Where’s the value in the Senatorial betting markets?

With most eyes on the Presidential election, and much of the value squeezed out of the White House political betting markets, it is easy to forget the glut of interesting Congressional and Gubernatorial races that offer to the political punter the opportunity to find a little extra value.

House races are strange beasts, and the sheer number of races (435, of which maybe 150 are truly competitive) means that betting on individual Congressional districts is rarely good value for money – spreadbetting on the party totals is the only way to make any sort of return. Gubernatorial races, to which I’ve referred before, have less of a profile, because their impact is not as strongly-felt nationally. For political punters interested in the US, the most liquid markets beyond the Presidential contest are those for the Senate Races.

The Senate elects one third of its members (a Class) every two years, giving each Senator a six-year term. 2008 sees Class II fight for re-election, plus special elections for Wyoming and Mississippi (both Class I) meaning these two states will be electing both their US Senators in November. Of the 35 races, 23 are in Republican held seats versus 12 in Democrat held seats.

I don’t think it is too bold to claim that these contest fall into four categories.

Firstly, there are the 12 seats that the Democrats hold, and none of them looks like being lost, now that Mary Landrieu looks safe. The twelve are AR, DE, IA, IL, LA, MA, MI, MT, NJ, RI, SD, and WV.

Secondly, there are 9 Republican seats that not even an Obama landslide could overturn:
AL, KS, ME (polling now indicates Susan Collins is completely safe), MS (Thad Cochran), OK, SC, TN, and both seats in WY.

Thirdly, there are four seats that the Democrats now seem certain to take from the GOP: former Governors Mark Warner in VA and Jeanne Sheehan in NH, and the Udall cousins Tom and Mark in NM and CO respectively.

Finally, there are ten Republican seats that look worth betting on, either because they are toss-ups, or because the market is not yet sure how to price the possibility of a Democratic landslide in states that have only recently seen the influence of Howard Dean’s 50-state strategy. I wanted to look at these ten, and the current prices on InTrade (Betfair’s Senate markets have zero liquidity), to see if there is any value available. All prices quoted are the Last Traded Price at time of writing.

ALASKA: Sen. Ted Stevens (35.5) v Mayor Mark Begich (64.5)
Ted Stevens is taking the stand in his own trial for corruption today, and the Alaskan of the Century will either be found guilty or will have cleared his name before election day. With Alaska Governor Sarah Palin on the GOP ticket, Stevens only has to win his court case to secure victory against an otherwise excellent opponent. This is indirectly a bet on the outcome of a court case – does that offer any value?

GEORGIA: Sen. Saxby Chambliss (61.0) v Jim Martin (39.0)
This was a safe seat, but recent SUSA and Insider polls have this as a statistical tie. If there is a seat that will be affected by Obama’s coattails and African-American turnout, this will be it, with massive early voting having already occurred.

IDAHO: Jim Risch (GOP) (87.0) v Larry LaRocco (13.0)
Again, should never have been in doubt, but former Governor Risch doesn’t have the benefit of Senate incumbancy (the retiring Senator is scandal-ridden Larry Craig) and may be beaten in the ground game by LaRocco – a Democrat whom he has twice thwarted in statewide elections. I suspect there may be a little value in this market, as we’ve seen no proper polling for about 6 weeks.

KENTUCKY: Sen. Mitch McConnell (61.0) v Bruce Lunsford (39.0)
The Senate Minority leader shouldn’t lose bids for re-election, and it is seen as fairly disheartening that the GOP are facing the same humiliation that befell the Democrats in 2004 when Tom Daschle lost his race in South Dakota. McConnell has never won his races by a great margin, and this is a tougher test than he has faced to date.

MINNESOTA: Sen. Norm Coleman (41.0) v Al Franken (D-F-L) (60.0)
One of the closest races of the autumn, compounded by the strong showing in the polls for Dean Barkley of the Minnesota Independence Party. It would be astonishing if the margin of victory was more than 5%, and with the third-party unlikely to win, anything below 50% has to be reasonably good value here.

MISSISSIPPI: Sen. Roger Wicker (60.0) v fmr Gov Ronnie Musgrove (40.0)
Wicker took over the Senate seat when Trent Lott resigned, and his House seat (MS-01 was spectacularly lost to the Democrats in a Special election. Musgrove is a well-known figure statewide, and all the Democratic money is being spent on this race, rather than against Sen. Thad Cochran. If no candidate reaches a majority (rather than a plurality) there will be a run-off election on November 25th.

NEBRASKA: Mike Johanns (85.0) v Scott Kleeb (15.0)
This is the seat vacated by the retirement of moderate GOP Senator Chuck Hagel. Oddly, for a Democrat, Kleeb is doing far better in the west of Nebraska than the urbanised East. If Barack Obama can ensure sufficient Democratic voting in the 2nd Congressional District (which awards its Electoral College vote separately), then Kleeb could be in with a chance. He’s not likely to pull it off, but I’d expect his price to rise if the Presidential race can help him in the East of the state. 15.0 is pretty good value, even with the polls showing a 14% defecit a month ago. It doesn’t hurt that Kleeb looks just like Superman.

NORTH CAROLINA: Sen. Elizabeth Dole (30.0) v Kay Hagan (80.0)
I think there is now a strong chance that Dole could lose her seat, and that Mayor Patrick McCrory could also miss out in the Gubernatorial race to Bev Purdue, but at 30.0 I’d say the value lies with Dole. She is not liked, but I wonder if this price is being inflated by Obama’s NC polls – many of those voters might not vote Democrat down-ticket, and I reckon there is some value here.

OREGON: Sen. Gordon Smith (39.5) v Jeff Merkely (65.0)
The Speaker of the Oregon House of Representatives was the safe choice for this race, and it seems to be paying off. He has finally taken the lead against Smith in the polls, but this is still essentially a dead-heat. Likely to be the closest Senate race, or second to Minnesota, anything below 40.0 looks like short-term value.

TEXAS: Sen. John Cornyn (80.1) v Rick Noriega (10.0)
Cornyn is a first-term incumbant who has struggled to get his approval ratings over 50% in an unspectacular first term. If the other races start to look safer for the Democrats, Noriega might be the reicient of some welcome cash from Sen. Chuck Schumer’s DSCC in the final weeks. This race isn’t too close, but it’s getting closer, with little polling and some stubborn fringe candidates, who may frustrate the Republican’s chances. This is probably the best value bet on InTrade’s Senate markets at the moment.

So those are my ten to watch – some of them are close, some of them aren’t, but in terms of betting, they are the only Senate races that might still yield a little profit to the shrewd political punter.

Morus