have been "even" and R+2 via Rasmussen
• Gallup, who is only one of two pollsters who has surveyed party loyalty, has R up 5 points. That would be a huge R win on election day.
• States like Pennsylvania and Minnesota have closed, with one poll showing O+4 and O+3 respectively. If those solid blue states have closed, how in the heck can Romney lose?
• R is killing with independents. The dude who wins I's wins the race, generally.
• Voting models, which look at turnout, show R winning by five, like today's GWU battleground poll. This is a favorite of right wing blogs. They have a point.

If you want to go long Obama and take the 48 cents on the dollar, you have plenty of things to like too.

•  In the swing states - CO, WI, OH, CO, VA, NC IA and FL - he is leading in most polls averages. He can't possibly lose if he leads in so many of these states can he?
• The ground game: Left wing blogs especially have hung their hat on this one, and they have a point. This isn't a myth. In 2000 it worked like gangbusters, in 08 it was awesome. 
• The R turnout numbers are too bullish. Signs in early voting in NV and elsewhere are looking fine.
• R's momentum has stalled. He was trending upwards but now is not and things are moving the Prez's way. 
• The odds say so. When the odds are like this - this late - the winner will be the chalk. Follow the money. 
• The polls that have Romney way up - like Gallup and Rassmussen -  cannot be possibly right. 

 I wish I had some pearls of wisdom, or a valiant prediction. I can say that I think Betfair is close to accurate right now. Nate Silver is too bullish O (probably because of a lack of a Black Scholes component) and InTrade is too bullish R.

What can change the prices over the last week?

1. If the two latest OH polls show a trend, with one or two more falling into line with an R lead, batten down the hatches and load up on Romney. With a 1% RCP average in the general edge and an edge in OH, he is probably 60% or higher to win. It is important to note, when the R+2 OH poll was released this morning Betfair did not move one inch in the Ohio markets.It needs more numbers, and/or Nate Silver to show these polls in his models.

2. The Employment numbers: Economists are calling for a tick up in the unemployment rate on Friday. If they're right, it will hurt O. If the numbers are good like last time, R may be toast.

If you are betting this, and trying to trade, there's plenty for you to watch and analyze. If you are an R or O fan and interested in the race for that only, there is certainly a lot to hang your hat on. It feels like 2000 all over again, where both sides think they can win.

Of course this is simply the prelude to the real time action 8 days from now, where if it is close, there are sure to be some huge winners and losers on the exchanges.