Barack Obama + Kathleen Sebelius

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New York Times publishes the portraits of all the VP candidates.

I have just read the article on Kathleen Sebelius&#8230- and that has strongly reinforced my view that she is the best pick for Barack Obama.

I am less opinionated as for what should be the ideal Republican ticket. (Wait&#8230- I want Ron Paul as VP candidate. :-D )

Inexperienced Illinois senator (and presumptive Democratic nominee) Barack Obama should pick Kansas governor Kathleen Sebelius as vice president candidate to bring executive experience to the Democratic ticket -and to piss off Hillary Clinton (which will delight me).

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Arbitrage in the InTrade Dem VP Market

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There has been an unexploited arbitrage opportunity in the Intrade Democratic VP market (&#8221-2008 Democratic VP Nominee (others upon request)&#8221-). As the attachment shows, you can sell the slate of candidates for 123.2 (just sum the bids) while you will only have to payout 100. This possibility has existed for at least three weeks, and is particularly puzzling now given that the announcement is likely to occur this week.

What is also a bit odd is that Intrade has another market (&#8221-2008 Democratic Vice-Presidential Nominee (with Field contract)&#8221-) on the same outcome which includes a catch-all field contract which does not have the same arb&#8211-again see the attachment below. It is substantially cheaper to buy the field contract in the second market than the omitted candidates (Kaine, Sebelius, Hagel, Schweitzer, Gephardt, Kerry, and others) in the first market.

Any thoughts on why this is occurring?

attachment: intradedemvp_summedbidsexceed100.pdf

InTrades market data shows that the sliding Dow Jones Industrial Average has an exceptionally strong negative correlation (approx. -0.91 over the last 10 weeks) with the rise in the InTrade Market for Barack Obama to be the next US President.

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UPDATE: Some smart comments, just below&#8230-

I told you that vice presidential search committees and VP prediction markets are complete bullshit, didnt I?

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The McLaughlin Group of mid-June (yes, I know, that&#8217-s last month):

MS. BERNARD: Well, here&#8217-s what I think. I think the dirty little secret is Barack Obama probably already knows who he&#8217-s going to select to be his vice presidential running mate. You put out the search committee, probably because Hillary Clinton was all over his back last week &#8211-

DR. MCLAUGHLIN: So this is a smokescreen. This is a smokescreen.

MS. BERNARD: I don&#8217-t know if it&#8217-s a smokescreen, but I think he has a good idea who his vice presidential running mate is going to be. And the search committee is much ado about nothing.

I told you so.

No good advanced, primary indicators.

Don&#8217-t trade on VP prediction markets.

US ELECTORAL MAP: Prediction Markets for the 2008 Electoral College

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ELECTORAL COLLEGE MARKETS: Probabilistic predictions for the 2008 US presidential elections based on market data from InTrade Ireland &#8212-(

By Lance Fortnow, David Pennock, and Yiling Chen. :-D

For more on probabilistic predictions, go to our &#8220-Predictions&#8221- page, or visit the prediction exchanges.

Alternatively, if you want an electoral map made of polls, go to

VP conditional probabilities

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BetFair is running markets on both who will be the next vice president and who will be nominated by the two parties.

As we&#8217-ve discussed before in other contexts, one can divide two probabilities like these to obtain a conditional probability: e.g., if the Democrats put X on the ticket, they will win the general election Y% of the time (where Y = odds of X becoming VP/odds of X being nominated).

These markets are thin, so the conditional probabilities should be taken with a grain of salt. But they are interesting nonetheless:

The pattern I see here is that conditional probabilities are higher for fresh faces (Webb, Sebelius- and arguably Bayh and Richardson despite their longer tenure) than for the old guard (Clinton, Nunn, Biden).

Of course, these should be viewed as correlations, not necessarily causal effects. For example, two possible explanations are: 1) putting a fresh face on the ticket helps Obama, either because there is less baggage or less of a contrast in national-politics resume length, or 2) Obama will only pick an old guard candidate in the state of the world in which he needs to shore up a weakness (i.e., picking Clinton to end a civil war, or Nunn to add foreign policy experience).
On the GOP side:

Huckabee has the highest conditional probability, and Pawlenty and Jindal are noticeably lower. Interpreting this one is harder: it depends on what aspect of Huckabee one thinks the market is expecting to be appealing (religion, likeability, Southernness, selective economic populism).

Technical note: the bids and asks reported above are actual quotes scrapped this AM- the mids are (bid+ask)/2, rescaled to add to 100 across all candidates.

Bob Barr markets

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Reason, a libertarian periodical, writes that the Bob Barr effect is &#8220-confirmed.&#8221- Because Obama&#8217-s campaign manager says it is.

Yes, pathetically a pro-market publication heeds the remarks of a political operative rather than markets that say Bob Barr will not make an impact.

Admittedly we have very little signal from prediction markets and lots of noise from political operatives, so writing about the latter makes for easier journalism.

There are now Intrade contracts on Barr&#8217-s share of the popular vote. Perhaps they&#8217-ll provide a little more signal, but I don&#8217-t have high hopes for reasonable trading volume &#8212- or for libertarian politicos embracing markets when the message of market prices might not correspond to their hallucinations.