Saturday, May 15, 2010

A Window To The Future

A good thing about trading markets is that it gives (usually) an objective view of current thinking about the subject matter being traded. Indeed, sports odds are in concept another form of trading market to give an unbiased view as to how a sporting event is likely to play out, and as such is very useful to sport fans as to creating expectations. An interesting website is that established by Intrade, which creates markets for specific future events, including but not limited to political and financial events. More than just being fun, Intrade can give you an insight into current events when an unfiltered reading of the news media is inconclusive. Case in point was the last few days before passage of the health care reform bill. Democratic leaders expressed confidence that the bill would pass, but other news stories hinted that they were a handful of votes short, or that a hitch developed because no single representative wanted to be the person to cast the decisive vote. However, turning to Intrade saw passage futures trading at 80 percent, so I knew that it was a done deal. One interesting current contract is that Arlen Specter's prospects of winning his primary race have dropped from 80 to 20 in just a couple of weeks. Also the chances of the Republicans winning the House this fall are currently pegged at 44, though they hit slightly over 50 a few days ago.

Of course this is not meant to say that the predictions are highly accurate in the long run. If these futures contracts were that predictive, we'd be in the second term of the Kerry administration, as his futures soared on election night as results of the subsequently discredited exit polls portended a big Kerry victory. But these futures seem to be as predictive as sports odds, and that's a pretty good record.