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Forget the Polls: Obama Is the Odds-On Favorite to Win in November

Research & Commentary
September 07, 2012

by Salvatore Babones

According to the latest Reuters/Ipsos poll, the November presidential election is a dead heat between Democratic incumbent Barrack Obama and Republican challenger Mitt Romney. The late August CBS News poll ] had Obama ahead by one point, while the equivalent Washington Post poll had Romney ahead by a point.

Once statistical margins of error are taken into account, all the polls agree that the presidential election race is a virtual tie.

So much for the amateurs. What do the professionals think?

Among those who put their money where their mouths are, Obama is the odds-on favorite to win. British betting web site Ladbrokes is giving 2-to-5 odds on an Obama victory.

That means that a bet of $5 will return you $7 if Obama wins, for a net gain of just $2.

Compare that with the odds for Romney. Ladbrokes has Romney at 15-to-8. In other words, an $8 bet on Romney will pay $15 if he wins, for a net gain of $7.

[pullquote]Among those who put their money where their mouths are, Obama is the odds-on favorite to win.[/pullquote]

Converting the election odds into percentages, the Ladbrokes odds imply a 71.4 percent chance of an Obama victory compared to a 34.8 percent chance of a Romney victory. Together these add up to a 106.2 percent chance of someone winning the election.

The extra 6.2 percent is the bookmaker’s premium.

In presidential elections, as in all organized gambling, the house always wins.

Splitting the bookmaker’s premium down the middle gives an implied 68.3 percent chance of an Obama victory versus 31.7 percent for Romney.

Interestingly, the British bookmakers’ odds on the November elections have barely budged over the past several months. Poll numbers may go up or down, but the bookies have pegged the election as an Obama win right from the start.

And while different polls may contradict each other, all the bookies agree: It’s Obama to win in November. According to odds posted on betting information,  the 16 major online bookmakers have all priced in an Obama victory.

Across all 16 betting sites, the implied probabilities of an Obama victory range from a low of 65.6 percent to a high of 69.1 percent (splitting the bookmakers’ premiums down the middle). The average prediction is 66.9 percent for Obama.

Of course, the truly smart money bets both sides.

As Steve Horn reported for Truthout, the same organizations peddle influence at both the Republican and Democratic national conventions.

But it doesn’t make sense to pour money into a losing proposition. If the bookmakers are right, the big-money donors for whom a campaign contribution is not a commitment to a cause but a calculated investment, will soon begin to desert the Romney camp.

Right now an Obama win looks likely, but not certain. By mid-September the situation might be much clearer. In that case, look for Romney fund-raising to stall after the Democrats meet in Charlotte.

Ironically, Romney’s donors could make back some of their investments by placing bets on an Obama win. Obama may be a 2-to-5 favorite, but a win at 2-to-5 still represents a quick 40 percent return on investment.

That’s a figure any Republican can respect.

On the other hand, for the ornery few who want to see the US electoral system truly tied up in knots, Ladbrokes is offering 100-to-1 odds on a 269-to-269 electoral college tie. Bet big at 100-to-1 and you just might win enough to run for president yourself in 2016!

Originally published in Truthout. Copyright, Truthout. Used with permission.

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