One of the things that is happening on PredictIt is that the odds that people are giving Trump to win the election and to win some select states are totally bonkers. TBH, it is hard to look at PredictIt’s map and not assume that an extremely large number of traders are taking the same crazy pills as Kanye West.
The conventional explanation for why these prices are so off is that people are retards, especially people who love to bet on Trump. In some cases, that might be true. But it is generally a good idea to understand why people are betting against trends and respect their opinion, otherwise you could get totally nuked with a surprise attack and experience an electoral Pearl Harbor come November.
So here are a few other reasons why pricing is so janky for this election:
1 – There are tons of traders on PredictIt who are not trying to predict politics at all. Instead of trying to nail the right outcome, they will just drop a few brief cases of cash into a market and hope to predict a small movement in polls or in the news cycle that will push the price in their direction by a few cents. This strategy is way more profitable when you take the cheaper side of the bet. So I would guess that there are a lot of smart traders buying Trump to win places he’s guaranteed to lose — for example, New York or New Jersey — and hoping for the right news story to push their 7c shares to 8c or 9c shares.
2 – There are a lot of novice traders who think they understand how to do what I just described. But the truth is it is actually harder than you think, because it requires you to know what your shares are actually worth — and that is its own skill. Everyone who reads this blog has had the experience of getting trapped in one of these “I’m just flipping shares” markets and getting their faces ripped-off. So be careful.
3 – The polls. There is the constant under-current that polls are wrong and Trump has more support than they show. I won’t get into this because lots of people have already written about it already. And while I do think that it’s true that the people just don’t vocalize their support for Trump due to the fact that there is at least a 99 percent chance that an Antifa cell will burn down their house and enslave their family members if they do, I don’t see how those numbers are possibly big enough to overcome Trump’s 8 point deficit in the RCP average.
4 – People are used to elections being close. The last time that we had a serious blow-out was in 1984 when Ronald Reagan basically put Democratic challenger Walter Mondale in a skirt and called him Susie. Adding to that, the Fake News Media (FNM) always portrays elections as being closer than they really are, because they need you to believe that in order to keep your eyeballs glued to the news. Jake Tapper is never going to say, “this election is over, please don’t waste your time watching my show.” That would be like Daniel Craig saying, “this James Bond movie is going to blow, so just skip this one and buy a ticket once they re-cast me.”
We know that #2 is true. And based on all observable evidence, it’s looking like #1 will be the case as well. But no one is ever going to make either of those announcements publicly. Which gets us to…
5 – People are front-running the, “This election is going to tighten-up” trend that the Fake News Media is selling them. But there’s really no guarantee that will happen, and I personally think they’re flushing a lot of money down the toilet. We can talk about that later.
So those are your answers to why pricing is so bonkers: people are stupid; some people are using a clever betting technique; a lot of people think they’re using a clever betting technique but are going to lose money; there is a kernel of truth in the “polls are wrong” conspiracy theory; and people think the election is going to tighten-up, even if there isn’t a lot of evidence to support that.