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Romney a Value Play at 28% on Intrade?


bmichaud
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The contrarian in me says Romney's presidential intrinsic value is far higher than what Intrade currently predicts. As anyone who has dug into the details of the various polls knows, many of the polls showing Obama up even 1 or 2 in the swing states are over-polling democrats to the tune of 5 to 10% higher than Republicans. 2008 was D+8%ish, 2010 was R+ and 2004 was roughly dead-even. With republican enthusiasm up and democratic enthusiasm down, any poll showing D+5 or more is asinine, IMO.

 

The various markets are voting Obama today with equities, gold and Intrade all rising - and the Street has capitulated on Romney's chances, per this CNBC article: http://blogs.wsj.com/peggynoonan/2012/11/05/monday-morning/. If this isn't a contrarian sign, IDK what is.

 

Karl Rove is predicting a narrow but potentially blow-out win for Romney: http://news.investors.com/politics-andrew-malcolm/110612-632299-election-prediction-close-race-with-romney-beating-obama-narrowly.htm, and he mentioned on Hannity the other night that his super pac American Crossroads would not be spending $2MM in PA if it was not far closer than what the media would have you believe.....

 

And lastly, Peggy Noonan had a good note out the other day regarding Republican enthusiasm, etc....:

 

http://blogs.wsj.com/peggynoonan/2012/11/05/monday-morning/

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The contrarian in me says Romney's presidential intrinsic value is far higher than what Intrade currently predicts. As anyone who has dug into the details of the various polls knows, many of the polls showing Obama up even 1 or 2 in the swing states are over-polling democrats to the tune of 5 to 10% higher than Republicans. 2008 was D+8%ish, 2010 was R+ and 2004 was roughly dead-even. With republican enthusiasm up and democratic enthusiasm down, any poll showing D+5 or more is asinine, IMO.

 

The various markets are voting Obama today with equities, gold and Intrade all rising - and the Street has capitulated on Romney's chances, per this CNBC article: http://blogs.wsj.com/peggynoonan/2012/11/05/monday-morning/. If this isn't a contrarian sign, IDK what is.

 

Karl Rove is predicting a narrow but potentially blow-out win for Romney: http://news.investors.com/politics-andrew-malcolm/110612-632299-election-prediction-close-race-with-romney-beating-obama-narrowly.htm, and he mentioned on Hannity the other night that his super pac American Crossroads would not be spending $2MM in PA if it was not far closer than what the media would have you believe.....

 

And lastly, Peggy Noonan had a good note out the other day regarding Republican enthusiasm, etc....:

 

http://blogs.wsj.com/peggynoonan/2012/11/05/monday-morning/

 

Man, I guess lottery tickets are always enticing.

 

The last few days  I was thinking about a career change, and betting against underdogs across all races both Republicans and Democrats. All underdogs are showing odds that are not squared with polling reality. For example, some people still think Brown has chances of winning… good luck with that one.

 

And by buying a basket across parties you can hedge a bit possible party bias. I guess people are even more emotional about politics than stocks.

 

PS: Party affiliation for Republicans have been plummeting the last few years while the Republican share of the Independents vote has been increasing. One hypothesis, is that Libertarians don't like to call themselves Republicans but at the end they vote for them anyway. That is the reason why sampling includes more Democrats, and historically… there has not been party bias.

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The contrarian in me says Romney's presidential intrinsic value is far higher than what Intrade currently predicts. As anyone who has dug into the details of the various polls knows, many of the polls showing Obama up even 1 or 2 in the swing states are over-polling democrats to the tune of 5 to 10% higher than Republicans. 2008 was D+8%ish, 2010 was R+ and 2004 was roughly dead-even. With republican enthusiasm up and democratic enthusiasm down, any poll showing D+5 or more is asinine, IMO.

 

The various markets are voting Obama today with equities, gold and Intrade all rising - and the Street has capitulated on Romney's chances, per this CNBC article: http://blogs.wsj.com/peggynoonan/2012/11/05/monday-morning/. If this isn't a contrarian sign, IDK what is.

 

Karl Rove is predicting a narrow but potentially blow-out win for Romney: http://news.investors.com/politics-andrew-malcolm/110612-632299-election-prediction-close-race-with-romney-beating-obama-narrowly.htm, and he mentioned on Hannity the other night that his super pac American Crossroads would not be spending $2MM in PA if it was not far closer than what the media would have you believe.....

 

And lastly, Peggy Noonan had a good note out the other day regarding Republican enthusiasm, etc....:

 

http://blogs.wsj.com/peggynoonan/2012/11/05/monday-morning/

 

Man, I guess lottery tickets are always enticing.

 

The last few says  I was thinking about a career change, and betting against the underdogs across all races… republicans and democrats are both showing too enticing odds for them. I guess people are even more emotional about politics and stocks.

 

Betting on Romney here would be akin to the example Munger always uses to explain the pari-mutuel betting system where some make careers out of loading up on an underpriced horse........which has absolutely nothing to do with betting against all underdogs and/or emotion.....

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if you buy into Nate Silver's model, then 28% is far too high:

 

http://fivethirtyeight.blogs.nytimes.com/

 

It's not just Nate Silver's model that suggests that Romney's chances are a lot less than 28%. Here are a couple of other sites that use sensible statistical techniques on poll aggregates.

 

http://votamatic.org/

 

http://election.princeton.edu/

 

These sites do discuss the possibility of systematic bias in the polls skewing their conclusions. It looks like systematic bias cannot be ruled out, but it is not likely.

 

Romney at 28% does not look like a value play at all.

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if you buy into Nate Silver's model, then 28% is far too high:

 

http://fivethirtyeight.blogs.nytimes.com/

 

If it weren't for the hoops to open an Intrade account I would have done it.  Due to time constraints I would have had to wire money.  Since the market is so thin I doubt one could have put a $1,000 to work without significantly moving the numbers.  I decided it was not worth my time.

 

But Nate's model is only good as the data he feeds it.  So IF there is oversampling of Democrats via oversampling of minorities, then the model will spit out the wrong answer.  Maybe it is because I am a Romney supporter but when I dig into the state polls I struggle to believe them.  Most imply an electorate that will be more Democrat than 2008 and that seems highly unlikely.  Look at 2008 - Obama had a huge advantage due to the economy, his fundraising, his charisma, and his message.  Today - he does not have the advantage on the economy, fundraising, or message. 

 

There is a lot of evidence that Romney supporters point to that imply victory.  Lower early voting numbers for Obama, Romney winning independents nationally, and partisan leanings as measured by Rasmussen are the three biggest.

 

Political preferences aside.  The process of sorting through conflicting information (and spin) in order to come to the most probable outcome is fascinating to me.

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Gallup historic party affiliation

http://www.gallup.com/poll/15370/party-affiliation.aspx

 

The meme going around is that among Independents Romney is winning and that the polls are oversampling Democrats. Well, if Republicans don't like to call themselves Republicans … what would you expect? And add the electoral map math…

 

The value play is based on the general polls over-polling democrats. Any model based on the general polls doesn't take this into account.

 

Here's an interesting model with a very good record:

 

http://www.colorado.edu/news/releases/2012/10/04/updated-election-forecasting-model-still-points-romney-win-university

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Gallup historic party affiliation

http://www.gallup.com/poll/15370/party-affiliation.aspx

 

The meme going around is that among Independents Romney is winning and that the polls are oversampling Democrats. Well, if Republicans don't like to call themselves Republicans … what would you expect? And add the electoral map math…

 

 

There is no disputing that some partisans switch when their party is not popular, just as some true independents become leaners for a few years.  While he doesn't push leaners, it is interesting that Rasmussen is seeing something different:

http://www.rasmussenreports.com/public_content/archive/mood_of_america_archive/partisan_trends/summary_of_party_affiliation

 

If you compare their numbers to actual election results, Ras picked up the 2006, 2008 and 2010 swing where Gallup's numbers definitely picked up the 2006 swing but not so much in 2008 or 2010.  Granted he is not measuring turnout but identification which is different.

 

How doe we make sure we are not locking on to information that confirms our biases versus being objective?  This happens in investing just as in politics.  That is why it is fascinating to me.   

 

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How doe we make sure we are not locking on to information that confirms our biases versus being objective?  This happens in investing just as in politics.  That is why it is fascinating to me. 

 

Bayesian inference. You compare polls and check the track record and adjust accordingly. Exactly what Silver is doing and just like investing.

 

In 2010, Nate Silver of the New York Times blog FiveThirtyEight wrote the article “Is Rasmussen Reports biased?”, in which he mostly defended Rasmussen from allegations of bias.

 

However, by later in the year, Rasmussen's polling results diverged notably from other mainstream pollsters, which Silver labeled a "house effect". He went on to explore other factors which may have explained the effect such as the use of a likely voter model, and claimed that Rasmussen conducted its polls in a way that excluded the majority of the population from answering. Silver also criticized Rasmussen for often only polling races months before the election, which prevented them from having polls just before the election that could be assessed for accuracy. He wrote that he was “looking at appropriate ways to punish pollsters” like Rasmussen in his pollster rating models who don’t poll in the final days before an election.

 

In June 2012, Silver wrote that "Rasmussen Reports, which has had Republican-leaning results in the past, does so again this year. However, the tendency is not very strong – a Republican lean of about 1.3 points." Silver ranked Rasmussen Reports as having the third lowest house effect of the 12 polling firms that Silver analyzed.

 

After the 2010 midterm elections, Silver concluded that Rasmussen's polls were the least accurate of the major pollsters in 2010, having an average error of 5.8 points and a pro-Republican bias of 3.9 points according to Silver's model.

 

 

 

 

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For example, there is this guy called Chris Whalen that comments on banking. Once upon a time I called him smart but somewhat biased. With all the evidence accumulated over time, I think he is just biased. That does not mean I completely disregard his comments … only that there is very little probability to his views.

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For example, there is this guy called Chris Wallen that comments on banking. Once upon a time I called him smart but somewhat biased. With all the evidence accumulated over time, I think he is just biased. That does not mean I completely disregard his comments … just attach a very little probability to them.

 

He grew up in a privileged household where his father was on Reagan's staff (well, a policy advisor to Reagan) and Volcker was a friend of the family & household guest.

 

So he has this confidence of being an imagined important person that isn't born from his own competence.

 

That's my psychoanalysis of him anyhow.

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For example, there is this guy called Chris Whalen that comments on banking. Once upon a time I called him smart but somewhat biased. With all the evidence accumulated over time, I think he is just biased. That does not mean I completely disregard his comments … only that there is very little probability to his views.

 

I still think Whalen is a smart guy, but he seems unable to distinguish between that which he knows well and that which he ought to be much less confident about. He wouldn't be the first smart guy I have seen who has this problem. I mean, in that 2010 video clip somebody linked to -- I think you or Eric provided the link -- Whalen goes on confidently about Russia and the EU joining forces on a gold-backed currency or some such nonsense. He should have the good sense to know that something like that is entirely speculative.

 

Whalen also serves as a good reminder for me not to take predictions from pundits seriously (with very few exceptions).

 

So I have found him quite useful, even if he has been horribly wrong on US banks.  :)

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The value play is based on the general polls over-polling democrats. Any model based on the general polls doesn't take this into account.

 

Yes, Romney's chances hinge on the polls being systematically biased in favor of democrats. Btw, Nate Silver has an article about this issue: http://fivethirtyeight.blogs.nytimes.com/2012/09/29/poll-averages-have-no-history-of-consistent-partisan-bias/

 

It looks like there is no historical evidence of a pro-democratic bias in likely voter polls; there is one in polls that use registered voters, but that is not relevant. In 1980, 1996 and 2000, there was a significant difference between the poll average and the actual election results (7.2%, 5.1% and 3.2% respectively). A swing of such magnitude would be enough to give Romney the victory, I imagine. But you better have some pretty good evidence to conclude that the chances of this happening are more than 28%.

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bmichaud - I agree undervalue.  Another trade that is overvalued on Intrade is Florida having the closest margin of victory of all states.  I looked into putting some money to work on intrade a while back...as a word of caution they are not regulated and do not release their audits when requested. 

 

I know you've spent some time in the great state of ohio - what are your thoughts there specifically?  My thoughts are as follows:

 

-On the one hand you have the polls, and Obama's ground game.

-On the other hand you have the fact the polls oversample Dem.  This may have to do with Ohio not having true party registration though.  Some of the Reps are really in the Ind numbers perhaps.

-Ohio generally votes more conservative then the nation.  O won ohio by 4.7 in 2008, and won the nation by 7.2.  The national polls are now tied (and these polls have better-vetted methodology and are more likely accurate).  A similar shift in ohio would point to a Rep win. 

-Independents polled appear to consistently support Rep.

-Finally, the numbers from the early voting in raw for support Dems, but the shifts from 08 appear to erode O's 08 winning margin in the state.

Anecdotes: Coal unions for Rep for first time in decades.  Rep base appears more energized.  Dem base appears less energized.  Ohio has a lot of catholics - that could play a role.

 

All that said I would agree that 30-70 odds for Rep/Dem appears to undervalue Rep at this point. 

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I'm hesitant to add to a political discussion on this board, but a couple of quick thoughts:

 

1.  Romney will have to take 5 of the 7 swing states to win the election.  Actually, he can't just take any 5, he'll have to take the 5 with the most electoral college votes.  Is that likely?

 

2.  The percentage of white voters (the core of the Republican party) has been on a steady decline since the 90's.  Has the percentage of whites in America grown or declined since the last election?  And how does that help or hinder Romney's chance of winning given the Republican's core voting block?

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Watsa,

 

I look at the entire race but also Ohio specifically as follows - Obama won in 2008 with three big tailwinds: 1) anti-bush rhetoric, 2) Obama's fraudulent promise that he was going to unite the country that made everyone feel all warm and fuzzy (despite having one of the most liberal voting records on the planet) and 3) McCain as an alternative. This three tailwinds combined to produce record democratic turnout driven by the youth vote, the minority vote and republicans voting for something different. NOW....1) you have a demoralized democratic base due to Obama's horrific performance since the first debate, and 2) the republican base is now fired up since the first debate b/c we FINALLY got to see Romney for who he is - a brilliant turnaround artist with a positive vision for the country - both of which will combine to narrow the turnout gap, IMHO.

 

I'm not a polling expert, but when Ohio polls have Obama up 1 or 2 with D+8 and you have the above two factors driving a narrower turnout gap, I tend to believe Karl Rove when he says the following ((See attached for Rove article):

 

One potentially dispositive question is what mix of Republicans and Democrats will show up this election. On Friday last week, Gallup hinted at the partisan makeup of the 2012 electorate with a small chart buried at the end of its daily tracking report. Based on all its October polling, Gallup suggested that this year's turnout might be 36% Republican to 35% Democratic, compared with 39% Democratic and 29% Republican in 2008, and 39% Republican and 37% Democratic in 2004. If accurate, this would be real trouble for Mr. Obama, since Mr. Romney has consistently led among independents in most October surveys.

 

Desperate Democrats are now hanging their hopes on a new Quinnipiac University/New York Times/CBS News poll showing the president with a five-point Ohio lead. But that survey gives Democrats a +8 advantage in turnout, the same advantage Democrats had in 2008. That assumption is, to put it gently, absurd.

 

Sifting_the_Numbers_for_a_Winner.pdf

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I'm hesitant to add to a political discussion on this board, but a couple of quick thoughts:

 

1.  Romney will have to take 5 of the 7 swing states to win the election.  Actually, he can't just take any 5, he'll have to take the 5 with the most electoral college votes.  Is that likely?

 

2.  The percentage of white voters (the core of the Republican party) has been on a steady decline since the 90's.  Has the percentage of whites in America grown or declined since the last election?  And how does that help or hinder Romney's chance of winning given the Republican's core voting block?

 

1.  The 7 states are not independent events happening in vacuum (Correlation).  It is really 1 event.

 

2.  Not sure.  A lot of Rep base stayed home in 2008, while a lot of first time minorities showed up.  This may have accounted for the above-average decline in 2008 of white voters as % of electorate.  What is the likelihood this repeats itself?

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Guest deepValue

My bet: record Republican turnout in swing states.

 

Maybe that's just my hope. If I still had my Intrade account, I'd probably buy some Obama here.

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Nah, a Value Trap.

 

;D

 

as for the election, thank god it's over. :)  no big change (president, house, senate) more continuity.  :)

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