Write about what you know, they say. So I don’t normally write about American politics, about which I don’t pretend to have any special understanding. I’ll happily bet on it though. I’m going to break my habit now, to consider four related markets on Betfair and their interrelationship, to see if I can find some relative value.
Let’s start with the simplest: the winning party for the 2020 presidential election. The last traded price for the Democrats was 1.92, implying a chance of success of 52%, and that for the Republicans was 2.06, implying a chance of success of just over 48% (those percentages seem familiar from somewhere).
With that in mind, let’s turn to the next President market itself. This is a very actively traded market, with nearly £5 million traded already, and the actual election is more than a year away. For context, the next Prime Minister market – admittedly brand new – has had just over £6,000 traded so far. So the next President market is a fluid and presumably efficient market. Donald Trump was last traded for next President at 2.24: an implied 45% chance.
Turning to the Republican nominee market, Donald Trump was last matched for the nomination at 1.12. This translates into an 89% chance of his securing the nomination.
Let’s do some maths together. These imply that there is a 3% chance that the next President is a Republican who is not Donald Trump. There is, however, an 11% chance that the Republican nominee is not Donald Trump (I’m discounting the possibility that Donald Trump is not the Republican nominee but is the next President – perhaps I’m being too hasty in this ever-changing world in which we live in, but at least Betfair’s “winning party” market makes the same assumption as me).
Following on from that, part of the 55% chance that Donald Trump is not next President is the 11% chance that he does not get the Republican nomination. If so, that implies that if he clears that hurdle, he wins 50% of the time. A N Other Republican has an implied 36% shot – dismal in a two horse race.
Let’s stop and think about some of those conclusions. Do you think that Donald Trump is a coin toss to beat whichever Democrat he is up against, assuming he gets through the primaries? This does not seem to be conventional wisdom and his present polling position looks weak. If you think that he is odds against, then you should either be backing him to win the nomination or laying him to retain the presidency (or both).
Turning to the Democrat side, there are some real oddities. Andrew Yang has fervent fans and he is this year’s heart-over-head betting sensation. He is unaccountably as short as 25 for the nomination and 38 for the presidency. The price for the presidency is especially silly – it is an implied 65% chance that if he is nominated he will win the presidency.
Conversely, Hillary Clinton is 55 for the nomination and 140 for the presidency, giving her an implied 39% of the presidency if she is nominated. She’s not going to be nominated but if she were, she would be a better than 39% chance. Nevertheless, all of these prices are clear lays in my view, if your books on these markets permit you the space to do so. Laying Andrew Yang on the next president market and Hillary Clinton on the next nominee market offers particularly good value.
The implied prices make more sense with the front runners. Elizabeth Warren is 3.15 for the nomination and 6.2 for the presidency, giving her an implied chance in the main event if nominated of just under 51%.
Joe Biden is 4.3 for the nomination and 7.4 for the presidency, giving him a punchy 58% chance of winning the presidency if nominated. Similarly, Bernie Sanders is 7.8 for the nomination and 14 for the presidency, implying he has a 55% chance of winning the presidency if nominated, which is still well above the 52:48 split that the winning party market would suggest.
If you’re uncertain about either of their prospects, you might back them for the nomination and lay them for the presidency (no one is stopping you doing that for both of them).
Most strikingly among the front runners, Kamala Harris is 9.6 for the nomination and 24 for the presidency, implying a measly 40% chance of her winning the presidency if nominated. That looks nuts. At least one of those prices looks wrong to me. So I’ve backed her for the presidency at 24.