Congressman Ron Paul of Texas is running for the Republican nomination for President. I'd estimate his chances at approximately zero. Intrade gives his chances at 7.5%. Intrade is an online prediction market, the modern equivalent of a bookie. There are people betting for Ron Paul, and people betting against him, and 7.5% is where the market clears. Of course, this is a new millenium and we don't talk about making bets, we talk about buying and selling contracts. It amounts to the same thing.
The trade is obvious: sell Ron Paul short at 7.5 and cover at 0. Can it really be this easy? It's a short sale, and Intrade requires a margin that doesn't earn interest. The contract runs through August 31, 2008, after the Republican convention. The trade works out to about 9% annualized. For all intents and purposes, the nomination will be over by the end of January, after Iowa and New Hampshire, so I can probably cover then, if not at zero then close to zero. I wouldn't be surprised to see a 20% annualized return on this bet, I mean investment.
Or I could look at this in a "Wisdom of Crowds" sort of way. The people at Intrade know something that the mainstream political pundits don't, and Ron Paul really does have a snowball's chance in hell of getting the nomination. Nah... I don't think so. Al Gore has a better chance of getting the Republican nomination. I think there are libertarians and conservatives at Intrade who are betting on what they want to happen, not what they would rationally expect to happen. However, there is a lot of enthusiasm on the internet, and you can read "Ron Paul Can Win" for the Paul supporters' case.
" sort of way. The people at Intrade know something that the mainstream political pundits don't, and Ron Paul really does have a snowball's chance in hell of getting the nomination. Nah... I don't think so. Al Gore has a better chance of getting the Republican nomination. I think there are libertarians and conservatives at Intrade who are betting on what they want to happen, not what they would rationally expect to happen. However, there is a lot of enthusiasm on the internet, and you can read Or I could look at this as psycho-financial arbitrage. I like Ron Paul. I'd like to see him get the nomination. I voted for him when he ran for President as a Libertarian in 1988. So I sell him short at Intrade. If I'm right and he doesn't get the nomination, I make some money. If I'm wrong and he does, I have the satisfaction of seeing him run and voting for him in the general election. If I bet, I mean invest, the right amount, on balance I come out ahead either way. Such a deal.
I have $250 of edutainment money on its way to Intrade. If Ron Paul is still at 7.5% when my account is cleared to trade, I will sell him short.
3 comments:
I hear the "Ron Paul can't win" argument less and less these days.
May I ask why you think he can't win?
I think he both can and will.
--FZappa
FZappa...
Ron Paul won't win because the American people aren't that smart.
You have a once-in-a-lifetime opportunity here. If you take the other side of the trade, and you're right, you get a 1200% return. You'll be filthy rich, AND you'll live in a libertarian paradise.
-- Dogbert
PS: love the music!
Well, Ron Paul is a Republiar and most of the people I know, except a few willfully gullibles, are tired of being lied to.
The problem with dealing with r-liars is that it takes so much time to research and refute the lies and by then the damage is done.
Like the little boy who cried wolf, no one is wiliing to listen to what liars are promoting this week.
Now, the man may be honest, but he should run as an independent to get clear of all the LiaR-publican baggage.
As far as the intelligence of the American people, Jimmy Carter won the debate with logic and honesty, RR was already in the throes of Altzheimers to those with eyes to see. That debate which declared RR the winner is why I took up residence in a tree for the duration.
I really don't understand gambling or the stock market so I am going to have to go look up "selling short" before I understand that thread.
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