by Jon Schweppe
PredictIt is a prediction market that attempts to “guess” the outcome to a number of political questions. For example, during the 2016 election, PredictIt had a market for “Will Donald Trump win the presidency?”.
On PredictIt, you have the opportunity to buy YES shares and NO shares on any of these questions for anywhere between $0.01 and $0.99/share. When the question resolves to a YES, the YES shares will close at $1 and the NO shares will close at $0, and vice versa. This creates a market. When an event is perceived to be more likely to occur, the YES shares increase in price (and the NO shares decrease in price). When an event appears unlikely, the NO shares increase in price (and the YES shares decrease in price).
The idea behind a prediction market is to add a level of skin in the game to the “expert opinion” we hear on cable news. Many have argued that prediction markets can be more accurate than polling. I’m here to tell you, however, that’s not always the case. “Will Donald Trump win the presidency” YES shares opened at just 22 cents on Election Day morning last year.
As that mis-prediction implies, the PredictIt consensus is often wrong. Another major example of this taking place occurred on October 21, 2015. PredictIt had a market asking, “Will Joe Biden run for President?”. Based on a number of #FakeNews stories that suggested Biden was running, YES contracts spiked to 72 cents. However, Biden held a press conference, along with President Obama, in the Rose Garden that day to announce he would not be running after all.
These types of discrepancies are the opportunities we will be looking for in my new weekly PredictIt column.
A reminder to anyone that follows these hot PredictIt tips: PredictIt charges a 10 percent fee on any earnings you make, and they also charge an additional 5 percent fee to withdraw. That’s no small amount. Participating in prediction markets should be seen as a recreational activity, not a serious investment.
Each week, I will be reviewing the markets over at PredictIt and offering up the best “locks” and “value plays” I can find. A lock is a market on which I feel fairly certain about the outcome. A value play is when I believe a particular outcome is undervalued, i.e. the chances of it happening are higher than the rate at which its shares are trading. Today I will provide one lock and one value play.
This contract specifically states that the Better Care Reconciliation Act — i.e. the Obamacare repeal and replace bill — has to pass the Senate by July 31 for it to resolve to YES. Everything I’ve read and heard from Capitol Hill indicates that the 50 votes needed to pass this through the Senate simply aren’t there.
There are only 52 Republican US senators currently in office. It’s safe to assume that every Democrat will vote against an Obamacare repeal bill. That means there is only room for two GOP senators to vote no. Sens. Murkowski (R-Alaska) and Collins (R-Maine) have indicated they will vote no on any bill that defunds Planned Parenthood; meanwhile, a large portion of the conservative bloc will vote no on any bill that funds Planned Parenthood or doesn’t include Hyde Amendment language.
There are also serious reservations from both conservatives and moderates about the bill. Conservatives like Sens. Ted Cruz (R-Texas) and Rand Paul (R-Ky.) have expressed concerns about the bill not driving down health care costs and not being conservative enough. Meanwhile, moderates like Sens. Shelley Moore Capito (R-W.Va.) and Rob Portman (R-Ohio) don’t like the Medicaid cuts or tax cuts, which would seem to be at odds with Paul and Cruz. If the anti-abortion language is included and Murkowski and Collins are out, that means there is no room for error on these other ancillary issues relating to the health care bill.
With NO shares at 89 cents currently, we’re looking at a 12.3 percent gain in just under three weeks. That seems like a pretty good investment. This is a lock, after all.
Right now, the market ranks the next justice to leave the Supreme Court as follows: Anthony Kennedy, 58 cents; Ruth Bader Ginsburg, 27 cents; Clarence Thomas, 15 cents; and Stephen Breyer, 7 cents. The rest of the justices stand at 3 cents.
The Ginsburg market is, in my opinion, the most overvalued. There is no way she steps down under a Republican president — so this is nothing more than pure ageism at its finest. Breyer is likely at 7 cents for the same reason.
The real plays here are Anthony Kennedy and Clarence Thomas. Both have privately weighed retirement, according to reports. There has been a lot of speculation about Kennedy from former clerks and court watchers alike. But I wouldn’t count out Thomas either. Thomas is the Court’s most conservative justice, and he understands the importance of maintaining the balance after he is gone. After his nightmare confirmation hearing back in 1991, where his character was assassinated and his credibility attacked by opportunistic Democrats, he must also understand the rarity of having a GOP president and GOP Senate that could easily confirm another conservative justice without liberal interference.
And at 15 cents? That’s not a bad deal.