What if politics was like the stock market and you could buy politicians you like and sell the ones you didn't without envelopes of sequentially numbered small money orders in the same Chinese handwriting or cold cash hidden in the freezer?
For those rich enough -- they can buy a politician or two. The rest of us probably could rent a couple minutes of time with a big campaign contribution, and get lots of promises from a politician. Knowing the integrity of politicians and the value of political promises I am not sure how good of an investment politicians turn out to be.
Maybe you are one of the people smart enough to pick up a couple of bucks around the office at election time with bets on who is going to win. I have to admit I lost the last political bet I made. Good thing it was only a buck. What if there was a stock market where you could buy and sell shares in the candidates? The candidates would move up and down every day and those of us who are financial analysts could quantify the likelihood of people winning based on how bets are placed.
Now I am not into horse racing, poker or sports betting; but I do have to check up on the political bets every once in a while. With real money on the line there is a big incentive to be right. If you do not like the odds you can jump into the market and take the other side of the action. So what do the bookies think is going to happen in the coming election? Well it appears that Clinton is the favorite for the Democratic nominee with 67.8% and the Republican Rudy Giuliani leads the GOP with 35%.
Let's explain briefly how this works. Intrade.com acts as a political futures market with each contract worth $10 if the specified conditions are met. For example, it is like me writing Hillary elected President in '08 on a $10 bill and seeing what action I can get on it around the office. People buy and sell those $10 contracts in a stock exchange-like market. If Hillary is trading at $4.30 (she is), then this means that the people perceive her to be 43% likely to win the election. And with a volume of 101,000 contacts, there is about one million dollars currently riding on the outcome.
The table shows the probabilities of the top four candidates for both the Republican and Democratic nominations. Currently Clinton leads the Democrats with a 67% chance of the the Democratic nomination. Barack Obama comes in at 16%, with John Edwards and Al Gore both at 7%. Giuliani has a 35% chance of the Republican nomination, while Fred Thompson comes in at 24%, Mitt Romney 23% and John McCain at 16%.
There is also a separate contract for the final election; at this point Hillary comes in at 43% for winning the Presidential Election. Considering that the elections are typically close, and that gives gives each party about a 50% chance right before the election, a 43% chance of winning now shows there are some real believers out there several months before the first primary.
While not promoting gambling, as a financial analyst needing to continually weigh the risks in the market place, it is good to be able to quantify political events. The election is still a ways away, but who wins will significantly affect the stock market.
With Clinton you have heath care on the line, which could affect the insurance companies like Aetna (NYSE: AET), Cigna (NYSE: CI) or United Health (NYSE: UNH). Obama is promising to do away with the capital gains tax breaks, so companies that appreciated like Google (NASDAQ: GOOG) or Apple (NASDAQ: AAPL) could see profits taken and the market as a whole could plunge. Microsoft (NASDAQ: MSFT) has been in antitrust trouble and a new administration may affect it. Of course a retreat from Iraq would hurt defense or oil stocks like Cheney's Halliburton (NYSE: HAL) or Lockheed Martin (NYSE: LMT). But this early, it is hard to predict who exactly the winners will be.
What do you think? Are these numbers accurate? Who is your favorite for the election?
Kevin Kersten is an Options Analyst with InvestorsObserver.com. Disclosure note: Mr. Kersten owns and or controls a diversified portfolio of long and short positions that may include holdings in companies he writes about.
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Reader Comments (Page 1 of 1)
9-19-2007 @ 9:24PM
G GENTRY said...
What if politics was like the stock market and you could buy politicians you like.
That's the most ridiculous premise I have ever read! "What if?" Politicians are nothing more than bought employees of their contributors. Taxpayers do not qualify for the title of "Boss".
9-20-2007 @ 8:34AM
elena said...
God help us if Hilary wins! She wants health care for all Americans, but what she proposes is ridiculous. Also, she wants to legalize all illegals here. Is that what Americans want. Let's get our country back. Stop rewarding illegals for breaking our laws.
9-23-2007 @ 11:37AM
August said...
A very interesting article... thanks!
In your closing paragraph you allow us a glimpse at the terrifying undercurrent of Clinton and Obama's SOCIAL popularity, and that current is a flood... a very real possibility for the devastation of our economy.
Our total taxation, including "through taxes," is already at 50+ percent of every dollar. So, its easy to see how these socially popular, (even though they are only superficial, get me elected rants), are politically helpful to the candidates, but absolutely tragic for the financial stability of our country.
In fact, these empty save for popularity seeking, "Hooray for Hilary & Obama!," social programs would bring small business to its' knees, which are already buckled from the stress of soaring taxes and the cost of existing regulatory compliances.
WHEN are we going to stop acting as if the quality of life we borrow from the future won't have to be paid back?
Thanks for listening.
AUGUST
10-10-2007 @ 12:06PM
Sherry said...
It's about time to put another Clinton in the White House. Maybe my pocketbook will fatten when that happens. I could even possibly get Social Security that would be coming to me in the next ten plus years. As it stands now, there will be no Social Security when I'm ready for it. Get Bush out of office, bring our men and women home from Iraq, and let's focus on the USA for a change. What a concept???
11-08-2007 @ 2:38PM
John said...
Hillary is such an ambiguous president candidate. First she votes against ethanol then she changes her mind and decides to support it in her energy plan. In the last debate, she contradicted herself in different subjects, which is obvious in this video that compares her many contradictions at the same day: http://www.weshow.com/us/p/22225/the_politics_of_parsing_by_hillary_clinton
You guys that have watched the debate or this video that shows just some of her obvious contradictions should agree with me that we just can't vote for a so clearly pathetic candidate.
11-08-2007 @ 8:53PM
Bluesaga said...
Woop woop, go Hilary!
Another Clinton in the whitehouse will do a world of good! Her strong constitutional beliefs are what should drive our country, not war and false claims!
http://www.lovetheconstitution.com/?sid=wfc081107
11-09-2007 @ 8:33AM
troy said...
this is ridiculous. the first clinton was a lying, cheating, retard. and now she wants to get office now too?
and all you bush haters, would kerry have done any better?