Intrade’s Presidential Prediction Machine

Looking for a good bet? Bet on Barack Obama to be re-elected as president of the United States. And yes, you can legally make that wager. Just make sure you’re getting 2-to-1 odds on an Obama victory.

As of this morning, the users who make up the polling/sampling body of prediction-making website Intrade are saying Barack Obama has a 64% chance of winning 2012’s presidential race. Conversely, Mitt Romney’s odds of being this nation’s 45th president are 36%. And given the site’s past success with picking presidents, I wouldn’t dismiss these numbers lightly.

No Bookie Needed

Intrade bills itself as “the world’s leading prediction market,” and it truly is a market in the sense that visitors can buy or sell “shares” — and make or lose real money — in a particular event’s outcome. Intrade has facilitated wagers on the size of the box office for a particular movie’s opening weekend, the Supreme Court ruling on whether Obamacare is unconstitutional, and yes, even presidential elections.

Users buy shares at the prevailing market rate ($6.44 for an Obama victory, for example), and get paid off if the event comes to pass (Obama shares would be worth $10 in the event of an Obama win, while Romney shares would be worth $0.)

But what do the amateurs who participate in this online market know that professional political analysts don’t?

True, anybody and everybody can place wagers at the Intrade website, and there’s no guarantee some of them aren’t crazy. Then again, there is one distinct difference between the people who handicap the presidential race on Intrade and the talking heads who predict winners on TV — the folks at Intrade are putting something of real value on the line, while the television gurus can hit or miss with little consequence.

And the Intrade crowd is good … really good. For example, the site’s bettors not only correctly predicted George Bush would be re-elected in 2004, the group even properly predicted which candidate would win each state (and subsequently how it would cast its electoral college vote). In 2008, Intrade’s bettors correctly predicted Barack Obama would be victorious; they picked wrong on the voting outcome for two states — Missouri and Indiana, each with 11 electoral votes, were flipped in the run-up to the election — and the final electoral vote count was off by just 1 (due to Nebraska splitting its votes for the first time in history).

But what about Romney’s media-declared victory in last week’s first presidential debate? Intrade’s crowd is adaptive too. Prior to the debate, Barack Obama was given a 79% chance of re-election, vs. a 21% shot of a Romney upset. The market rewarded the GOP candidate’s relative success in the debate, but was savvy enough to realize even a really strong showing in the first debate wasn’t going to be enough to turn the tide. Indeed, this week’s national polls show the race much tighter than it was prior to the debate, but Intrade bettors are still backing Obama by 18 points.

And If the Tide Turns?

While that Intrade gap may seem insurmountable for Romney, stranger things have happened. And if it does happen, the site will updating the odds along the way — just as the payouts are constantly updated in horse racing, right up until the race begins.

Unlike horse racing though, Intrade’s participants aren’t necessarily stuck with a bad bet should things sour between now and post time.

Just like the stock market, wagers on an Obama or Romney victory can be bought or sold at any point between now and Nov. 6. Like any stock, those shares may be sold for a loss or a gain as their market value changes. But, it may be possible for a bettor to cut his or her losses early (or lock in a gain) if public opinion starts to shift over the next four weeks.

But here’s the key takeaway — whoever Intrade has as the favorite on Monday, Nov. 5, is stunningly likely to be your next president.

Eat your heart out, James Carville.

Article printed from InvestorPlace Media,

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