Play with Your Head, Not Your Heart
Here comes a hot take, remember where you heard this first:
Donald Trump is a polarizing figure in American politics.
I think I should be in line for a Pulitzer after that observation, wouldn’t you agree?
Okay, we all know that is hardly a revolutionary sentence, in fact, it’s really kind of obvious. What I’m more interested in is whether or not it is a piece of information we can use to our advantage.
On a few occasions last year, I wrote articles for both here and LCB concerning the probability of Donald Trump being impeached and how that may result in positive bets that could be made on PredictIt.com, or otherwise. I am returning to say that all of my observations then remain correct, though some of the numbers behind those observations may have changed a bit.
The first thing that you want to realize should you ever run across this particular proposition bet is that the, “Yes,” is generally going to be a terrible choice unless astronomical odds are being laid to you. Even if that happens, the probability lies well on the side of you losing the bet, so only play with money you can afford on that one! It’s something of a bridge-jumper for the, ‘No,’ takers, to be sure. Don’t worry too much, though, that bridge is retrofitted with eight-foot tall protective walls, (oh, walls, sorry) several girders and a safety net just in case someone manages to get up and over all of that.
Think about it: Last year (and this year) several online sportsbooks did have a proposition line for taking the, “Yes,” that Donald Trump would be impeached in 2017, but several of them offered no line on the, “No,” whatsoever. In other words, many sportsbooks found the suggestion so completely absurd that they were willing to run the risk of losing to every single, “Yes,” bettor. More importantly, the question was often not framed as, “Be in office,” but rather as, “Be impeached,” which means that if he dies, you lose. Death is not impeachment.
The fact of the matter is that not much has changed since then, except for his approval rating.
As of the time of this writing, according to fivethirtyeight, which uses an aggregate of multiple polls, (fivethirtyeight is not itself a pollster) Donald Trump’s approval rating is the highest that it has been since a very brief period back in April of last year. In other words, the highest it has been in almost a year.
Just don’t tell that to the voracious Trump-haters, for their scorn, in many cases, has only increased rather than subsided. Trump cannot be given credit for anything, every decision he makes must be wrong, he’s a criminal, he’s running this country into the ground.
Yada, yada, yada.
I understand and appreciate that there is an untraversable chasm between the views of Donald Trump and those of your average Liberal. More importantly, I appreciate that there are many, perhaps warranted, criticisms of our President. Hell, I’ll even go as far as to say that I agree with many of them. None of that changes the fact that he remains our President, and more importantly, he seems to have transcended his, “Base,” of staunch supporters and is now appealing to the, “Average Republican,” a little bit.
The fact of the matter is that you are not going to turn off the average Republican with the words, “Tax cut,” quite the opposite, in fact. In some cases, it doesn’t matter where the taxes are cut, for whom the taxes are cut or the costs of those cuts, any tax cut is a good tax cut. That’s all perfectly fine, and regardless of whether or not certain individuals understand the particularities behind a piece of Legislation, or Executive Action, it doesn’t change the fact that buzzwords such as, “Tax cut,” illicit an immediate favorable response with some people.
More importantly, that was one of his campaign promises, as it were. In other words, that ingratiates him to the, “Average Republican,” who, amongst perhaps other considerations, looked at it like this:
Trump: Taxes go down.
Clinton: Taxes go up.
It’s really a pretty simple equation in the minds of some people. And, again, it cannot be emphasized enough that he kept a promise. I don’t have to agree with the tax cuts themselves, but I’m being completely not objective and hypocritical if unwilling to extend credit for keeping one of his promises.
Oh, and they’re also going to start on that silly wall soon. Yay.
Another promise (kinda, sorta) kept, I guess. I think I’m missing the part where Mexico pays for it, but someone is sure to be along to correct me soon enough.
In any event, the stock market hit an all-time high during his Presidency and, despite a recent precipitous drop, (partially recovered though it be, as of the time of this writing) remains considerably higher than it was at the time he took office. Some may want to relate that back to the, “Tax Cut,” news, even though that hadn’t yet happened as it began to climb....because it began to climb during Obama’s Administration...and the fact that it dropped pretty close to the time that the tax cut was announced.
Again, your run-of-the-mill Republican is going to want to give Trump credit for the recent events of the stock market, and now, they approve of the job he is doing as a result.
We all know it’s wrong, but how willing are we to admit that it’s wrong when a President that we support is in office? It is wrong, has always been wrong and will always be wrong to extend credit for the current state of the Dow Jones Industrial Average to the sitting President, but that does nothing to change the fact that people do it. If any credit could be given, and really none should be, you would want to look at the market shortly after they leave office, or maybe during the last few years of office, in the event they serve two terms.
Look, people approve of Republican Presidents because of it and people approve of Democratic Presidents because of that. It’s always wrong, but for other Liberally-inclined folks out there, just because it’s Trump in office doesn’t suddenly make it more wrong.
But, why is any of this relevant?
It’s relevant because we have FBI findings of fact that have not yet been concluded combined with the fact that we have no idea what those findings will be. It’s quite possible that those findings of fact will bear out the conclusion that he did not commit an Impeachable offense, in the eyes of the House of Representatives, who must first draft an, “Articles of Impeachment,” which would then move on to the United States Senate.
It’s even more relevant because, even if those findings of fact result in a legitimate cause for Impeachment to take place, the Impeachment has to also be somewhat incentivized. In other words, it has to be a politically popular decision. With President Trump sitting at an approval rating of 41.5%, we can assume that he has the support of the vast majority of Republicans.
It’s also important for those proponents of Impeachment to consider that 2018 also happens to be an Election Year for members of both the House, in its entirety, as well as some of the members of Senate. In order to undergo the Impeachment process in time for it to conclude at the end of the year would also necessitate initiating the process (because nothing in D.C. happens quickly) before Election Day. One thing that you don’t want to do, if you’re a Republican Senator or Representative, shortly before Election Day is seriously irritate Republicans...many of whom are staunch supporters rather than mere, “Approvers.”
Beyond that, it’s also possible that the process would have to be initiated before Primaries, though that’s a bit of a stretch. Again, it might not be a good look to be as opposed to Trump as one could ever possibly be, (i.e. wanting him out of office) if you’re going up against a Pro-Trump Primary challenger and Trump is still generally popular with the Republican base.
That’s pretty much Chapter 3 for a playbook titled, How to Lose a Republican Primary in One Day.
In other words, when it comes to the findings of the FBI, the more popular/approved of Trump is, the stronger those findings are going to have to be. You not only have to turn the average rank-and-file Republican voter against him, it has to be strong enough to turn those strong supporters, even in the worst of times, against him.
Besides that, Trump has occasionally (though not often enough) shown a willingness to reach across the aisle and allow the Democrats a couple of things in exchange for votes on a greater matter. Granted, he seems to only do this when it is absolutely needed, but that’s better than doing it never. I also think that some Democrats are willing to negotiate with him because they only think he’s going to be in office for three, or fewer, years. I would just encourage them to be careful with such notions, as we see what that arrogance got one Hillary Rodham Clinton.
As I’m writing this, 90% of Republicans, 36% of Independents and 7% of Democrats approve of the way that President Trump is handling his office. Again, the divide is undeniable, but I think that it’s somewhat telling that the support amongst Independents is reasonably close to his overall average.
Okay, enough about that, let’s get to the fun stuff!
Betting the Better Binary for Better Bettors:
Try to say that sub-title five times fast, I dare you.
Again, as of the time of this writing, “Yes,” shares are going for $0.77 apiece whereas shares in the, “No,” are $0.23.
I think everyone is capable of understanding the implied odds behind this one, it’s a binary option, so the implied odds always add up to 100%.
The notion that there is a 23% probability that Trump will not be in office at the end of this year is patently illogical and absurd. The FBI has issued no findings of fact, it’s an election year, he’s relatively popular amongst his base as well as Republicans, in general.
Beyond all of that, the Republicans currently enjoy a majority in both the House and Senate.
I’ve discussed this before, so I’ll be brief: The first thing everyone needs to understand is, “Impeachment,” is not, “Removal from Office.” The House of Representatives does the first thing and the Senate does the second thing. However, some betting sites (at least last year) seemed to define Impeachment as, “Removal from Office,” so I would recommend always reading the specific terms of the bet to get some clarity.
Either way, this question is expressed in a positive way. Will he, “Be President.” In other words, the House of Representatives drafting an Articles of Impeachment WOULD NOT have the result of him losing the Presidency because it is incumbent upon the Senate to decide that matter. If you are going to bet this, regardless of what side you wish to take, make sure that you are cognizant of what it is that you are betting on or against.
In fact, it’s arguably easier to be, “Impeached,” by way of the House of Representatives than by way of the Senate because the matter requires only a majority vote in the House. At that time, a group of appointees will then be selected to take the drafted Articles of Impeachment over to the Senate, present it and argue on its behalf in favor of removal from office.
To be clear, it would be a historical event for any of that to happen on its own, but it would not be a first. What would be a first, on the other hand, would be a President actually being removed from office by the Senate. Nixon was impeached and would have undoubtedly been removed from office, but he resigned his Presidency prior to that happening, so there was no office to remove him from.
The Senate, “Conviction,” is much more of an uphill battle (for anyone hoping for removal) because it requires two-thirds of the Senate for that to happen, or 67 Senators, provided all are present and vote on the matter. They may actually all be required to vote on the matter, but I’m not really sure of the intricacies of that or whether they can vote, “Present,” rather than Yea, or Nay, as they could in other votes. Either way, the balance of the Senate is 51-49 in favor of Republicans, (the 49 includes two, ‘Independents,’ who caucus with Democrats) so I’ll leave it to you to let me know where those other votes are coming from, because I have no idea where you think you’re getting them. There are even a few at-risk Democrats, if Joe Manchin of West Virginia were to vote in favor of removal, for example, he might as well go out the next day and declare that it is his last Senate term...because he’s not winning again anyway.
I sincerely hope that this has convinced anyone who sees that, “No,” at twenty-three cents and share, and thinks it’s a good value, otherwise.
What probability would I assign to Trump being removed from office this year? I’m going to go with 1%, in light of everything else going on, I think there’s a 1% chance that Mueller and his investigation find something so damning that sixty-seven Senators would find that they have no choice but to vote for removal from office. There’s almost no way that could happen.
In the meantime, Trump could die. It’s a good thing this isn’t the king in medieval England we’re talking about, or the mere notion of the frailty of human life in respect to the leader would be a capital offense! Anyway, he could. People don’t live forever.
According to the Social Security Administration.
(There’s a fair chance that the Wizard himself is responsible for that page, you may or may not know that he created the Popularity of Baby Names databases and was an actuary for the SSA!)
Anyway, as of 2014, they say that at the age of 72 (which Trump turns this year), there is a probability of death of 2.7885% for men. Even if we take the extra stress of being President, and all the rounds of golf that entails, into consideration, I’m going to very graciously round that probability up to 5%. Between that and the 1% probability that he is removed this year by means of the Senate, and I’m probably being overly-generous with that, we are brought up to 6%.
Okay, so we’re back to an implied probability of 23% that Trump is no longer in office by the end of the year against an implied probability of 77% that he is. Let’s take a look at how that all works out based on the probability of 6% and 94%, respectively, that I am assuming. That’s actually going to be pretty easy, because we’re going to do it based on one share and the amount to be won is precisely what the other side buys in for.
(.23 * .94) - (.06 * .77) = $0.17
I may not have expressed that very well, because the equation is deceptive in its simplicity, so let me go ahead and break it down by each of the two parts:
.23 = The amount to be won if he remains in office, also, implied probability of him not.
.94 = My probability that he remains in office.
,06 = My probability that he does not remain in office.
.77 = Amount to be won if he does not, and implied probability of him doing so.
In other words, and again that is what is so beautifully simple about binaries, (especially ones that don’t have a vig) the math is easy: If you think the probability of him being removed from office is less than 77%, then you have a good bet.
Unfortunately, it’s not that simple, because PredictIt is an, albeit non-profit, house, but that house still needs to get its vig:
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The first thing that I am going to assume is that this is the only bet that you intend to ever make on PredictIt. Having made that assumption, I’m going to assume that you are going to take 100 shares of the, “Yes,” which would thereby cost $77. The first thing that you will notice is that doesn’t do anything to you if he is out of office, because your bet will have lost and no fees affect you. However, PredcitIt does take a 10% cut of any profits you make. Remember, you would be making a profit of 23 cents per share, so PredictIt’s cut will reduce that to 20.7 cents per share. Unfortunately, should you choose to cash out, you will now also have to pay 5% of your total balance for the privilege of doing so.
If you have a new balance of $97.70, (after the first cut has been taken out) then the additional, “Processing fee,” of 5% would leave you with an overall cashout of $92.815, which I assume they would round down to $92.81. Your actual profit, therefore, would be $15.81 on 100 shares and $77 exposed. Your expected profit:
(15.81 * .94) - (.06 * 77) = $10.24 (Rounded)
That’s certainly less attractive than the $17 that 100 shares with an expected profit of $0.17 per share would represent, however, if you agree with me on the overall 6%, then it represents an advantage of:
10.24/77 = 13.2987%
That’s clearly a pretty healthy advantage, although, it bears mentioning that you would have to wait until the end of the year for the market to close, barring an extremely significant line move in the meantime. Granted, the line will probably move closer and closer to $0.99 (as we saw last year) as the days go by and it becomes ever more inevitable that no Impeachment will be discussed leaving only death that becomes less likely every day. In other words, you should probably expect to leave your money in there.
I’m looking at the calendar and I’m going to call it about eleven months left, so we’ll say your money gains about 1.209%, by expectation, that way. I guess that’s more than most Certificates of Deposit are paying right now, although, savvy (or even not-so-savvy) investors will probably be able to do better than that percentage elsewhere.
Besides, with such a huge advantage, you would want to bet an amount large enough for the win to be meaningful to you, but small enough that having it tied up isn’t going to hurt you. The unfortunate aspect about a long-play binary is that, when it does move, it tends to do so slowly. In other words, it’s going to be a few months (in my estimation) before you would even be able to sell your options for enough money to overcome that 5% cut they take out of the withdrawals. I’m sorry to be the bearer of bad news.
Still, egregious fees aside, it’s still a little bit more flexible, I guess, than making a bet on this matter at one of the more traditional online sports books. Unless you can find someone to whom to sell your stake in the bet, you’re pretty much locked into that.
In the meantime, for those of you who want the, “Yes,” PredictIt is far from being your best bet. Although, I assume you don’t know that given that you want the yes to begin with.
BetFair is currently offering odds of 8.4:1, as of the time of this writing.
If you would like to bet that Trump will be, one way or the other, out of office by 2018. In other words, that same $23 for 100 shares, as well as the 10% that they’re going to chip off of your not-so-huge profits, could instead get you $193.20, for a profit of $170.20.
Betfair also has something for you, “No bettors,” but I wouldn’t want it. In order to take the side that says he will remain in office, you’ll need to Lay at least 9:1 Odds. In other words, you’ll have to risk $207 in order to win $23. Given the numbers I used for probability earlier, your expected win would be reduced to $9.20 and you’d also be locked into it. Maybe BetFair should be called BetSane, instead, because that’s what the bettors there seem to be!
This could all change, but I doubt it. For whatever reason, the PredictIt markets tend to react more extremely and quickly to relatively small pieces of news that sometimes don’t move the other betting sites (Oops, PredictIt is, “Not a betting site,” pardon me) at all. It’s full of a bunch of people who are too busy playing with their hearts to consider gambling with their heads and with any sense of actual probability. Wanting something to happen, of course, does not make the event any more or less probable.
In any event, currently, if you are on the side that says he will be removed from office by the end of the year, then you want to march over to BetFair, or just about anywhere that’s not PredictIt. The problem with PredictIt, in your case, is the fact that those betting on Trump to be out of office are probably more vehemently against Trump than you are, if indeed you are at all. Maybe you just think it’s a good bet. I can’t imagine why.
I’ve not scoured every book taking action on this, but just comparing PredictIt to Betfair, those of you who want to take the side that says Trump will remain in office are better off to go with PredictIt, for the time being. Your advantage, by my assumptions, on BetFair is less than 5%, so PredictIt is a way better value even with the fees. This is especially true if you already have money tied up in PredictIt. The reason why is because it’s a fundamentally good bet, and even if you wanted to cash out all of your money right now, you would still have to pay the 5% fee on the cashout amount. Unless you need the money in the very near future, or find something on there you think is better, I would recommend putting the whole house and dog on this one and praying for long life and good health to our President!
Not only is this not the only thing on PredictIt, but much less is this the only proposition in the world, or even in everyday occurrence, in which you may find an advantage betting against someone who is playing with heart as opposed to head.
It doesn’t necessarily have to be political, in nature. It could be something sports-related where you make a Proposition bet with a friend who is giving you better odds than Vegas would have ever even considered. This is especially true of people who are not seasoned gamblers, which can be said of much of the PredictIt crew. The PredictIt crew also seems to lean very Liberal, in general, (or at least the money does) so that’s something to keep in mind for future bets.
There’s a bias against Trump from some people, and good proposition betting in any regard begins and ends with being able to exploit the flaws in the biases of other people.
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