At what stage is it worth betting on the Chancellor?

The above chart shows the best betting price available on Gordon Brown to be the next Labour leader shown as an implied probability.

This morning on the Betfair betting exchange you could get 0.44/1 – which for those less familiar with betting prices means that an investment of £100 would produce a profit of £44 on top of getting your stake back if he made it.

So is that good value given that the Labour Leadership contest must be getting closer?

For those who argue that he’s an absolute certainty then the only risk is the timing. You might have to wait a year or so for the contest so your money would be locked up but there would be little risk. I don’t take that view.

We last discussed this in June when somebody wrote to me asking whether he should tie part of the lump sum from his pension up in betting on “the near certainty of a Brown victory”. At the time the price was 0.38/1 – so a £100 bet would produce a £38 profit.

The general consensus then was that it wasn’t worth the risk and as the chart shows there has been an easing in the Brown position over the past two months. So the mood on the site was correct and if this man had waited to put his £10,000 on he would have got much better value. My understanding is that he has kept his cash in the building society.

For months I have taken the view that the certainty of a Brown victory was less than the betting odds – if only for the great Harold Macmillan dictum “Events Dear Boy – Events” the quotation, attributable to the former Tory PM regarding the thwarting of best intentions.

I bet put money on Brown at the start of the year when the price was at just under 0.5/1 and I got out of the bet when it tightened to 0.4/1 leaving me with a little profit at no risk should Gordon end up doing it.

I think that there is going to be a contest and Brown will not get his hoped for coronation. Provided he’s facing a serious challenger there will be a further easing of the price and, maybe, 0.7/1 would prove tempting.

Mike Smithson