386. Betting on Elections; the Repeal of Prohibition; Saint Paul's First Letter to Titus and his remarks on the Love of Money

Don McNay is a financial analyst, counselor, and writer in a city back east - east of Lexington at least, which for many is a great line of demarcation for many things. McNay is from Richmond. You can view his website at www.donmcnay.com. I am on his email list and very much enjoy his columns. Now and then I respond, as was the case today. So, first I reprint Don's column, and follow it with my response, which admittedly wandered a little from Don's original premise.

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Don wrote:

2008 is a turning point in my life. I quit watching pundits and rarely look at political polls. I have the answers, long before political "experts" do.

I track who is betting on political races.

A futures trading website called www.intrade.com allows you to "buy" futures contracts on the outcome of the presidential race.

There is supposedly a difference between betting and buying futures contracts. I have no idea what it is. It looks like gambling to me.

I grew up around bookmakers and the people at www.intrade.com figured out how to make it legal.

I've followed www.intrade.com for the past year and found it to be amazingly accurate. Look at it and see.

By going to www.intrade.com you eliminate the television blowhards and avoid polls like the one that picked Obama to win the New Hampshire primary.

I have not sent www.intrade.com any money. I have no idea who is behind it or where they are. I don't like to bet but want to know how other people are betting.

The political futures market is a great example of an economic theory called "the wisdom of crowds." Following money movement is a great way to predict outcomes.

When many people put their money up, sentiment and emotion are minimized as factors.

The www.intrade.com numbers are an interesting mix. The bettors favor Brack Obama to win over John McCain, but if you look at the betting on a state by state basis, McCain has a slight lead in the electoral votes.

Al Gore will tell you that winning the popular vote doesn't mean anything unless you get the electoral votes.

Looking at the state by state breakout, I'm stunned at how many states has already been "decided" one way or another.

If the odds are 90% in one candidate's favor, 60 days out, they are normally going to win an individual state.

Barring something extremely weird, a vetted candidate is not going to screw it up.

According to the trading, most of us are sitting the 2008 election out. If you are an Obama supporter in Kentucky, the odds are 98% to 5% (there is a margin of error) against your candidate. If you are a McCain supporter in Maryland, you are also out of luck. Obama has 93% there.

Most of the states that were for Bush in 2004 have a 90% or better rating for McCain. The Kerry states are generally going for Obama.

Virginia, Nevada Ohio, New Hampshire and Colorado are where the battle will be fought. Virginia, Nevada and Ohio have small leads for McCain and the other two slightly favor Obama.

All five states went for Bush against Gore and all but New Hampshire went for Bush against Kerry. If Obama is going to win, he needs to get all the states that Gore won in 2000 and add one.

Any one will do.

The good news is that we won't care about Florida. The betting favors McCain by about 65%.

Every now and then, I fall into the trap of political gossip and I wonder where some people get their information. I read that some Democrats were worried about California. 93% of the bettors disagree with that concern.

I thought that Obama would have a hard time winning Pennsylvania because he struggled against Hillary Clinton. 74% of the futures traders think otherwise. Just last week, I argued that Pennsylvania was in play. The futures traders have smacked down that notion.

A prediction does not mean that results are locked in stone. Someone can screw up or have a scandal break.

I doubt that McCain or Obama have a girlfriend (or boyfriend) on the side. On the other hand, I never dreamed that John Edwards had a mistress.

If Edwards had still been a viable candidate, his bettors would have lost big time.

For every person that wins a bet, there is another person that loses. Just like an election.

With tools like www.intrade.com, we have a better idea as to will be victorious.

As the late Mayor Daley of Chicago would say, "don't make no waves, don't back no losers."

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Here is my response:

You know the old saying, "If it walks like a duck . . . ." Intrade is gambling. But to consider it so, one must also consider any "official" trading as gambling. The Stock Market is licensed gambling as are any casinos where states have approved them. The only differences are the middle men (or women). In licensed trading at the Stock Market, or via a state Lottery - all gambling, the profits of the middlemen are taxed, thereby making them a friend of the government. In most true gambling rackets, those profits by-pass the IRS and go into the pockets of the middlemen undiminished.

Consider the imposition of Prohibition in this country - by a Constitutional amendment no less. Despite all the temperance leagues in the world, one of the biggest but unspoken arguments in favor of prohibition was the government's inability to control the distilling and distribution of alcohol. This was especially true just after the First World War when our economy and those of much of the civilized world were under seige in a depression. What brought about the change in Prohibition? One thing was the government needing a new tax source during the depression. The other was all about control. With the advent of cross-country railroads and the coming on of cross-country highways, alcohol could be taxed as it became an economic interest of interstate commerce. But first the government had to legalize it. Then they created tax stamps. And if they couldn't tax it at the production house, they used railway inspectors as tax collectors imposing fees as an item of interstate commerce. The Repeal of Prohibition was a revenue enhancement scheme, to borrow a phrase from President Reagan.

The lack of reveue enehancement schemes are some of the reasons I believe we are in the economic throes, the great transfer of wealth that T. Boone Pickens has suddenly become interested in. But this transfer isn't new. It has been growing and growing since the late 1970s, since Proposition 13 in California, House Bill 44 in Kentucky, and all the tax-reducing pieces of legislation at all levels of goverment since that time. As people were taxed less and less, thereby putting more money in their pockets, as opposed to the governments, people found more and more opportunities to invest. And those opportunities weren't limited to the good ol' US of A. More and more of those dollars which used to be invested in the government of the United States of America (as taxes) were now being sent overseas and across international borders where both labor and materiel costs were far less. And not all of it came back in return. The great transfer of capital out of the United States is a direct result of the tax-lowering policies which put the Republican Party in power in this country and kept them there for a generation, by politicians promising lower taxes or no new taxes, a scheme which can ultimately be the downfall of a nation.

We are now feeling, at all levels of government, the impact of this transfer of wealth out of our Republic. And we are now faced with what the politicians like to call "doing more with less" but what is in reality "doing less with less." Until and unless there is a stop to the wealth going overseas, there will be a dearth of it homeside. One way to prevent that is put more money back into the government - investing in the country - which will force less of it to be available to leave in the form of foreign investments or off-coast tax shelters, benefitting only a few and ignoring the many.

But most Republicans and for that matter many Americans of all political stripes, have lost the enthusiasm and desire to invest in their government. The politicians have made doing so something less than honorable. When I see people using the flag as a political backdrop, or relying on expressions like Country First, and the politicization of events like September 11th, I remind myself they are frauds - nothing less.

If they aren't willing to invest in the government, which means paying more taxes, as opposed to investing in private enterprise and overseas banking concerns, they should haul down their flags, put away their firecrackers, and forget the words to the Star Spangled Banner. They aren't deserving of these accountrements of patriotism, because they aren't patriots. They are rather the people of whom Saint Paul wrote in his First Epistle to Timothy who love their money, the desire of which is described as the root of all evil. They are America's great Evil-doers. And before our country falls as did Rome, they must be stopped.


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A final note -- The most important line in Don's entry is this four-line whopper: "Any one will do." We need one more state than Al Gore got in 2000 to begin to change the country, the way we began to change it back on November 6, 2006 when we elected the 110th Congress. Again, as Don points out, any one will do.