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Sunday, July 25, 2004

New election odds 

I just updated the Tradesports odds, and Bush's reelection chances are down to a flat 50%, which is almost an all-time low (it briefly went as low as 49.5%). I'm not sure what caused the change. The polls don't seem to have changed dramatically. It could just be the selection of Edwards and pre-convention excitement. In that case, I'd say this is a pretty good moment to go long on Bush. But maybe I missed some political news while I was away. I did catch Tom Ridge's announcement a few weeks ago about there being a "significant chance of a terrorist attack before the election." Okay, so clearly this was an attempt to steal media attention from the Edwards nomination announcement. But I found it strange that Ridge would refer so explicitly to the election. It almost sounded like a Freudian slip: we're warning you about an attack, but what we really have on our minds is the election. Why not convey the same idea by saying "before the end of the year" or "before Labor Day"?

The fact that Ridge specifically said "before the election" means one of two things. Either he has specific intelligence indicating that Al Qaeda might be trying to disrupt the November elections with a terrorist attack, or the Bush campaign has decided to use the possibility of an attack as a scare tactic. Without more information it's very hard to decide which is the case. It pretty much boils down to just how evil you think the Bush people are.

Earlier I wrote about how the chance of an orange alert (again, according to Tradesports) on October 31st, two days before the election, was 41%, more than double the chance for the last day of any other month. That figure, now 40%, has hardly changed. Since the Ridge announcement, the figures for September and November have increased slightly. The biggest change has been the chance of a red alert in October, which grew from 4.5% to 7.0%. Still, the changes are not as significant as you might expect from such a major announcement like the one Ridge made. Here's the new chart:

Month Chance of red alert Chance of orange alert
July 3.5% 12%
August 3.0% 18%
September 3.0% 25%
October 7.0% 40%
November 5.0% 20%
December 4.0% 20%

The fact that the odds didn't change much after Ridge's announcement causes me to lean toward the second explanation: that the Bush campaign is merely playing politics with the terror alert system. If traders on Tradesports thought Ridge was speaking on the basis of real intelligence, the odds should have moved more dramatically.

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