Election Betting Final - Waiting For Returns

Well, the long and sometimes very annoying election cycle is winding down to a number of hours. I figured we'd have a look at some betting strategy. As we've talked about before, election betting can be lucrative and fun. With millions matched on betfair, the world outside America is captured by it as well. When there are liquid markets (pay attention harness racing!) people will come.

I wish I had a valiant prediction, but at the present moment I don't. I won't be making a move until the numbers start to come in and I will tell you why:

In 2004 George W Bush was ahead in the polls by about 1.5%. He was ahead in the states by similar margins - FL 1%, OH 1.5% ...... NM, CO, NV, IA all ahead. He was also very close behind in places like PA and MN. He looked like a formidable chalk.

At Betfair his price was about 1.50, or 1-2. 

In this election we have the President ahead by about 0.4% in the national polls - which is well below where Bush was - but like President Bush, slightly ahead in almost all the key battleground states he needs for 270. He too looks like a formidable chalk.

His price at Betfair is 1.28, or 7-25.

I do not know why I am seeing such a discrepancy in the odds. It could be twitter, it could be facebook, it could be the media narrative (a lot of pundits in 2004 were calling Kerry, but few are today calling Romney), it could be path to electoral victory, it could be Nate Silver dominating the headlines. It could be the "Sandy Bounce" we're seeing in very good Obama polls over the weekend. It could be simply that George W. Bush was such an overlay in 2004, that his odds were way off, but Obama's are right on.

I don't know.

All I do know is that I'm not biting on something that looks overbet (Obama).That's simply because I'm a bettor. Just because I think Rachel Alexandra with tactical speed and a push button would beat Zenyatta in a match race, doesn't mean I'd bet her at 1-5. 

But, I'm not biting on something that looks underbet (Romney), mainly because I can wait. It's 2012, and we have in-running betting now. There is no reason to stick your neck out.

A few things to look for in both early returns and some exit polling where one may make a move (beware, exit polling like in 2004 will likely be garbage unless you look at trends):

Party ID (Turnout). Scott Rasmussen of the Rasmussen Reports has been good at predicting this number, which almost every pollster sucks at. He has a massive R turnout edge this year.

If he's anywhere close to right - and it is a probably not that skewed - Romney will win at long odds. If we're looking at a ~D+4 (like most of the polls are using, and a strong argument can be made for), one can look to Obama pretty quickly, because everything you are seeing in the real clear politics averages, and on Nate Silver is being confirmed. If it's in between (like a D+1), then the media is right and this is probably a true toss up, close race.

White Vote: The white vote is projected to go 60-40 Romney. If that holds, Obama can be bet. The Obama campaign thinks they are going to get at, or over 40%. If it is closer to 35% or 36%, Romney is a good bet .This might be shown in exit polling, with some caveats, to get the jump on other bettors.

Early Numbers: If Romney is not up by a nice amount in FL or NC, the turnout numbers that people like Michael Barone are using is not likely happening. The focus at that time will probably be not only if Obama is going to win, but how much is he going to win by.

Exits: In 2004 the exits for Kerry were huge.... and very wrong. He was actually a favorite at Intrade during the day. Currently the Obama campaign is warning its supporters not to be demoralized if the exits come back bad. This is because Romney is likely to win election day handily. If the markets swing tomorrow, keep it in mind.

Whatever happens early, there are markets to play.

If the polls are right on and Obama is closing in on a huge win, you can bet the electoral count market (eg over 309, etc). You can also bet the states (some states will be close regardless if it's a blowout or not), handicap markets and Senate races. Ditto if prognosticators like Barone are right.

Most of the states, like in the general, are really overbet based on current polling. Mostly leaning Obama. It's hard to find any value on the Obama side. The following of course is my opinion, and please, no wagering.

Ohio: Currently 1.28 for Obama.  I'd normally ignore get out the vote poll, panicked releases like this, but one of the best pollsters in the business confirms it somewhat today with a good sample bellwether poll that few have reported (standalone). For any bettor worth his or her salt, this is a fade right now. You're getting the best of it no matter what happens.

Nevada: Currently 1.14 for Obama. I think Obama is going to win this state by 4 or 5 points. 1.14 is too low for me to bet, though. This is a weird state with a huge union vote and a lot of machinery for the D side. Nate Silver predicted Sharron Angle to win this state in 2010 beating Harry Reid with an 83.4% certainty. Reid won with his special interest machine. Uncertainty + Bad Odds  = bet something else.

Colorado: Currently 1.72 for Obama. I think he will win Colorado. But the odds are not quite high enough for me to go long the President (1.90 and I'd bite).

Florida: 1.55 Romney. I don't want him at those odds. That's too low for me. I think he takes this state, though.

Iowa: 1.34 for Obama. This is a fade for me. I think this state is no gimmee, based on early voting and the trends. All four major newspapers in the State flipped from Obama to Romney. I think this goes right down to the wire, and that is going out on a limb if you read the news media.  1.34 is good value.

Virginia: Currently 1.64 Obama. That's too low for me. A fade. Unless the D+4 number happens with turnout, this state is a toss up.

Wisconsin: Currently 1.20 Obama. I dislike Romney here by quite a bit, but so does everyone else it seems. 1.20? Way overbet for this kid, considering the polls were terribly off for the recall election for the Democrat and some polls have this even anyway.

North Carolina: 1.31 Romney. I tried to find a reason to fade Romney here - Obama's early vote is ok. Black vote is up. There are some positives for him. I think that's close to fair odds though. Obama won this by 14,000 votes last time, and he's down in early voting via party ID by about 4%. I can't bet Romney, I can't bet Obama.

New Hampshire: Not really interested in anything here. New Hampshire is a strange state with polling. Up to the day of the Primary in 2008, polling had Obama winning by 9 points in the Real Clear Politics average. Hillary Clinton won. I stay away from this state each cycle.

Outliers: PA, MI, MN. You can bet Obama and take some free squares if you think the polls are all good. If the early voting goes one way or another, you can probably bet them with some skill. None of them really interest me at the current less than ten cents on the dollar. Unless something crazy is happening.

Predictions from scouring the data? Will it be a blowout for Obama, or will it be close? Almost all of the time the narrative wins elections. This time the narrative (a bad economy) does not match the polling numbers. If I can't get both to match up, I've learned long ago to not have a strong feeling on anything. I think there are a number of potential scenarios, just like in 2000 or 2004. With that, I respectfully punt.

Regardless, good luck if you're playing. And if not, good luck to whichever candidate is of your choosing.