I’m not sure if you should particularly care about the little 5 or 10 point hedges (usually to the pessimistic side) that I’ve periodically been recommending around the Intrade contract on the chances of reform passing. Even if you staffed a whole room full of the smartest vote-counters, modelers and analysts and had them work 24/7 on trying to beat the Intrade contract, I’m not sure if they could come up with anything sufficiently rigorous to provide them with a real advantage. (That doesn’t necessarily mean the market is “efficient”, but we’ll save that conversation for another day.) But for what it’s worth, the Intrade contract, which is trading at 75 percent right now, now looks about right to me or perhaps even a hair pessimistic.
-
-
ADDENDUM
More info on health care reform on Memeorandum, Politico and Slate.
The HCR bill is changing in real time to please big business and traders on Wall St. – and to a minor extent observers (like Paul Krugman/NYT) who look and report on prices on InTrade.
Part of the gross manipulation and misrepresentation that occurs on sites like InTrade and other so-called ‘prediction markets’ is that the underlying commodity being traded – in this case – a bill in Washington – morphs during the life of the contract – depending on how prices are trending – invalidating the idea that the contract is supposed to predict outcomes. Clearly, this market, and its manipulators, is being used to manipulate an outcome not predict an outcome.
In other words, the current price on the InTrade HCR contract is not a reflection of probability of whether or not HCR policies are passed (that will reshape health care in America) but rather, the price reflects the probability that the end result will have been successfully manipulated by the vested interests of the monopolists who own the health care industry.
A “Yes” outcome in this contract confirms a “Yes” that the health care policies and health care market have been hijacked by special interests.
Yes, this contract is being manipulated in small ways, as we say a couple of says ago, and big ways we see in the concentration of monopoly pricing power in the hands of those companies and politicians, working against the greater interest.
At the moment – through manipulation of this contract (and nobody doubts this any more – based on the incident earlier this week) and the manipulation of the media that reports on the manipulated contract – Big Business is succeeding in getting Congress to centralize the health business in the US into fewer corporate hands in ways that will further undermine America’s health care provision ability – as compared with other countries.
This is a shame. A shame that has been enabled by this HCR contract on InTrade.
Pointing to a manipulated contract on InTrade as ‘proof’ that ‘the market’ is efficiently broadcasting the probability of ‘success’ of a bill – that is being rewritten in real time to satisfy narrow special interests of corporations – is beyond deceitful. It’s fraud.
When these concepts are applied to political exchanges . . .
http://wallstreetwarzone.com/behavioral-scientists-economics-finance/
. . . it’s a new way to rig elections by rigging markets.
Max, I’m curious how you square your hard money / debt collapse outlook with your populism. You are implicitly arguing for much higher taxes, yes?