Friday, March 12, 2010

What Happened to the American Civics Exchange?

As the Cantor Exchange, a futures exchange for movies, prepares to open next month, the American Civics Exchange, which billed itself as "the first US-based commercial market for political futures," appears to have quietly closed.

AmCiv launched nearly a year ago after announcing that it had filed a notice with the CFTC to operate as an "exempt board of trade." Accordingly, only institutional investors and multi-millionaires were allowed to trade with real money.

The Exchange listed event derivatives dealing purely with public policy questions, such as whether cap and trade would be passed and whether Congress would increase tax rates. It never delved into political predictions, and it was also apparently never listed in the CFTC's online directory of exempt boards of trade.

A request for comment on the current status of AmCiv was not immediately returned by its (former) general counsel.

Tuesday, March 9, 2010

Here Comes Health Care Reform

In a blog post this morning headlined "Health Care Resurrection," Paul Krugman alluded to the latest Intrade odds on reform. The likelihood of a health care overhaul is now trading at 62.5%, which is up nearly 10 points since yesterday and over 20 points since early last week.

Krugman claims he isn't completely convinced of the predictive power of political prediction markets, but he is keeping a close eye on Intrade.

"Betting markets don’t have any mystical power, but they do summarize conventional wisdom pretty well," he said, "and judging from Intrade, health reform has gone from a long shot to more likely than not."

But Business Insider suggests there's a better reason to pay even closer attention to the Intrade price on health care than Krugman purports: "What we're witnessing is the equivalent of political insider trading," said Joe Weisenthal. "This doesn't just reflect conventional wisdom. No, this is Washington DC insiders speaking here."

Weisenthal contacted Intrade CEO John Delaney, who said that a lot of the volume on the health care contract is coming from the Washington DC area.

The Bottom Line - If you haven't already invested in the health care contract, now might be a good time to get on board. Senator Specter just told MSNBC "momentum is building." Dan Rather, Katty Kay, Andrea Mitchell, and Joe Klein all predicted on Chris Matthews' Sunday show that health care reform will pass. Health and Human Services Secretary Sebellius told David Gregory on Meet the Press on Sunday that "we'll have the votes." Rachel Maddow predicted last night on her show that health care reform can't be stopped. Even if Pelosi loses her grip on the House and Congressman Stupak and his Blue Dog supporters somehow thwart the final effort, the contract is likely to keep climbing on Intrade in advance of the final whip count.

Friday, March 5, 2010

Paterson Probably Staying Put

As another disastrous week for NY's disgraced governor comes to a close, a majority of New Yorkers are now telling pollsters they want David Paterson to resign. But political prediction market traders at Intrade are growing more confident that the accidental governor isn't going anywhere.

As of this afternoon, Intrade gives Paterson a 55% chance of departing by July 1. The likelihood of him leaving office is down 18 points from yesterday's close, and 25 points from a high of 80% earlier in the week. While fewer than 400 shares have been traded so far, volume has picked up steadily during the last few days of the scandal.

Some pundits are crediting Al Sharpton's show of support for Paterson's improving prospects. Last night, at the second summit at Sylvia's restaurant since last Saturday, Al Sharpton and a number of prominent black politicians said that Paterson should stay put.

"Most of those in the room tonight strongly felt that the Governor should continue," said Sharpton.

Chris Cillizza, author of "The Fix" blog at the Washington Post, seized on Sharpton's statement in offering advice to a reader in a web chat today on whether to buy into an office pool on Paterson's resignation.

"I think he bought himself a little time when leading African-American leaders decided not to call for his resignation last night," said Cillizza. "Will paterson resign ultimately? I think it depends on what else -- if anything -- the New York Times has on him."

The Bottom Line - Traders would be wise to take Cillizza's advice. Barring another bombshell from the Times, the chance of Paterson leaving will likely continue to decline by the day, at least until Andrew Cuomo announces the results of his investigation.

Although increasingly isolated, Paterson is already trying to turn the page. He has political events planned for this evening and several scheduled for early next week. To that end, he appears determined to follow in the footsteps of the obstinate Mark Sanford and legendarily resilient Rod Blagojevich.

Whether another article, leak, or slew of staff resignations will ultimately force his hand, of course, remains unclear. But as long as he's able to buy time, traders should probably not buy the Paterson resignation contract.

John Stossel: Health Care Reform Will Pass

John Stossel, who profiled Intrade on ABC's 20/20 before the 2008 election, is still tracking political prediction markets. Although he has since left ABC for Fox Business, Stossel has not stopped citing the wisdom of the crowd.

In a post on his Fox Business blog this afternoon, Stossel proclaimed: "Obamacare is coming."

"Uh -oh...the Intrade betting odds that Obamacare will pass are now above 50%," he wrote. "That means that smart people who put their money where their mouths are now think that it is likely that some form of Obamacare will pass before June 30th. The odds dropped as low as 20% after Scott Brown's election, but as I write this, the trading is at 52 cents (winners win a dollar for each 52 cent bet."

As of this writing, the health care contract is trading just above 55, down from the 60% mark it reached yesterday.

White House Press Secretary Robert Gibbs, of course, gave traders reason to feel bullish about health care reform yesterday.

During his daily briefing, he said: "I literally believe that what I said on a television show this morning was the President leaves for Indonesia and Australia on March 18th, and we believe that -- I believe that, based on conversations that I've had in the building, that we're on schedule to get this through the House by then."

Thursday, March 4, 2010

NY Black Leaders May Call for Paterson to Resign

Yesterday's bombshell that the beleaguered NY Gov violated ethics laws by lying under oath about accepting Bronx Bombers World Series tickets may be the final strike for David Paterson.

The Daily News is reporting that Al Sharpton will convene a group of black leaders tonight in Harlem to discuss whether Paterson should resign. Sharpton is "rethinking his support" for Paterson, a Democratic Party adviser told the Associated Press.

"We'll see how it plays out during the day," an anonymous source told the Daily News. "I can't imagine anything will change people's minds."

The "Paterson to resign" by July contract last traded at 80 on Intrade, where just over 200 shares have been traded since the start of the scandal.

Bottom Line - Once Sharpton calls for Paterson to resign, the price will likely spike. If you think that's going to happen tonight, this could be a good buying opportunity.