Election Model Updates - October 6th

Ok, sports fans, I finally found the time to update both models at once. If you want to learn how this is calculated, go here. First, the Pulse Index:

Obviously, this reflects what we know, which is a big momentum shift towards Democrats since the convention. Interesting to note that each bounce for the Dems (downward lines) has been bigger than the previous bounces. He's what the cumulative graph looks like:

While Republicans, overall, are still up since April, Democrats have manged to erase about two-thirds of their gains in just three weeks.

A couple of comments. First, these numbers do not yet reflect any post-debate polls. Check back in a few days to see if Romney's performance resonates up and down the ballots.

Second, you should not interpret this as a "who's going to win" model. It is only meant to measure short-term shifts in the national mood. Just because the Republicans are up, over all, doesn't mean they will do well. It simply means they have done relatively better than Dems, overall, since early April. If their starting point was poor, they could still theoretically get wiped out.

Even a last minute surge by either party isn't a lock, because it might not be enough. 1976 is a good example. Gerry Ford had a huge surge late in the game but fell just short. Had the election been one day later, Ford would have won.

On the other hand, The Naked Dollar Electoral Model is very much intended to predict the winner (of the presidential race only):

If you want to understand this, go here.

Right now, the call is 302 votes for Obama, 236 for Romney. In 2008, it was 365-173. 270 are needed to win. Note that this does include post-debate data, which means the prediction markets aren't as impressed by the debates as everyone else seems to be.

I find this curious, and not a little bit illogical. Is the diffuse, wisdom of the crowds seeing something that we don't see as individuals? Certainly, that's possible. The other possibilty exposes one of the flaws of these markets, which is that they aren't terribly liquid, and so they can be manipulted with a fairly small amount of money. In 2004, for instance, in the early afternoon, there was a huge surge in the John Kerry contract. Remember, on election days, there's basically no information available until later in the day. Did someone know something? Secret exit polls, perhaps?

In reality, the surge made no sense unless someone was trying to create an air of inevitability around a Kerry victory. I figured whomever it was spent about $10,000. A pittance in the scheme of a presidential election.

No, I doubt this is what's going on. I just think the market has been buying into the media narrative that, until a couple of days ago, had Obama winning in a walk. There's some easy money to be made right now on Intrade.