Raped by Rick Santorum
A few weeks ago my friend, let’s call him Dave, was aware of my incredible knack for predicting the GOP primary results and discovered a whole new way for me, a sober alcoholic (alcoholics are never recovering, only sober), to lose my money and enjoy it. Dave had discovered Intrade.com. Intrade is an online prediction market, ranging from weather predictions to political predictions. You can buy or sell shares based on what you think the outcome of a particular event will be. Now, I’ve done some online betting in my day, but nothing like betting on political outcomes, and after my first few weeks of using Intrade, I’d have to agree with Hunter S. Thompson’s conclusion from Hey Rube! that betting on politics is more fun, more unpredictable, and more addictive than betting on sports.
The first few weeks made for pretty easy predictions: Gingrich to win South Carolina, Romney to win Florida and Nevada. We even picked most of the second and third place finishers, too. Dave was pretty confident Romney would continue winning primaries, and I was sure he’d be the nominee, but probably not know it until Super Tuesday. My biggest fears were in Minnesota, where I knew being moderate wouldn’t get him far in a state that had a government shutdown last year and has swung to mass conservatism. Well, Dave got a bit ahead of himself and started buying shares of Romney to win in Minnesota for $8.50 before conferring with me. Romney never had a chance in Minnesota, where I knew Santorum and Paul would perform well, but we picked up enough Santorum to win Minnesota to cover our losses on the Romney bets, and I even made $5.86 buying Ron Paul to finish second in Minnesota, but selling it much to early instead of waiting it out. I never give Paul enough credit and generally don’t like betting on him. He performs anywhere from 2-6 points better than he polls, but I never expect him to hold his position once the higher populated counties start reporting votes, so instead of winning $8 I only stuck around for $6. So after the Minnesota fiasco we were actually ahead about $5, but then Colo-notso-rado happened.
At the start of the day, a day that will live in infamy, Romney had a 10 point lead according to PPP polls in Colorado. These polls are relatively reliable and had given me no reason to doubt them in the past. Even the PPP polls in Minnesota were at least close, but as results were reported in Colorado I was shocked at the lead Santorum had after the rural counties reported. I then received a frantic call from Dave saying he was ready to sell Romney at a $22 loss but I reassured him that I expected Romney to make a push once the more populated counties reported, so Dave started buying up more Romney. And I was right. At one point Romney actually held a lead, but he wasn’t winning the populated counties by much, and he was not performing to his 2008 standards. In counties he won in 2008 taking over 50% of the vote, he was only pulling 35-40% of the vote! With Jefferson County, the largest county (12,000 votes), still left to report I started doubling-down on Romney and buying more shares. I never thought I could sweat so much sitting in front of a computer screen without cocaine, but Santorum started pulling away and was called the winner before Jefferson County even reported. It was over. We had lost roughly $70 in one day, and it was our first real loss since we started trading. And that’s what it feels like to be raped by Rick Santorum. So what did we learn?
- Don’t commit money too far in advance. Ideally, you really shouldn’t start trading until votes start coming in. The markets change enough during the day of the primary that it doesn’t make much sense to commit a bunch of money a week in advance.
- The polls are STILL your friend, but shouldn’t be completely trusted. I had plenty of success because of the polls, but momentum can change in politics just as fast as in the Super Bowl. A miraculous catch, a kick return, or a judicial ruling in California finding it unconstitutional for gays to be stripped of marriage rights already given and a ridiculous tweet by Rick Santorum can motivate a lot of gay-haters.
- When a candidate says he’s “shaking off his performance” that day, don’t pick him to win anything! Romney had said he wasn’t worried about his performance in Minnesota or Colorado.
- There’s more money to be made picking second and third place finishers. They can generally be bought for less, making for smaller losses if you are wrong and huge profits if you’re right.
- We should have put all our money on Obama and just waited it out.
