Tennis Probe Finds 45 Suspicious Matches

We first talked about the story here. Chris Masse blogged the story here.

You can read the full update from Bloomberg here:

Tennis investigators found 45 matches in the past five years that need to be studied because of ``unusual betting patterns,'' the sport's governing bodies said.

The matches, identified in a study started in January, ``require further review to ascertain if they affected the integrity of professional tennis or if there were other tennis reasons for the outcome of the matches,'' the International Tennis Federation, the ATP Tour and the WTA Tour said in a news release.
…
Tennis had ordered the review to assess the threat posed by gambling after suspicious betting on a match involving fourth- ranked Nikolay Davydenko of Russia in August sparked an investigation. More than a dozen players said publicly last year that they were approached to throw matches and the men's ATP Tour suspended three Italian players for betting on matches.

007 Finance - NYT on Intrade

An article about off-beat investments in the NYT mentions Intrades political contracts:

For that matter, why not go to Intrade, an online betting site, where you can hedge the 2008 presidential election? If you’re a Democrat, try betting Republican, so that if the vote doesn’t go your way, you can take solace in the cash you make on election night.

This is very similar to an idea on The Economist blog:

Go to Tradesports (or the officemate you like to argue politics with) and lay a wager against your party. If they lose, your sorrow will be mitigated by the burst of dopamine which accompanies a sudden realisation that you are now several hundred quid to the better.

TradeSports Senate Race: Were the markets wrong?

The answer, unequivocally, is no.

The suggestion that Tradesports "missed" on the control of the Senate is based on a faulty understanding of probabilities. By Election Day, Senate control really came down to three close races, Virginia, Missouri, and Montana. A probability calculator shows that if the markets accurately gave each of those races about a 60% chance of going to the Democrat, then the odds that all three would go Democratic were only 22% (0.6 to the third power). Therefore, a rational person would choose the Democrat in the individual races, but would nonetheless choose the Republicans to retain control. After all, the Republicans needed only one of those three, while the Dems needed all three. Only if we posit that the Democrats had an 80% chance to win each race would Senate control have been even a 50-50 proposition.

A Hedge for Emotions

A very clever post from The Economist blog:

Whether you are laying in champagne or valium in anticipation of tomorrow's results, you can make yourself better off by betting against the outcome you desire. Go to Tradesports (or the officemate you like to argue politics with) and lay a wager against your party. If they lose, your sorrow will be mitigated by the burst of dopamine which accompanies a sudden realisation that you are now several hundred quid to the better.
...
This is a particularly good tactic for foreigners who care about tomorrow's outcome. You can't affect the results, but you can ensure that it makes you less miserable

Why WSX and not TradeSports?

Washington Post article on the Washington Stock Exchange. Why are they promoting a fake money exchange when real money ones exist?

The site uses the theory of prediction markets -- the higher the "stock price" of an event, the more likely it is to happen -- to try to accurately forecast outcomes. The Iowa Electronic Markets, another political prediction market that started in 1988, claims to be more accurate than the polls 75 percent of the time.

So who's going to win that tight Senate race in Virginia? At press time, WSX gave the edge to Republican incumbent George Allen, who was trading at $62.25, while Democratic challenger James Webb was at $54.98.

The Allen contract on TradeSports is now at 72 with Webb's at 30.

GOP House Contract Continues Decline

Keep in mind that this was trading at 50 only 16 days ago! The Republicans are getting crushed.

Mark Warner Officially Withdraws from Race

“I have decided not to run for President.”




His contract collapsed on the announcement to its current .6 level. The biggest DEM gainer was Edwards who picked up nearly 6 points (his contract now trades at 13), followed by Clinton who picked up 2. Clinton is by far the favorite for the 2008 Dem Nominee with her contract at 48 and looking like a good short when the time is right. The next closest nominee is Gore who is trading at 17.

Fundamental Event of the Week: Non-Farm Payroll (NFP) Predictions

Consensus: 120,000
CME Derivative Auction: 120,030
ADP: 78,000

What the market needs is a “Goldilocks” Non-Farm Payroll report. Too high could signal that future rate decreases that the market is counting on will be less likely to occur. If the number comes out too low traders will see it as slow down beyond what was already priced in.

Here are previous posts on the topic:

August: NFP Forecasts
July: NFP Forecast Divergence

Although TradeSports lists the contract, there hasn’t been any volume on it since US traders were banned from trading on US Economic numbers.

New TradeSports Hastert Resignation Contract

It’s currently running at 50% with a short expiration. If it’s this high now, the market must think its nearly certain he will resign after the November elections.

Is the TradeSports GOP House Control Contract Falling on Foley?

Is scandal involving former Rep. Foley the only reason for the contract 10+ point decline in less than a week?




Many bloggers seem to think so, but other events the last week have likely played a larger factor.

1. Gaming Law – This law was snuck into an impotent port security bill and and passed on Friday. Although the House passed this in mid-July it seemed unlikely to go through until very recently. Is it unreasonable to think a law that has very little support and criminalized the actions of million of votes won’t have any backlash? People’s first instinct is to throw the bums out.

2. The War Gets More Unpopular - Woodword’s State of Denial – This scathing picture of the current administration war incompetence is now #1 on Amazon. As the Liberman defeat showed, not supporting the war in Iraq is no longer toxic; the anti-war spirit could play a factor in the upcoming election. At any rate one would hope that the voters find this topic more important than another political sex scandal. Rumsfeld, the main villain, has seen his resignation contract go up nearly 10 points since the publicity blitz started.



3. The Foley Cover-up – Will Hastert resign? Did he give Foley too much room to avoid seeming homophobic? *yawn* Talk about things that don’t matter...

It’s too early to know for sure, but House control looks like a dear heat.

Port Security Sneak Attack - Gambling Bill Passes

Port Bill passes with gaming bill attached:

Republican leaders reach a port security conference deal and the Internet Gambling bill also was included and passed tonight.

The bottom line is that the our government has now passed a bill making Internet gambling a crime for both the operator and any individual or institution involved in online gambling.

**As of now the TradeSports USLAW.IGAMING.JAN07 is trading at 90 likely due to a question of rules interpretation

Picking Winners - Protrade Sports Market

Interesting Forbes article on Protrade.com, the HSX of sports:

The site has turned into the MySpace for sports-stats geeks. Members blog about their favorite players, create personal profiles, share their portfolios with other members and compete in weekly challenges. "Everybody wants to prove that they're the smartest sports fan," says Kerns, 29. "What better way than to be the top trader?"

Is this Tradesports?

-"Several legal online betting sites have approached Protrade to use its win-probability statistics in a live gambling game."

TradeSports: The Smart Money according to IBD

They quote to 10ths and feature Luskin:

In handicapping the midterm elections, conventional wisdom and the smart money seem to have parted ways in recent weeks.

If you happened to catch "The Chris Matthews Show" on NBC on Sunday, you would've learned that 11 of his 12 panelists expect the Democrats to capture the House.

But those who put money behind their predictions see things differently. Quotes at TradeSports.com show that futures traders favor Republicans to retain control of the House.

TradeSports Updates Fee Structure

Details of the changes are...

* No Fees Pre-Event: No trading or expiry fees on sports events if you trade them before they become "in-running".
* No Expiry Fee Unless "In the Money": A position that expires "out of the money" used to incur a 4c fee per lot. "Out of the money" expiries will now incur no expiry fee. An in the money expiry will now incur a fee of 10c per lot.
* Trading Fees: Trading fees are being increased to 5c per lot. Trading Fees at price extremes will be 3c per lot. Price extremes are 0 to 5 and 95 to 100.

Forum comments on the change

Sacha

the canuck

HedgeStreet Hurricane Contracts

In a flurry of press releases and an extremely well put together How To, HedgeStreet announced their new Hurricane contracts. Unlike the TradeSports weather contracts these allow a trader to bet on the amount of damage during the entire season as well as damage by individual hurricanes.

The conference call sounds like it will be something worth listening to:

The teleconference will be attended by Russell Andersson, VP Instrument Origination and a Co-Founder of HedgeStreet; Dr. Robert Dubil, Chief Market Strategist for HedgeStreet, Bill McIntosh, Vice President of Marketing for HedgeStreet, and Gary Kerney, Assistant Vice President of the Property Claim Services unit of Insurance Services Office, Inc (ISO), which provides underlying data for the contracts. All four will be available to answer questions and discuss the contracts, their structure, and the many ways they can be used.

The call will take place at 1pm EST and can be accessed at (866)-244-4530.

TradeSports Contract Suggestion - Aybody care to put a price on the contract?

Asks The Unknown Professor at Seeking Alpha.

Sure! I'll make a two way market in anything, but you won't like the spread.

TradeSports Won’t Reverse the NKM Contracts and They’re Right - The Trade is Settled

By now anyone who follows prediction markets is familiar with the TradeSports North Korea Missile contract debacle. Chris Masse did an excellent job covering and publicizing the case.

The Edmunds email rationally covers the reasons that TradeSports was wrong in expiring the contract at zero.

Several commentators on the incident wrongly suggest that TS should go back and compensate the traders of the contract. That would be a mistake. Refunding the bets after the fact won’t increase confidence in the market.

Time to Move On

Right or wrong, once a contract settles the question of who should win is a dead issue. Any clarification can’t take place after the trade is done. No trader wants a market that works that way. The fact TS provides the exchange and is not taking bets gives them a strong case to stick to their decision. Pushing for reforms (which TS has already put in place) is a good way to minimize expiry source confusion. Once traders know the rules and how contracts will be handled they will adjust.

This won’t be the last time that a contract is disputed on the exchange. What will hurt the market more than the current decision is if bets are reversed after settlement, turning the winners into losers. Traders won’t know when a contract really settles. It would also be a bad precedent for TS to hand out refunds to the bettors. Refunds now would taint any future contract disputes and cause inconsistency based on the size of the market. In other words, TS won’t be able to make refund larger volume contracts if there was a legitimate dispute. So the refund decisions would be related to volume not legitimacy, and that’s not a consistent way to run a market. The way to head that off now is by not giving refunds in the first place. TS has chosen a path and is obligated to stick to their guns.

No one (that I’m aware of) is suggesting that the contract winners’ trades be reversed and credited to the losers. Why should the funds to compensate the contract losers come out of TS’s pocket? If the contract really should have expired at 100, aren’t the current winners unjustly enriched?

TradeSports dropped the ball in the handling of this contract. Clarifying the rules for next dispute is what traders should focus on.

What counts for source confirmation? A press release? An anonymous source? A blog? A personal email? Recording of a phone call? What if the source won’t confirm either way?

Refunding traders who lost won’t fix the market or increase confidence of its participants.

A Necessary Clarification- – TradeSports Cuban Presidency Rules Updated

In order to avoid NK style debacle TradeSports has been adding more contingency scenarios to their rules. As we discussed with the Cheney contracts, resignations and taking office contracts are always about more than just the act in the contract. They also include the chance that the candidate can die or, like in the case of the Cheney contract, take a higher office.

The Cuban Presidency

http://www.intrade.com/news/mainpage.jsp?article=news_62.html states what most traders likely already assumed, “No return to power can be for various reasons such as ill health or death etc.”

Not a bad start, as long as the DOD doesn’t have to confirm…

New TS/Market Blog

http://caveatbettor.blogspot.com/

a link from http://www.chrisfmasse.com/ is worth a read. Lots of TradeSports gossip, news etc.

The Lamont Fade - TradeSports CT Primary

With polls for the CT Senate primary opening at 6am, the TS odds have put Lamont as a lock with 80% chance of winning. While it is tempting to just ride the favourite in this race I think that a smarter play will be to fade the favorite here (by buying Lieberman or selling Lamont). What we've seen in past close races where the odds are far outside the polls is a pull toward parity leading up to the election day. This one is going to cut it close since Lamont clearly has the momentum. The Lieberman/Lamont contract is worth buying/selling till Lamont is down to 60-70.

Another trade to look at is the GOP senate control. Its at 83 now and is less subject to temporary whims like this CT Primary. Since Lieberman says he will run as an Independent if he loses the primary, the split vote will be very good for a GOP victory, turning a good chance of maintaining Senate control to a better one. If Lieberman does end up winning the Primary and running as a Democrat its not a state the GOP was expecting anyway. Buy it.

North Korea Missle Launch - Tradesports Odds

FYI: Contract just added under Current Event and showing a 25% chance of launch by the 31st.

Election Season Already?

"Sears Tower Plot" screams the headlines, making it seem that a hardened terrorist group was nearly ready to demolish the building before being stopped by savvy law enforcement officials. The pdf of the indictment makes for fascinating reading.

http://graphics.nytimes.com/packages/pdf/national/20060623_TERROR_INDICT.pdf

Al Qaeda Connection?

Despite the indictment mentioning Al Qaeda several times and Bin Laden for some reason, neither were involved in this alleged plot. There was a law entrapment, errr…enforcement officer who somehow convinced these boneheads they he was really part of Al Qaeda. He got them to swear allegiance to Al Qaeda and even got them to believe they would have a chance to blow up the Sears Tower.

They are so laughable inept that the idea they could be a threat to the Sears Tower is absurd. By the end of the indictment it is clear that this group has probably seen too many movies (just look at their materials list) and that even getting boots was a multi–step process that they could barely accomplish.

Boots of Terror

Some of the more amusing examples of "evidence" shows that this group wasn't even capable of procuring boots on their own. The indictment lists boots as one of the items they requested from the Al Qaeda representative (actually a law enforcement official, as no members of Al Qaeda were involved in the plot). Besides asking for boots, they sent the fake Al Qaeda representative a list of shoe sizes. After they sent out the shoes sizes they took delivery of the terror boots. Every step of the boot acquisition through the Al Qaeda representative is painstakingly broken down in the indictment and seems to be the bulk of the governments case.

Equipment List

If you were going to request equipment from a leading terrorist organization to blow up one of the largest buildings in the world which of the following would be most helpful: radios, binoculars ("Brother Rot, is that the Tower?? Quick, hand me the bios"), firearms ("By Allah it is, lets shoot it down"), bullet proof vests (I thought they were going to be martyrs?), vehicles, uniforms or $50,000 cash.

Why not just get a job and then buy a car, boots, a radio, and binoculars? Their plan was to use an Al Qaeda operative to get things that anyone can just pickup in an hour at Wal-Mart? Hmmm….

Don't forget the pictures

Some of the other evidence listed is also a stretch. No guns. No explosives. No architectural drawings. No rope to swing from a nearby building and land on top the tower for a top down assault. They did take some pictures though. In this day and age, you think these guys would use google images or Flickr or even just visit the places. What is the purpose of taking pictures?

They get an F for planning.

Casing The Joint

Consider this detailed security analysis of the Sears Tower:

The EST model IRC-3 fire detection and alarm control panel monitors the smoke detectors located in the HVAC return air shafts and the stair door unlocking system. An EST model EST-3 fire detection and alarm control panel monitors the two-way firefighters voice communication system and the stairwell speaker system. This system provides two-way communication for firefighting personnel between the exit stairs and the Control Center. Firefighters' phones have been installed at every fifth floor of the exit stairs.

Now consider that is on the http://www.thesearstower.com/ and the plotters were planning this operation using snapshots. Comical.

Not Hockey Fans

They indicated a desire to, "kill all the Devils that we can."

A threat?

The charges are serious, that they agreed to provide material support and resources to a Foreign Terrorist Organization, that they planned to damage by means of explosives, and to levy war against the United States.

At what point does talking about this plot turn to crime? How much of an influence was the law enforcement official acting as an Al Qaeda operative on their plans? If someone is too inept or ineffectual to commit even a minor act of terror what kind of resources should we use to control them?

We are either in very good shape since these terrorists were not very bright or we are missing real terrorists going after these easy pickings.

Back above 50

Marginal Revolution Called It - NBA Finals

Free money indeed, the contract didn't even hit 50 when they were up by a game. Bettors were way off on this one.

Enron Trial – All Bets Are Off

http://www.nypost.com/business/66511.htm

BetCRIS, an online gambling site, decided to stop taking bets on the outcome of the Enron trial after the odds so heavily favored guilty verdicts for ex-chiefs Ken Lay and Jeff Skilling that people began complaining about paying too much to bet on a conviction.

The site closed betting yesterday with odds at 1 to 80 that Lay would be convicted and 1 to 100 that Skilling goes down.

This is not directly comparable to the Tradesports wagers which require a certain number of convictions to pay off. By designing a different contract they could have continued to make a market but instead they chose to pull the contract.

American Idol Betting: Taylor Hicks Move From Likely To Lock

Dial Idol says so:



Tradesports says so:



Pinnaclesports says so: After the competition they moved the line on his win from -363 to -600 meaning Taylor’s odds greatly improved.

And the judges agree.

If there are correct it’s a 10% return on TS in one night. Traders should pay attention to the McPhee odds as well, for some time it has been a better trade to short her contract than to buy Taylor. Good luck.

A Threshold is Crossed

As you can see from the chart Mr. Calderon has taken the lead from Mr. Obrador in the 2006 Mexican elections. Supported by current president Fox, and waging a vicious attack campaign against Obrador has moved Calderon to the favourite. Madrazo, which the polls put at 20% and Tradesports puts at 1% will not be a factor. The election will be held on July 2nd so there is still plenty of time for surprises; the smart play in betting elections so far has been a pull to parity the closer the elections get. So the farther away the favourites get from 50 the better the bet looks.

Foreign elections are always tough to predict, the Canadian presidential election was the latest example, betting the favourites has not been a winning strategy.

Kentucky Derby - Tradesports Nailed It

This image says it all. TS called the winner. Another thing of note is just how bad the odds are overall compared to TS. To be a winner at the track you have to overcome a 40% vig, no mean feat.

Kentucky Derby Betting

This is, by far, the trading event of the week. The main even has light liquidity now but expect it to pick up substantially before race day. As far as tips I'll defer to Grantland Rice (Gartman readers will already be familiar with this one), "The race doesn't always go to the swiftest nor the fight to
the strongest, but that is the way to bet." For now you can get better odds on tradesports than most sports books on Brother Derek. Snatch it up, it won't last.

International Prediction Markets - The Tradesports of India?

http://www.dnaindia.com/report.asp?NewsID=1026056&CatID=2

PublicGyan is an invite-only, general interest market started by Nitin Pai and Srijith Krishnan Nair. The site encourages members to determine the outcome of events by trading stocks using virtual currency or Moolers.

The site’s co-founders have cited the James Surowiecki book, The Wisdom of Crowds, as an inspiration, as it champions the cause of prediction markets.

Tradesports Contract Direction When No Trades Take Place

Level 2 as a Guide To Market Direction

Leading up to Skillings cross examination, the Tradesports contracts priced in a 70% chance of expiring at 100. Once Skilling took the stand, no trading took place until he had finished at the end of the week. With no price action can a trader determine if ther is a change in market sentiment? Or did his entire time on the stand have no effect on his odds of being convicted? Using the pending bid and offers when there is no price action can be a useful guide to where the market makers think the price action will go.

The Market Makers

Prior to taking the stand the Skilling contract bid-ask was approximately 5-7 points and, in theory, straddling the true price of the contract. Trading spreads are determined by inventory (in this case margin since there is no real "inventory"), order processing (not really a factor here), and adverse selection. Adverse selection means that the market maker is always in danger of being picked off by an insider or someone with more information. A less liquid contract requires a MM to increase the spread. The more likely a market maker is to get picked off on a contract, the wider the spread needs to be to compensate the MM for the risk.

Last week while Skilling was on the stand in Houston there was no trading but the bids and offers showed a lot of movement and widened. Spreads should widen around events that cause volatility, so this was no surprise, but the skew was heavily to the downside indicating that the MM's feared the contract not paying off. The contract that had been bought last in the 70's could still be bought at that level, but the sell side disappeared from 68 down to 50. The Bids dropped and the Offer didn't move, showing the expectations of the market maker even though no trades took place. Their expectations were to the downside since they were willing to sell at the same price but would only purchase contracts at a much lower level.

Followup

The market on Friday bumped up three points on the Skilling contract on no news. The MM's indication of a downward move didn't happen and the contracts for Lay and Skilling have settled down to the 70's where they have been for most of the trial. The spreads tightened to the upside and are now unnaturally tight for this contract. On current levels the initial trade rec holds: Long Skilling and Short Lay

Tradesports 2008 GOP Contracts and Roe vs Wade

http://elcapitan.redstate.com/story/2006/4/19/25046/0362

This is a unique application of the political futures on Tradesports. This blogger uses the chance that a candidate will be anti-Roe and their anticipated odds of a winning the presidency, to calculate the odds the next SCOTUS Nominee will be anti-Roe. His numbers may need a little work but still very interesting stuff.

Berkowitz Blows It – Enron Update

Instead of the anticipated sparks Sean Berkowitz finished his cross examination today with a whimper. The most anticipated part of the trail so far left Skilling undamaged and gave the impression the government was struggling to make its case. Berkowitz threw some curve balls especially by bringing up Skilling's investments in Photofete.

The Photofete business was easily refuted by Skilling’s lawyer Petrocelli. The investment involved was so small that Skilling just didn’t remember how much it was. Berkowitz strained to use this to undermine the credibility of the witness but ended up making the governments case look bad. In all the digging and charges there has been no direct evidence against Skilling and the best example they have of wrong doing is a tiny photo shop? It must have been extremely anti-climatic for the jury, but for Berkowitz’s show trial they have to use what they can.

Several news sources made a big deal out of the fact Skilling lost his temper on the stand, but it didn’t come off that way to us. Berkowitz reached for evidence and tried to insinuate that preliminary accounting estimates that were later updated in the actual published financial results were evidence of fraud. Of course thats an absurd idea and Skilling, never one to suffer fools gladly, let him know it. From the exchange it seemed pretty clear that Berkowitz either didn’t understand what was going on or was deliberately making something commonplace seem like fraud.

Berkowitz finished off by throwing in some non sequiturs, asked some questions that didn’t go anywhere and really not doing much of anything. It’s impossible to know what the jury thought of all of it but the Tradesports contracts have no moved a tick since the cross started. All of this bodes very well for Kenneth Lay. If that best Berkowitz can do then Lay is nearly home free.

Tradesports Contract: George Ryan Guilty – Payout Rules Killed This One

George Ryan was found guilty today and the contracts, one of the least traded on the site, didn't move. The total volume was only 20 contracts for what seemed to be an interesting trial. The last time this traded was in November and it never seemed to have any depth on the offers side.

The reason for this was the payoff rules which state that the contract will expire at 100 if: George Ryan is found guilty of at least one of the 22 charges alleging racketeering,corruption, fraud and conspiracy.

One of 22 is all it took to make this contract expire at 100, no wonder there were no offers. Tradesports got smarter with the Enron contracts which will only pay off if Lay and Skilling are convicted of half the charges. Think of it as a point spread for court cases.

By making the contracts more fair for traders they reveal less information about the event. For instance the Cheney.Resign.Dec06 contract trades at 16 currently, but since it can be triggered if Cheney leaves the office for almost any reason, its is actually showing the odds of Cheney resigning or dying and Bush dying since they would all trigger the contract. Clearly that's much less of a sound bite than what the contract appears at first glance. These rules would also make it difficult to use the contracts as a hedge. Would it be useful for Lay to hedge his case when he could still get convicted of three charges and have the contract expire at zero? For news events like Supreme Court nominations contacts are much easier to construct, for guilty convictions it is still a work in progress.

Skilling Guilty….of preparing for the trial – Sean Berkowitz on the run – Enron Update

The two Harvard grads went toe-to-toe, with Skilling winning this round. First Berkowitz couldn't get his A/V exhibits to work and to keep the momentum had to plow through without his visual aids. According to the WSJ law blog this, "seemed to visibly frustrate Berkowitz, possibly throwing him off his game." Off his game is a good explanation for the Berkowitz follies later in the day.

The fact remains that there is no smoking gun evidence from emails or documents that points to Skilling. The prosecution has relied on tainted witnesses to make their case so far. The prosecution's cover for this seems to imply that Skilling has something to hide since there are no documents which implicate him. In other words, Skilling has something to hide because Seanie can't find any evidence against him. That seems a bit tenuous.

Apparently still reeling from the A/V disaster Berkowitz let the jury know the bombshell that Skilling had prepared for the trial by hiring a consultant. Even SHOWING A WEBPAGE THAT'S CONCLUSIVLEY PROVES SKILLING WORKED WITH A TRIAL CONSULTING FIRM! I'm not sure if it was as significant to the jury but it should have been. Working to prove innocence should not be a sign of guilt.

With no real evidence Seanie's main tactic seems to try to "crack" Skilling. The former McKinsey director so far has been too smart to take the bait which isn't stopping Berkowitz from trying.

Showing much less dignity than the average Harvard grad, Seanie is relying on word games and extreme, almost satirical, indignity to make his case. Here are a few of the more amusing gems taken from http://blogs.chron.com/enrontrialwatch/ If you are following the trail you need that link:

Berkowitz continued this tack, giving Skilling little time to answer questions. Finally, Skilling tried to elaborate on the timing of when a study was done on the company's international assets.

Berkowitz wouldn't allow it.

"I don't want to hear speeches, OK?" Berkowitz said sharply.

"I was just.."

"Do you understand?"

"I will try to answer your questions."

Berkowitz continued to question whether Skilling was up front with analysts.

"I think the market knew the nature of our balance sheet," Skilling said, adding that Enron was open about the health of the assets.

"But you didn't tell them what they would sell for, did you?" Berkowitz interrupted.

This followed Skilling's joke about the energy crisis CA brought on itself.:

"You think that's funny?!" Berkowitz said sternly. "You think that was funny?!"

Skilling's smirk disappeared and he tried to explain that the "regulatory environment in California was just like Brazil..."

Berkowitz interrupted.

"You made jokes about (the energy crisis in California)," said Berkowitz pointedly.

Uhh, no Seanie it wasn't that funny, at least not compared with your joke of a cross-examination. I'm still long Skilling and short Lay on Tradesports, so lets hope Sean gets his act together. The contracts have not moved a tic all day.

Rummy, you're doing a heck of a job – Tradesports resignation contract shoots up

The pressure on Donald Rumfeld to resign is increasing. Several retired generals have openly criticized Rumsfeld which caused the RUMSFELD.RESIGN contract to gain this week.



The Cheney contract had slight gains as well this week and moved up in sympathy. As discussed here, the Cheney contract has more "outs" than the Rumsfeld one. This is due to the fact the contract can pay off if the current position is left for any reason, not just resignation.



The Bush admin must have learned its lesson from the Michael Browne incident, "The president believes Secretary Rumsfeld is doing a very fine job during a challenging period in our nation's history," is not nearly as catchy of a sound bite.

Take the movements with a grain of salt. Besides Larry Summers the market has not been extremely successful with predicting resignations so far.

American Idol Betting – Picking Winners and Contract Rules

Reality television rules are not set in stone. A contestant that is “out” can be brought back on and several winners or no winners can be declared. Tradesports has attempted to take that into account in their American Idol contracts.

The margin requirements and payouts make these tricky to trade profitably. All of the Outright Winner contracts remain open until the final winner has been announced to take into account that a contestant can be brought back. No matter how good you are at picking winners the margin will be tied up for a while. Fortunately there is a “Sent Home This Week” contract but it has much less volume than the Outright Winner ones.

The biggest gotcha would be if two winners or more winners were declared, according to the Contract Rules on Tradesports, “Should there be two official winners, both relevant contracts will expire at 50. Should there be three official winners the relevant contracts will expire at 33 etc.” How betting sites that give straight odds will handle the above scenarios is unclear.

Recent Articles and Resources

This New York Times article discussed some interesting handicapping techniques. The most accurate one seems to be DialIdol.com which counts the times a contestants line is busy. The harder is it to get through, the more votes the contestant is getting. This site is a must for Idol bettors.

Hitwise is also mentioned in the article and measures and contestants internet popularity. Although it predicted the bottom three last week, it is not a real time measure. The votes are directly related to that night’s performance, it would be hard to pick winners using this.

http://www.realitytvmagazine.com/blog/american_idol/index.html Follows the contest and even makes some bold gambling predictions. Worth a read.

http://www.gambling911.com/American-Idol-News.html Its exactly what the URL looks like, but doesn’t focus on prediction markets.

DeLay Gone - What does the market think?

Do you see that tiny, barely visible movement at the end, that is almost a 1% change in the contract. Seeminly the GOP is so covered in sleeze that even losing The Hammer won't increase their chances of controlling the House. The Senate contracts for GOP control declined today.

NCAA Tournament: UConn - Loved by Alumi, Hated by Bettors

UConn advances, besting Washington despite sloppy play. The Tradesports spread of 5.5 was covered by a last second three pointer (chart) but with most sports books quoting 6.5 it wasn't enough to break the not covering streak. "...Connecticut`s close play cost bettors their sixth-straight payday, failing to cover the 6 1/2-point spread."

Horseshoes and Hand Grenades…

…are the only places where being close counts. But definitely not on tradesports and $5,995/theater is not the 6,100 we would have needed to get paid off. The Hills Have Eyes ended up grossing 15,708,512 and not beating the $16 m benchmark. All we can do it acknowledge we’re wrong and acknowledge that it will likely happen many more times in the future. With proper risk management no one trade or idea will cause us to deviate from our overall trading strategy.

Only One Upset - Crash over Brokeback

Buying the favourites and selling the longshots worked on every single category except Best Picture. Crash was solidly trading in the 20's with Brokeback in the mid 80's which made the category a big upset.

Tradesports was slow in settling the contracts which kept margin tied up for much longer than necessary, but only overlapped tradable categories once.

A boring show but great trading.

Oscar Bets

The best paragraph I've seen so far on Oscar predictions from the New York Times:

A big fat caveat before we get to the picks for nine major categories (after which you're on your own): Although the Oscars have all the trappings of an election, there is no polling. The only people who actually know what is on the minds of the 6,000 or so members of the academy are the accountants at PricewaterhouseCoopers, who hand-count the ballots at a secret location in the days running up to the Oscars. While there is a not-so-mini-industry of Oscar pundits, blogs and predictors, nobody knows anything — all the declaratory talk of this film "gaining momentum" and that one "weakening" is mostly conjured baloney pushed along by spinners for the respective films.

Having said that, the trickiest bet looks to be Best Picture, with LA centered Crash gaining on Tradesports. PSH is a lock for Best Actor, the idea that Heath has a chance is ludicrous. Felicity Huffman, not a chance! Reese is a sure thing.

Sunday should be especially good for heavily fading the long shots, no need to worry about margin issues.

Put Your Money Where Your Mind Is

A site that I've been reading more and more, TCS Daily had this article, Put Your Money Where Your Theory Is (borrowing Tradesports' tagline). The writers' idea is that academics that back up their predictions in cash will either be more accurate in their predictions or more moderate in predicting worst case scenarios to avoid the embarrassment of being so wrong. This one is worth a skim.

http://www.tcsdaily.com/article.aspx?id=030106E

"Moreover, prediction markets are non-ideological: the future happens the way it happens. Thus although Julian Simon beat Ehrlich, there are now scientists concerned about global warming who want global warming skeptics to put their money where their mouths are." - This would be entertaining.

"Will teen pregnancy be higher in 2010? Teens are apt to have better information about this than sociologists." - This example seems to be plain wrong. From a bettors perspective I'm not sure if I would be willing to trade based on the "inside tips" and four year predictive powers of my 15 year old cousin.

The market can restrain people since their predictions would be backed up with cash but the real incentive would be accuracy. For reasons of practicality (carry costs, liquidity) the bets will be made for prestige not profit.

Ugliest thing I've seen all day

A relatively recent change in policy at Tradesports has made it impossible for US traders to trade nearly all of the financial contracts. No economic numbers, no oil, no gold. The effect on the market is exactly what you would expect.

This screenshot (Photoshopped for size but otherwise unchanged) says it all. No liquidity anywhere. No offers, no buys, no sells, basically no point. This is utterly useless for any of the promised benefits of an idea futures marketplace. Ohh, but you can still bet on Dow up or down every day.

This moves Tradesports even closer to be a marketplace for gimmicky trades (American Idol, Academy Awards) and sports gambling and further away from a serious financial marketplace, the direction Hedgestreet has taken

Tradesports Opportunites - Financial Contracts

2/28/2006
Existing Home Sales – Even beautiful weather couldn't save New Home Sales. The inventory buildup has already begun. The Trade: Softly sell the above consensus contracts. This will be a tough contract to get good prices on.

3/1/2006
ISM Numbers – After three straight months of declines will it finally perk up? The market thinks so. Consensus is for a 56 up from last months 54.8. Drilling down gives mixed signals, the employment section declined and new orders (the most important part of this release) also showed a small decline. But Backlog Orders were up and New Export Orders surged. The Trade: I'd stay away from this one unless you can make the market by selling high above consensus. The smart bet here is staying on the sidelines.


Personal Income and Spending– How long can we sustain a negative savings rate? That question has made fools out of too many forecasters for me to venture a guess. Consensus is at .6% for Personal Income and the guesstimates on this one are generally pretty close since it can be estimated from other similar releases. The Trade: After the huge rise in retail sales Personal Spending at .6% (at 90) , .8% (at 80) and 1% (at 55) are all reasonable longs. Fuel prices are the only "gotcha" here.

3/2/2006
Initial Claims – There are some numbers that you should never trade. This is one of them.

Goodbye Larry Pt. 2 and CPI Numbers

The Summers Step contract expired today at 100 meaning for us it paid off. With that contract I was able to enter with an average cost of 57.6 and scaled out at 70 and up. By the time it expired I was only open for 5 lots. I had the rest of the postion closed with pending orders. Very simple.

CPI Strategy

CPI numbers are coming out tomorrow morning (for Jan) with consensus at +.4% vs last months -.1%. The decline in December CPI was nearly entirely due to change in the price of crude. The Tradesports contract is on the Raw figure as the Core CPI barely moves.

Liquitity is lacking on this one constantly but if we can get in at good odds this one will pay by fading the consensus. Last weeks PPI showed an increase and although the pass through relationship between producers and consumers fell apart in Decemeber it was more of a one-off than a new trend. What this is a bet on is oil. While the energy weight of the CPI is less then PPI the previous month's move shows our expectations are realistic. The contact goes up to .6% on the high so we could see the whole board pay off.

The trade: If you can get the -.2% at less than 90 do it. Buy up .4% at 60 or less.

Goodbye Larry?

Thrust back into the spotlight by this recent New York Times article Larry Summers is back on the brink of keeping his job. Two days after it was published Tradesports added the contract and a vulgar banner ad to their front page.

“Summers’ future will be decided by the Harvard Corporation, the University’s highest governing body, not by public opinion—but that hasn’t kept people from being interested in speculating on what Summers’ fate will be.

Visitors to Tradesports.com yesterday were greeted with a banner ad that read, “Larry Summers in Hot Water Again!?,” next to images of the Harvard insignia and of Summers’ head hovering above a boiling cauldron.”

The Crimson


This is from the WSJ released a little after 4am today, “Calls for Mr. Summers's departure from faculty critics have escalated in recent days, while his supporters complain that he hasn't responded with his customary vigor.” The article also says that the issue is still up in the air but Mr. Summers does seem to have lost the unconditional support that he enjoyed during the women in science scandal.

The Trade: Buying in up to the 60 level and scaling out leading up to the vote. A battle for his life and he is on a “ski vacation”?!?! Either he is really confident or he has already given up.

Prediction Markets vs Bird Flu

Academic approach with its expected excuses:

"The Iowa flu market cultivates contacts in emergency rooms and pharmacies within the state. But an avian flu market, Nelson said, would require participants in Asia and traders with specialized profiles, such as microbiologists who examine data worldwide.“We’ve not yet tapped into the right circles to get access to those traders,” he said. “That has kept us from opening an avian flu market.”"

Capitalism in action:

"Meanwhile, Trade Exchange Network recently closed one avian flu prediction market and is winding down another. In the first market, traders bought and sold futures contracts on whether avian flu would be confirmed in the United States by the end of 2005. The other market has traders testing hunches regarding a confirmed U.S. outbreak by March 31. The flu market operates on Trade Exchange Network’s Tradesports Web site."



Fighting the flu -
From game theory to flu chips, researchers experiment with new technologies to help thwart upcoming health catastrophes

No Time For Sleep

This is going to be a fantastic week to be paying attention to the market. Bernanke, silver, GOOG earnings and NFP! Here are the bets to look at.

Dow close on Tradesports looks like a good short. The 10,900 is trading at close to even money now and has everything going against it; new fed chief, horrible GDP numbers, and a consolidation after last weeks schizophrenic rally. Sell this for end of the week close if you can get more and the 11,000 contract for end of the month.

The biggest market mover this week is the employment situation numbers coming out on Friday. The Non-Farm Payroll release looks over change in payrolls, hourly earnings, and the actual unemployment rate. Ignore the unemployment rate, everyone else does. The trade on this one is to fade the high end of the estimates for payroll growth. With consensus at 215,000 jobs created, sell anything above it but use caution. This one is extremely volatile.

Academy Award Best Picture Bet - TradeSports

The Bet

With two movies breaking away from the pack and the rest of the films with only small chances of winning at current levels, we can make a safer bet than by just picking one film by playing the odds. ‘Brokeback Mountain’ and ‘Munich’, trading at 40 and 32 respectively, are the clear favourites and although I'm rooting for ‘Brokeback’, we can lower the risk and lock in profits by betting smarter.

The contracts in this market are binary and will only end up at either 100 (where each contract pays $10) or 0. With only one winner and two favorites, we can think of the bet as to a presidential election where the two candidates are trading in the 40's (the level of trading are the approximate odds that the bet will pay off). Since we know one will win, as long as the contracts are trading low enough we can arb the market for a safe profit.

As present levels if Munich wins, the contract pays 6.8 and we lose the premium on Brokeback of 4.0, but lock in the spread. As long as the Buy side of both contracts is trading lower 100 total (absent of transaction costs) the opportunity exists.

Some issues with the trade exist, the most obvious being a surprise victory of one of the other films. The closest contract right now is ‘Good Night and Good Luck’ trading at 10 (a level I’d sell at all day) but that seems very unlikely to win. On a practical level the issue is liquidity, the market has very little depth which may be the reason that the opportunity even exists in the first place.