Odds of GOP Retaining Congressional Control

Sunday, October 08, 2006 | 08:51 AM

A recent comment to yesterday's Citibank Panic/Euphoria discussion led to this post being inserted in the weekend linkfest:

According to Tradesports, the odds of the Republican Party retaining control of each Congressional House in the 2006 Mid Term Election is mixed.

In the Senate, only one third of the 100 seats are up for re-election. Votes are staggered, so every 2 years a different third of the 6-year term seats come up. The odds strongly favor GOP retention of the Senate. The Democrats would need to capture 6 seats, something previously viewed as rather unlikely -- not impossible, but unlikely.

Although several races have tightened, this remains a long shot for the minority party. The MSM is, as always, focused on the horse races but not the issues. See Race for Senate control tightens for example.   

When we go to the most recent betting on the outcomes, the senate appears to be rather safe. Using trend or technical analysis, we see the GOP retention of Senate has been consistently above 70%; It has recently dipped as Tennessee and Virginia -- formerly "safe seats" -- have become competitive.  But it would take a significant break of 70 to suggest this was anything but a long-shot.

>

Senate Trading

Ts_senate

via Tradesports

>

When it comes control of the House, however, the prediction markets present a very different picture. All 435 seats are up for grabs. 

Its also one that lends itself even more to TA:

>

 

Ts_house

via Tradesports

>

From last November til today, we see a fairly well maintained down trend. Recently, that was almost reversed on an increase in volume since hitting lows of 40% in September. That was most likely the result of a 30% drop ingasoline prices, a 20+% in Crude Oil prices, and a strong post summer rally in the stock markets.

However, the Foley/Page scandal has now reversed that. On even bigger volume, the downtrend has been maintained, and the House odds are once again near low 40s.

If the election were held today, the Senate would stay GOP, while the House would shift to the Democrats.

~~~

There 2 additional notes:  I have long complained that the relative thinness of these markets -- the number of traders and the dollar amounts at issue -- can make their results somewhat suspect. For more on this, see our 2004 critique, Iowa and Prediction Markets.   

Second, I do not want to see the comments devolve into a political shooting match. The topic at hand is the odds of a change in the Senate/House control -- not the specific politics of each party. (For the record,  I am an Independent).

Sunday, October 08, 2006 | 08:51 AM | Permalink | Comments (41) | TrackBack (1)
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» Why Prediction Markets Fail from The Big Picture
Over the years, I have been critical of prediction and futures markets. In particular, the specific ways certain parties misuse them (i.e., politics). However, I am a big believer that markets can generate valuable economic and investing data that can ... [Read More]

Tracked on Jan 11, 2008 7:51:57 AM

Comments

I know that you wanted to stay away from a political discussion. I just feel too strongly about the big picture here that I can not resist.

My point is that I don't think it matters one whit which party has a majority. I think we need to look at the system itself. Something is broken. Something that is not about what party you are from.

What is lacking are people with a moral compass. People who actually try to make things better for America over the long haul.

There is an inevitable part of that job that requires one to be a quide to us all for how we should live our lives.

change the choices, so that I am not picking which party but where I get to pick between someone who will waste my tax dollars or someone who will get the budget back on track. Then I would care about what are the odds of one over the other.

Posted by: advsys | Oct 8, 2006 11:42:42 AM

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