This morning, I was trying to make sense of the discrepancy between the polls and the betting markets.
From everything I could tell at 3:00 AM this morning, the betting markets were more confident Democrats would win the Senate than what I could tell from polls.
This afternoon, that changed.
What Happed with New Polls?
CNN Texas: Talarico D+6
CNN Maine: Jackson D+4
CNN Kansas: Hamilton D+4
CNN Michigan: El-Sayed D+7
BJPP Texas: Talarico D+2
Activote Texas: Talarico D+4
Upswing Michigan: El-Sayed D+5
MSU Michigan: El-Sayed D+9
A2 Texas: Talarico D+3
ECU South Carolina: Graham R+4
Co-Efficient Iowa Senate: Hinson R+2
Q: Am I Really Surprised? A: Of course not.
The betting markets moved first and the polls caught up.
The Betting Odds Are All Breaking the Same Way, Towards Democrats
Pollsters fearing another big miss are overcompensating Republicans?
Early Voting?
Not Certain, Just Likely
I am going to up my odds of Democrats winning the Senate from 65 percent to something higher, but I am not sure what yet.
Anyone who thinks most of the races in my lead chart are tossups is overly fearful. These late breaks, all going the same way is convincing. [Even if we don’t know why – added October 29]
Yet, my base case remains the same. The single most likely outcome is Democrats pick up six Senate seats. Eight would not be a shocker. Neither would just four or even three.
But at this point, any polling error is more likely to be against Democrats than another Democrat overcount. Winning 6-7 seats is much more likely than only 2-3.
The election is about Trump, his policies and his graft, not Hillary, not Biden, not communism. Trumpanomics failed, and that’s undeniable to all but the most delusional MAGA voter.
Today we can add #5. Someone knew about these polls. Alternatively it’s #4 and #5 or #5 plus the combination I discussed today.
Texas Polls Today
Compare the chart I posted above to the following (new polls added today in yellow highlights).
A friend commented that there was no polling justification to have Texas at 65 percent. OK perhaps, but there was betting market justification.
And surprise, surprise. There is both betting market and polling market agreement today. Four new polls. I missed YouGov at D+8 in my lead chart.
Silver averages that at +3 Talarico. That’s reasonable. But it does not factor in early voting which I strongly believe is going Democrats’ way.
Texas Synopsis October 29
Kalshi: 70 percent
Polymarket: 70 percent
Nate Silver: 74.9 percent
Mish: 72.5 percent (wondering if way too low)
Look at things this way. If Texas is 70 percent, the odds of Democrats winning the Senate are easily in that ballpark.
I expect Cook Political will put Texas in the “Lean Democrat” column in the next day or two.
Texas has not been a tossup state since at least mid-September by the betting markets. And I was well ahead of that because of the way I expected Hispanic voters would break.
The polls and betting markets now both reflect what I thought would happen.
I find the title ridiculous. What the hell does a safe bet on politics even mean?
There is no such thing as a safe bet on politics unless you have inside information or are skilled enough at analyzing things to overcome the house edge which always takes something off the top.
A question that candidates and voters may be asking is: Will pollsters or the prediction markets provide the most accurate forecasts? To assess this question requires a deep dive into both approaches.
Polling has evolved over time, yet its basic premise remains the same: sampling a group of people from which a prediction about an election outcome can be drawn. A sample of 1,000 people typically results in a plus or minus three-point margin of error. This means that in close races, like one where candidate A is polling at 49 percent, Candidate B is polling at 47 percent, and 4 percent are undecided, the margin of error dampens the value of polls as a predictive tool. There are many such races in this election cycle.
Prediction markets take an entirely different approach. People trade contracts based on a yes/no question. The balance between yes/no bets determines the price of contracts and the effective odds of winning. Prediction market contracts are priced between $0 and $1, which reflects the market’s estimate of a candidate’s probability of winning. For example, if a contract trades at 60 cents, the market assigns that candidate a 60 percent chance of victory. Note that prediction markets do not provide a margin of error for their forecast.
Looking back, prediction markets were assessed to be more predictive than polls for the 2024 presidential election. One possible explanation is that odds are set by people placing bets on who they believe will win. This contrasts with polls, where people are sampled by pollsters and asked questions about candidate preferences. This means that voters who place a bet are self-selected hoping to win money, while voters have no real choice on whether they are sampled by pollsters.
The bigger issue is whether people who engage with prediction markets are representative of the people who will vote. This then begs the question: Is money being wagered based on who bettors believe will win or who they want to win?
[That paragraph above is nonsense. It is not an issue at all. Indeed, it is a certainty people making bets are not representative of voters. So what? Do skilled horse traders need to be jockeys or do they just need to understand horses and jockeys?]
Given that anyone with access to a prediction market platform can place bets on the election, barring state restrictions, while only U.S. citizens are eligible to vote, there is no reason why prediction markets should serve as a reliable prediction tool. [That is more nonsense, explained in detail below]
Understanding the Betting Markets
Betting markets are right more often than not because people with key information are going to drive a majority of the cases.
This is not speculation. There’s empirical evidence.
It’s not a matter of being “safe”. It’s a matter of probabilities, winning more times than not while not blowing too much on on a single bet. Money management comes into play.
I financed my way through college playing poker. No single game was a sure thing. But I had an edge over time.
I played in games where most of the time I knew without a doubt I was the best player at the table. That does not ensure a win. I lost sessions. But I won far more often than I lost, and my average win was much greater than my average loss.
I would not have an edge today in high stakes hold-em. It’s a different league and I am smart enough to know I do not belong in it.
Overall, findings suggest that Polymarket was superior to polling in predicting the outcome of the 2024 presidential election, particularly in swing states. Results are in alignment with research on ”Wisdom of Crowds” theory, which suggests a large group of people are often accurate in predicting outcomes, even if they are not necessarily experts or closely aligned with the issue at hand. Overall, our results suggest that betting markets, such as Polymarket, could be employed to predict presidential elections and/or other real-world events
Prediction markets produce remarkably accurate forecasts, but the source of this accuracy is poorly understood. Two explanations dominate: crowd wisdom and insider trading. Using the universe of Polymarket transactions, we show it is neither. Instead, accuracy comes from a minority of persistently skilled traders, around 3% of accounts. Unlike insiders, whose private edge is localized, these traders exhibit depth and breadth. They react to public news when it arrives, eliminate law-of-one-price violations, and trade against the crowd’s behavioral mistakes. The crowd, in turn, generates most of the volume but little of the information, and its losses fund the minority’s profits.
Understanding Wrong
The betting markets provide information, on average, whether you believe it or not. That’s not every time, it’s average.
If the odds are 60 percent, then 40 percent of the time the bet will go the other way. It is not “wrong” to bet on 60 and lose.
In 2016 I did not have Trump as the winner. I was in the 45 percent range or so (with most giving Trump almost no chance). Yet, I was repeatedly told I got it wrong.
But wrong or right is not being right on the outcome, it’s in understanding mispriced odds.
I still maintain that were it not for Comey’s last minute email bombshell, Hillary would have won.
In contrast, the pollsters were wrong. They truly underestimated Trump’s odds of winning.
The edge is not in 60 or 40 because the payout reflects that. The edge is in finding a market where the odds themselves are wrong. It’s not the easiest thing to do. Emotions and desires get in the way.
I did place a bet on Trump in 2016, not because I thought Trump would win, but because I thought Trump had a much better chance than was reflected in the odds.
So, although I thought Trump would lose, I bet on him because I thought he was underpriced. That’s getting it right, for the right reason.
In 2020 I bought Biden at 10 cents on the dollar because I thought that 10 cents was an absurdly low price. I held Biden all the way.
My edge, assuming I have one, is understanding the economy and how it applies to elections.
Alaska and Kansas Yet Again
All year long, I sided with the betting markets vs Nate Silver on Alaska. The betting markets were much higher than Silver and still are.
I side with the betting markest. My reason was quality candidate on top of Republican woes of all kinds.
I applied the same logic to Kansas as I did Alaska and stuck with it (no bets this year but reflected in my articles).
Adam Hamilton is the senior pastor of the Resurrection, a United Methodist Church, the largest United Methodist congregation in the United States, with multiple locations in the Greater Kansas City area.
Mish’s Four-Point Take
Hamilton is a popular minister and a moderate.
Democrats could not possibly have picked a stronger candidate.
Trump’s policies are extremely unpopular in farm states.
Marshall is viewed as too supportive of Trump.
I am calling this a tossup, for now.
Unlike others who call 40.1 to 59.9 percent a tossup, I mean a range of 48-52. Forced further, I will take Hamilton as the 52.
On October 5, Polymarket was 33 percent on Hamilton and Kalshi was 35.5 percent. I stuck my neck out and called tossup. More specifically, I said “I will take Hamilton as the 52.“
That new Kansas poll today confirmed what I thought to be true.
Maybe I was just lucky, but the betting markets just caught me. Regardless, it was a market I thought to be mispriced, and was.
I intended to discuss early voting today (which is going Democrats’ way) but that will be tomorrow as I wanted to discuss these new polls.
Nate Silver called audibles in the same direction and mostly for the same reasons I did ahead of him on Ohio, Alaska, Maine, and Iowa.
I feel pretty good about that. Silver also shifted Kansas but I didn’t. I am now 10 or so points higher on Kansas vs his Deluxe model but still at tossup level.
Nice article. They will impeach POTUS and appoint more special counsels and investigators They will not release the Epstein files. Will they take us out of Iran & Ukraine or will it be more Russia, Russia, Russia and mostly peaceful student protests like France? Will they stop the looting or double down?
Last edited 58 minutes ago by Mike
Avery2
1 hour ago
TRICK OR TREAT!
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Nice article. They will impeach POTUS and appoint more special counsels and investigators They will not release the Epstein files. Will they take us out of Iran & Ukraine or will it be more Russia, Russia, Russia and mostly peaceful student protests like France? Will they stop the looting or double down?
TRICK OR TREAT!