A New Kind of Campaign Advertising?

An anonymous Intrade investor poured hundreds of thousands of dollars into McCain futures, inflating the market’s prediction that Sen. McCain would win the presidency, an internal Intrade investigation has revealed.

The unusual trades drove down Intrade’s odds of an Obama victory by as much as 10 percent “for more than a month,” CQ Politics reports.

Justin Wolfers blogged here about the squirrelly movement in the McCain market when it was first noticed earlier this month.

The trades were totally legal under Intrade rules. Will market manipulation for political candidates become the norm as ever-wealthier campaigns try to control the news cycle?

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  1. Robert D. Stolorow says:

    Speaking of the tactics of the McCain campaign, check out my blog on The Huffington Post, “Portkeys to 9/11,” in which I explain how Bush, McCain, and Palin exploit reminders of the collective trauma of 9/11 to keep us terrified and under the spell of their “resurrective ideologies.” The current economic collapse and associated panic state constitute one such “portkey” to the helplessness and horror of 9/11.

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  2. Gary says:

    That is curious, although he may also be attempting to arbitrage what he sees as irrational exuberance for Obama.

    I have another question though. Obama spoke about giving a 3,000 dollar credit to any company that creates a job in the US. I assume that this will require the setting of a baseline at some fixed date, say Jan 1, 2009.

    So if a business owner believes the proposal will pass, and since the economy is currently slow anyway, wouldn’t that create a perverse incentive to accelerate layoffs between Nov and Jan if Obama wins the election in order to set the lowest possible baseline? Couldn’t that be the crushing blow our economy doesn’t need?

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  3. Greg Totten says:

    I guess good news for those who put money on Obama. Artificially inflating McCain’s stock should have led to some great buys in the Obama marketplace…

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  4. Jim says:

    InTrade is seen by many in the media as an “unbiased” poll of some sorts, as those “polled” are “putting their money where their mouth is” etc etc.

    The media stories then compare the InTrade “polls” to other polls and this may or may not have an effect on the undecided voter who is reading the story.

    At least that is the impression I get from reading stories that mention InTrade.

    So I think any campaign that is desperate for some “action” would be foolish NOT to dump $100K – $1million or more into InTrade to try and make sure “their candidate” is the one favored by the InTrade graphs.

    They are blowing money on all sorts of other advertising gambles that may or may not work, why not put it in InTrade?

    Its not illegal, it can’t hurt (yet) and if it helps – hey money well spent!

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  5. Berhin says:

    No wonder the Intrade odds for McCain have been consistently about 10% higher than Nate Silver’s projection at http://www.fivethirtyeight.com.

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  6. James says:

    “The trades were totally legal under Intrade rules. Will market manipulation for political candidates become the norm as ever-wealthier campaigns try to control the news cycle?”

    Control the news cycle? Please. Anyone that thinks McCain has controlled anything in the news, I’ve got some swamp in Florida to sell to you. If someone wants to blow his/her money to make that number 10% higher for a few days, more power to him. Given the $150 million that Obama took in this month, I doubt it matters.

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  7. MikeM says:

    Gary #2,

    Interesting point. But, if a $3000 tax credit is worth more to a company than a current employee, I doubt it’s a particularly suitable employee. I don’t think the $3000 incentive is enough to lay off most employees. Turning over to a new employee usually costs more than $3000 – so actually, Obama’s plan might be reducing this transaction cost and actually stimulating transitions to better (more efficient) employee/employer relationships.

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  8. MRB says:

    I think the disaster scenario would go something like this

    Employers lay off lots of employees just before Judgement Day, artificially depressing their baseline. We’re talking corps like Burger King, Subway, etc; not law firms. Temp contractors would be especially vulnerable.

    Those employees are then rehired shortly later, so that when the Wreckoning comes, they appear to have X more jobs than they did before, netting them $3,000 per “new” job, along with any new jobs they did create.

    If we assume that the value of an employee to a firm is greater than the wage they are being paid, then the amount of time that employee is laid off should be about equal to the amount of time it would take to earn them $3,000. For a minimum wage worker, that’s 545 hours, or roughly 3 months, which is a long enough period to appear as a legitimate layoff. The real amount of time would be less than that, maybe 2 months tops; so employers get paid $1,000 to lay an employee off for 10 weeks (that’s $3,000 minus revenue lost from not being able to profit from the workers labor)

    The worst case scenario is that employers realize they aren’t losing as much money by firing an employee as they are spending in employing them, and make the job cuts permanent.

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