Markets tell

November 28, 2012 01:12 PM

With this last presidential election mercifully over with, I hesitate to bring it back up but a recent Commodity Futures Trading Commission (CFTC) action has reminded me of it. The CFTC recently filed an action against Intrade, the Ireland based election market that creates binary option contracts on election results as well as market activity and a plethora of other topics. They are currently handicapping the Academy awards.

During one of presidential debates, I grew frustrated by the diametrically opposed analysis of who won and why being offered by the competing cable outlets and decided to log on to Intrade to see how the market was reacting. I figured — and studies have proven — that folks betting their own money on the outcome would provide a more honest analysis of sentiment.

It kind of became addicting and in the last days of the race when I heard claims from so called independent analysts regarding trends, I would see what the market had to say.

Did Romney really pull even or take a lead in Ohio; not according to Intrade that also listed contracts on who would win each state.

What it indicated was that President Obama won the second and third debates but was not able to maintain a bounce from it or regain ground lost during the first debate. Hurricane Sandy and the photo-op with New Jersey Governor Chris Christie helped but the real surge happened on the day that former Secretary of State Colin Powell endorsed the president and when more than 100 corporate leaders —including the CEOs of many Fortune 500 companies — endorsed the Simpson Bowles approach to deficit reduction.

Whether the announcement from corporate leaders changed the course of the election is an open question but the Intrade prediction market showed the president’s numbers surge higher on the day that this came out. Perhaps its prescription of higher taxes along with entitlement reform coming from a large portion of the business community made the president’s position on taxes seem more reasonable and the GOP’s objection to any revenue increase extreme.

It is hard to say but the traders on Intrade were more accurate predictors than most pundits. As we say in the business the market is always right.

The Intrade markets have been shut down by the CFTC and in a way it is a shame because it offered something that is becoming harder to find; an honest picture of sentiment.

How are we going to know who is going to win the Oscars?  


About the Author

Editor-in-Chief of Modern Trader, Daniel Collins is a 25-year veteran of the futures industry having worked on the trading floors of both the Chicago Board of Trade and Chicago Mercantile Exchange.