Political Futures Markets? Bah, humbug

Friday, October 01, 2004 | 03:18 PM

I keep hearing a lot of jabber about the Politcal Futures markets like Intrade.com and Iowa Political Futures, and how significant the political action is relative to the equities markets.

This is utter nonsense.

Lets compare these exchanges with the U.S. Capital markets, which are, in a word, massive. Total market capitalization for equities are ~$13 trillion dollars; for Federal debt (Bonds and notes) its about $4 trillion; while corporate bonds total in excess of $5 trillion.

The total dollar amount invested is the political futures? An absolute pittance.

Let’s start with Intrade.com. They state they are the largest political futures exchange in the world. Their biggest contract – The George W. Bush Futures -- has about two million dollars invested. Over the past year, these futures have traded a grand total of six million dollars. The Iowa Political Futures market is downright tiny in comparison. Over the summer, they had less than $20,000 invested in their “winner take all” exchange.

Let's put this in even simpler terms: eBay trades 10 million shares a day, and is priced at $91. It takes eBay less than 3 minutes to trade the entire years worth of Intrade presidential futures value. General Electric, at 15 million shares / $33, requires about 6 minutes. Microsoft takes one and half minutes.

And yesterday, when Merck got clocked, it traded the entire years worth of Presidential contracts in 25 seconds.

What does all this mean? Like it says in the fine print, this is good for "entertainment purposes" only. The dinky futures trading outfits are too small to reach even the level of unreliability as forecasters that the major capital markets are.

There is no alchemy: Pooling our collective ignorance does not somehow yield wisdom.

Friday, October 01, 2004 | 03:18 PM | Permalink | Comments (4) | TrackBack (0)
de.li.cious add to de.li.cious | digg digg this! | technorati add to technorati | email email this post

bn-image

TrackBack

TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a00d8341c52a953ef00d834319f1253ef

Listed below are links to weblogs that reference Political Futures Markets? Bah, humbug:

Comments

I track the Tradesports political futures market. Right now I wish I had shorted GWB at 70 instead of AAPL.

I can't help but notice that Tradesports is a prominently featured link on Don Luskin's Trendmacrolytics website. Luskin is unabashedly to the right on the political spectrum. I wonder if the bias of Luskin devotees skews the positions taken there. I might be giving him too muxh credit. But I can't discount the possiblity that the link there may have created a self reinforcing dynamic based on word of mouth of right leaners.

Also I think your friend Cramer is not tuned in to how close the election really is.

Posted by: zgveritas | Oct 1, 2004 3:33:39 PM

The comments to this entry are closed.



Recent Posts

December 2008
Sun Mon Tue Wed Thu Fri Sat
  1 2 3 4 5 6
7 8 9 10 11 12 13
14 15 16 17 18 19 20
21 22 23 24 25 26 27
28 29 30 31      

Archives

Complete Archives List

Blogroll

Blogroll

Category Cloud

On the Nightstand

On the Nightstand

 Subscribe in a reader

Get The Big Picture!
Enter your email address:


Read our privacy policy

Essays & Effluvia

The Apprenticed Investor

Apprenticed Investor

About Me

About Me
email me

Favorite Posts

Tools and Feeds

AddThis Social Bookmark Button

Add to Google Reader or Homepage

Subscribe to The Big Picture

Powered by FeedBurner

Add to Technorati Favorites

FeedBurner


My Wishlist

Worth Perusing

Worth Perusing

mp3s Spinning

MP3s Spinning

My Photo

Disclaimer

Disclaimer

Odds & Ends

Site by Moxie Design Studios™

FeedBurner