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?


Mitchell

And we wonder why America, while still better than any alternative, is going to hell in a handbasket. Maybe there never was a time when politicians debated the issues (not their pie in the sky solutions to spend more of our money) and citizens carefully considered the options, but for heaven's sake what a nation of idiots we have become.

Nigel Eccles

It is interesting that even today Intrade's prices remain biased towards McCain. Betfair has had Obama at 88% all day while Intrade's price has just moved from 84% to 85%. If the anonymous trader wasn't breaking the rules I would assume that they are still trading?

Carl

Nigel@#15: Lots of people did precisely that, making lots of easy money in the process.

Many more didn't even bother with the Betfair side of the hedge, simply buying obviously underpriced Obama bets or selling overpriced McCain bets on InTrade.

hillhopper

Rene Descartes was quoted as saying, I think therefore I am. A real head scratching stumper if there ever was one. Was he before he knew he was thinking? Duh. Nevertheless, living in a shell like some invertebrate without realizing that the environment does have consequential effects on one's life is termed ignorance, I think. There fore I am there fore I am glad for the ability to think. Being preceeded thinking for me, and it has not been all that difficult living with either. At least not as difficult as thinking about being. Yet back to the freaky economy business of money, I wonder if a simple neglect or slip of the mind has forgotten that it may well be monkey business as money business. I suspect the compulsive sin of greed however.

mikelotus

Except he did not do it elsewhere, like in the Iowa Electronic Market. And it had no impact on the betting lines in the UK. If you think McCain is going to win, then you should get a cheap flight to the UK and bet away on him. Your ticket and time there will be more than covered.

nycebo

Mitchell, are you running for office? You have my vote.

frankenduf

Murdoch was gonna do this before he decided instead to buy the wall street journal- same effect, different venue

Phil

Re: Nigel/14: Why isn't this an arbitrage opportunity? Why hasn't someone sold Obama on Betfair and bought him on Intrade? Are the commissions that high?

Eric Crampton

Umm... I think the consensus now is that it was a big outfit hedging, not somebody trying to manipulate prices. It'll have the same effect on prices, of course, if the hedger is big relative to the market.

Neil

Seems to me that Intrade numbers are really only covered in the political geek pages. These are the sources read by people who mostly have made up their mind. I don't see that Intrade numbers could be said to win news cycles, let alone sway votes.

Somebody's wasting their money.

Phil

If I knew this earlier, I would have gone to Intrade and bet on Obama. Now I, and others, know for next time. So in 2012, it'll take a lot more than "hundreds of thousands" to manipulate the market odds.

The problem is simply that the Intrade market was, at this time, too small. If it were legal and more widely discussed, this never would have happened.

Phil

Also, it seems to me that the nice thing about spending money to manipulate the market, instead of buying advertising, is that the money spent simply goes to other bettors. If you spend the same money advertising, it goes to buy (and use up) a lot more resources.

Jim

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!

DQKennard

MikeM is right that it wouldn't be cost-effective to lay off an employee that's anything like a right employee. On the other hand, delaying a new hire a little bit might be worthwhile. On yet another hand, though, hires late in the calendar year are low anyways (as there are already incentives to push the hire to the new year) so the effect would be likely pretty small or short term. There'd probably have to be some kind of clauses designed to limit gaming the system. Maybe instead of comparing employee numbers at single dates, comparing some kind of average counts and average hires/layoffs. Some kind of method to avoid pumping up the numbers with temp hires (e.g. 4th quarter retail hires). The best way would be to use year-to-year data, but that makes the first year implementation problematic.

mp

Who actually uses these markets anyway? It seems like they get alot more press than actual players. As long as thats the case, it will still seem cost effective to manipulate them.

The idea that this was a "hedge" kind of implies that the hedger is an idiot who was too lazy to take the cheaper mccain prices in other markets.

Also, to the guy who talked about 538, those predictions are based on the current polls and dont take into account the crazy stuff that could happen between now and the election. It seems possible that the McCain camp has been using this Ayers, Acorn, Rev. Wright stuff to prime the American people for some huge slander to be unleashed the day before the election.

MikeM

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.

James

"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.

Berhin

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

MRB

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.

Read more...

Robert D. Stolorow

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.