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Cautionary Advice from an Old Gambling Hand
Thursday, 13th July, 2006
You will notice up in the adjoining column that the Sportingbet PM watch now has Howard a shorter priced favourite to still be Prime Minister at the time of the next election than he was two days ago. To help readers better understand what emphasis to put on indicators like this I give below some comments sent to me by the man who is probably Australia's most successful professional gambler ever.
My friend was commenting on a piece in the second Owl daily email where I argued that betting markets were a more reliable guide than the opinion polls as to the state of political fortunes. If the subject interests you, read that piece of mine by clicking on the link above and then the wisdom of the following comments will be more apparent.
The hundredised market at 11/8 Labor and 8/11 Libs bothers me.
We know the market is hard to beat, but it can be wrong.
Without seeing those market odds, I would have said Labor was a big underdog. My reasoning – the old saw, Oppositions don't win elections, Governments lose them.
I hark back to the long rule of Menzies. I knew many traditional Labor voters who said, in effect, “we are doing ok, let's not change the winning game”.
I think the voters today are doing too well to vote for change. And I don't think the economy and the resources boom (while doomed eventually to over-heat) is likely to crash in the next 15 months or so. Could happen, but unlikely.
If Howard left, I imagine the odds would move towards Labor, because of the uncertainty about Costello or whoever. But I think that Howard is unlikely to leave. Leaders should leave around mid-term, and I think it already too late to go.
Back to the betting market. What you said about it being the best guide is right. But it can sometimes be inefficient. Before the last election, some US academics published some results, focusing on Centrebet, demonstrating the efficiency of the Election betting odds.
Centrebet, in my judgment, wrongly took this to be a tribute to their expertise in forecasting election results. That is dangerous. They should see themselves as a conduit matching supply to demand.
When Latham beat Beazley in the Labor ballot before the last election, Centrebet immediately ‘blew' Labor several points. That was a reflection of their opinion and not a response to market demand. I thought they were wrong for the same reasons I back a lightly-raced unproven horse to beat a better performed horse whose performance has plateau-ed. For the same reasons sporting teams spend a big part of their budget giving contacts to young, relatively untried guys.
I backed Labor, on the premise that at that point, whatever the right odds, they were a better chance with an untried new guy, than with the two-time loser. It was hard to get set for much. Bookies forever talk up the bets they claim to lay. Getting down for very much is another matter. I shortened Labor considerably for something like $2,000. That took several bets, because the limits didn't allow very much at each odds. The market did settle for quite a long time, at the point I had moved it to. Was the efficient market more efficient before or after my small bet?
At this stage, I suspect there is little betting demand and Centrebet's odds are a reflection of their opinion – not tested by money. The betting exchanges will be a much better guide, but they haven't yet opened election betting.
I got some of that Bull's Blood red you brought with you last December. It's very good.
Remember that these are the views of a man who has made a living for decades by seeking our value before having a bet. He is also a sound judge of a red. Click for our Bull's Blood description.
Sportingbet PM Watch