Politics betting: much bigger than you thought it was...

General Politics Betting / Mike Robb / 27 November 2007 / Leave a Comment

Michael Robb explores the 'swingtastic' market odds on offer for those placing a political bet...

People disinterested in politics often face the accusation of not taking their 'civic duties' seriously (whatever they are). If you don't vote in an election you are a lazy and uneducated sloth, with no right to ever complain about anything. What a load of complete rubbish. If you're disinterested in politics that's fine - but just make sure you're aware that you are still an idiot for the simple fact that you're missing some cracking betting opportunities.

Ask people what some of the biggest markets have been in Betfair's history and I'll offer anyone [1.01] that nobody answers with a politics market. The 2004 US Presidential Election, however, matched a colossal £17.8m and the Bush v Kerry showdown could well be beaten this time around, especially if Hilary Clinton wins the Democratic nomination.

In the lead-up to election-day, Kerry was trading at prices between [2.0] and [5.8], while on the day itself he traded as low as [1.24] to win. The market traded ferociously throughout the night, with in excess of 4,000 bets being matched between 12am and 8am UK time - a remarkable number bearing in mind that Betfair does not accept bets from the United States.

It perhaps should not come as too much of a surprise that this is the case as the savvy punter would realise that polls on America's west coast did not close until 3am, which meant that the market was swing-tastic as more results and exit polls came in. At 2.37am you could get as high as [4.9] on Bush to prevail, which goes a long way to show quite how volatile politics markets can be and how much value exists right up to the end.

A more recent example that saw some ferocious trading, if not quite as impressive in terms of volume, was the UK next general election date market. After Gordon Brown's conference speech the odds of a general election being held before the end of 2007 fell from [3.7] to [1.5] in the space of 48 hours. The market was then trading with swings between 1.4 and 2.5 for the next week until David Cameron's speech at the Tory conference, which saw the price shoot out before Brown officially announced that he would not call an election on 6th October.

So what of the present? The next Lib Dem leader market is a bit of a non-event as it's a two-horse race with a hot favourite, meaning swings are likely to be harder to find. Unless Huhne can put in a performance beyond those we have seen in the past on televised debates or we see a repeat of the party's last leadership battle with scandal forcing the hand of one of the candidates, the election of Nick Clegg as Ming's replacement should be a formality.

The next general election markets are prone to swings, with events having a notable impact on price - the loss of 25 million personal details records by HMRC last week saw the odds of a Labour majority at the next election drift out to [3.55], even though that event is going to be largely forgotten by the time the next election comes around in 2009 or 2010. The savvy trader could have locked in a decent profit by simply reacting to events.

The markets to really keep an eye on over the next few months are those focused on the United States. The primaries to select the Democratic and Republican candidates for November's presidential election start with Iowa on 3rd January, and the nearest thing to a dead cert in the coming weeks is that there will be huge swings between the 2nd and 4th January. Since 1980, five out of seven eventual nominees have won in Iowa, and for the Democrats one of the two that didn't win - Bill Clinton in 1992 - was beaten by an incumbent Iowan Senator, Tom Harkin. In 2004, John Kerry was polling close to John Edwards and favourite Howard Dean in Iowa but went on to win, resulting in his price coming in from [8.0] on the morning of the Iowa poll to [2.0].

Mitt Romney is currently leading his nearest Republican rivals Fred Thompson, Mike Huckabee and Rudi Giuliani by 11, 17 and 18 points respectively, and so his current price of [3.65] looks tempting. What is even more tempting is the massive 21 available to back John Edwards in the Democratic race, as he is currently only trailing Hilary Clinton by six points (and leads Barack Obama by one) in recent Iowa polling, so his price is sure to shorten as nervous Clinton backers look to hedge their bets. I am not saying Edwards will win the overall nomination, but I do predict with some degree of confidence that his price will come in to something in the region [12.0] by the evening of January 4th.

Those of us who think politics is boring might well be right, but any good punter should look beyond the façade of suits, sound-bites and scandals and see politics markets for what they really are - a myriad of opportunities. The intricacies associated with what makes prices move are significant, and the comparatively fewer people trading on these markets gives punters a fantastic opportunity to react and get their bets in ahead of the game. The moral of the story is that politics markets on Betfair are bigger than most people think and tell a story that opinion polls and news outlets often miss. Even if you don't fancy a bet they are well worth watching anyway.