Monday, July 31, 2006

aRod now inspires a buzz on BOOING

Skip Bayless, on ESPN.

Chris Masse's North Korean contract roundup

Lots of input, here. Includes input from John Delaney, CEO of TS, as well as luminaries like Eric Crampton.

This blog has also posts here, here, and here.

My personal view remains that a poorly constructed contract creates a lose-lose situation. TS will either lose credibility on strict contract enforcement, or else it will lose credibility at providing contracts that make predictive sense. How can TS gain get past this lose-lose situation? Comments welcome!

A new day in the Pit

The MUTE feature is now live! I'm not sure if I'm going to be using it on this guy, yet.

Saturday, July 29, 2006

Blinding me with science ... contracts

Tom Bell has a great paper on the great value of prediction markets in science:
The scientific prediction exchange would promote progress in the sciences and useful arts in a variety of ways. By rewarding skilled claims about those public goods, the SPEx would promote basic research and development.115 By aggregating, quantifying, and disseminating traders' consensus opinions about disputed questions of fact, moreover, the scientific prediction exchange would produce a vital input for promoting the sciences and useful arts: Accurate and timely information about progress in those fields.116 Even those of us who merely watch trading from the sidelines stand to learn something about the drama and value of scientific disputes. Reporters would find claim prices on a scientific prediction exchange offer a quick, objective, and neatly packaged way to follow esoteric debates. Scientific prediction exchanges would thus
fund, measure, and publicize progress in the sciences and useful arts. Scientific prediction exchanges offer to deliver those public goods at little or no public expense. In contrast to patent and copyright rights, the rights created by scientific prediction exchanges do not impose deadweight social costs.117 Those who buy prediction certificates get only the right to receive payment in the event an associated claim holds true—not the right to prevent anyone from enjoying progress in the sciences or useful arts. Far from enclosing public goods, prediction markets help to create and share them.
He also talks about the problems with U.S. law, and proposes some approaches:
Freeing scientific prediction exchanges from the failure of U.S. law takes a fair amount of work. It gives appeal to the prospect of escaping U.S. law altogether. As Part IV.A explains, though, there remain convincing reasons to endure and ultimately redeem U.S. law. In pursuit of that worthy goal, Part IV.B describes and evaluates several legal strategies for liberating scientific prediction exchanges from the risk of unduly burdensome regulations or outright prohibitions. Each of those strategies leaves success uncomfortably doubtful, however. Legal uncertainties continue to haunt scientific prediction exchanges. Part IV.C thus offers a statutory cure: the Scientific Prediction Exchange Act.
It would be great if our elected legislators knew a bit about law, economics, and/or innovation incentives. However, the evidence seems to suggest that they know very little beyond getting votes, as this review of The Moral Consequences of Economic Growth, a book on government programs, argues.

UPDATE: Tom Bell debates Senator Kyl on internet gambling.

Friday, July 28, 2006

Banter in the Pit: Baseball and US stock market

caveatBettor: Diem do you know the TEX revenues? I know NYY is approaching $400 mil and BOS is around $250
caveatBettor: NYY payroll is $195 and BOS is $120
caveatBettor: exclusive of payroll tax
Diem: dont know it off the top of my head
caveatBettor: 70% of fomc pause in august
caveatBettor: crude dropped a buck to 73
caveatBettor: treasury yields back under 5%
Silentconqueror: 200pt day?
It's been quiet in the Pit this week, vacation and stuff, I guess.

Thursday, July 27, 2006

Don Luskin is catching up on the North Korean contract

Unfortunately, he doesn't quite match the level of due diligence in his successful fiskings of Paul Krugman and the NY Times. Luskin says that, if needing to choose between the letter or the spirit of the contract, choose the spirit. But there is another complication, namely whether any of the missiles actually left NK airspace. If only he had read my post, from a couple of weeks ago.

My hindsight view is that the contract should have been just missile test, without any airspace condition. Then it would be much easier to choose the spirit of the contract.

UPDATE: I guess Luskin is in a post-vacation slump. He links us to this, when he should have also linked to this. But I'll still keep him at the top of my bookmark list.

UPDATE: Based on the nameless commentor on this post (and I appreciate your comments), I did a search at the DoD site http://www.defenselink.mil/. I also did Google and ask.com searches for "Department of Defense" + "North Korea" + "missile" + "test", but did not find any confirmation of a missile leaving NK airspace. So, while I accept that an NK missile did leave airspace, that has not been confirmed as far as I can find. Perhaps the Nameless Commenter could provide a link to the DoD confirm? Or just a DoD suggestion, even?

Chris Masse, prediction markets blogger

links to our humble blog. I must return his favor (check it out).

Light banter in the Pit: Landis, Enron, and Aunt Millie

mcwombat: what happens if landis loses tour win? how does ts handle?
mcwombat: probably already discussed, i missed it
AlanBStard: mcwombat: Usually the contract terms preclude any future revisions to the result.
mcwombat: good enough, don't how else they could remedy..thanks
caveatBettor: i want my money back for those $20 Enron shares
caveatBettor: oops $15
mcwombat: landis worked for enron?
AlanBStard: cB: You were Aunt Millie???
caveatBettor: maybe ...
AlanBStard: (Yes, I know, Aunt Millie was supposed to be a California electic customer, but I still feel it is a relevant inquiry.)
caveatBettor: aunt millie was done in by her state legislators for price fixing laws
caveatBettor: it is amazing that businesses cannot price fix but the govt can

Pit has been quiet today. Come visit if you get a chance.

A few charts on White House 2008


Current approvals (chart from WSJ)

Dem winner contract

Price for 2008 US Presidential Election Winner (Political Party) at TradeSports.com



Pub winner contract

Price for 2008 US Presidential Election Winner (Political Party) at TradeSports.com



Contracts In Everything: Sony Playstation 3

In the WSJ today (subscription required):

Sony still faces a big challenge ahead – the launch of its PlayStation 3 videogame console, which is expected to be the centerpiece of Sony's product lineup. The console is packed with an advanced computer chip for high-quality graphics and a new kind of DVD player. But it will face tough competition from Microsoft Corp.'s Xbox 360 game console, which is already out, and Nintendo Co.'s Wii console, which will be released around the same time.


The release of the PS 3 will be influenced by the releases of Nintendo's Wii, and potentially other new products in the gaming space. Here is the chart for the November contract (July - Dec are listed):


Price for Sony PlayStation 3 U.S Launch Date at TradeSports.com



Wednesday, July 26, 2006

Confessions of a gambling addict

Keith Taylor: ex-gambler and writer. (via Everyday Economist). Here is an excerpt:

I won't take you through all the tawdry details of my addiction, but online gambling cost me around £25,000 ($45,000) over three years. I had to drop out of university for a spell, and by the time I re-enrolled I'd fallen so far behind I had to repeat a year of study. I destroyed friendships. I damaged my relationship with my family almost beyond repair. I forfeited the right to trust and respect. It was only blind luck that I had people around me who still cared enough to bring me back from the edge.

You'd think, then, that I'd support any measures that might save others from going through the same agony. You'd think I'd hate gambling for what it did to me. Well, no. You see, what I learned is that it wasn't gambling that almost ruined me. It wasn't the flashing banner ads that enticed me at every turn on the Internet. It wasn't the temptation of easy money. I don't blame the bookmakers, websites or casinos one bit.

The fact that I gambled was my own fault. I worried obsessively about my life, and the only avenue of escape I could imagine was to gamble. You shouldn't expect solid logic from a compulsive gambler, but in my head I truly expected to win enough money so that I wouldn't need a degree; enough so that I'd never have to work. I wanted to escape from the pressures of university, and the uncertainty of what would come afterwards.

The most maligned athlete in the Pit gets help

And more of it comes from Yankee fans than Red Sox fans.

Better clutch numbers than Papi? Better bang for the buck than Jeter? I did hear about those guys bangin' ...

UPDATE: Yes, we are sure we don't want him!




Price for 2006 World Series Outright Winner at TradeSports.com




Price for 2006 World Series Outright Winner at TradeSports.com


Tuesday, July 25, 2006

Latest update on the North Korean Missile Test expiry

While we have successfully used the Department of Defense as an expiry source previously, no confirmation has been forthcoming on this occasion. Consequently, the Contract has remained unexpired.

Should no confirmation be received in accordance with the Contract rules, the Contract will expire at 0 after 31st July 2006. Please refer to the Contract for comprehensive rules.

This strict and correct adherence to the stated Contract rules ensures the integrity of the Exchanges markets, and our members ability to rely on what is written in our rules.

In this situation, however, the specifics of the North Korean Missile Test Contract have created an undesirable scenario in which the Exchange cannot confirm an event which some of our members believe has occurred. This is a very unfortunate position and one that the Exchange genuinely regrets.

Accordingly, the Exchange is taking a number of steps including the following?

1. The Establishment of an Arbitration Settlement Committee in the near future. Additional details to follow

2. Extending the sources for confirmation on similar contracts in future

3. Including a new extra confirmation step on the order ticket for similar contracts in the near future

We apologise for any inconvenience caused. In particular we apologise to those members who interpreted a 'contract intention' without having assimilated the Contract rules before they traded.



The entire statement can be found here. More from this blog and commenters here.

Some good news on the limits of the Gambling Prohibition Act

in today's WSJ (subscription required). Here are two excerpts:
The government won a court order to temporarily shut down BetOnSports.com and other sites, but didn't file charges against any bettors. Instead, it asked BetOnSports to return funds held in their accounts.

The case raises the question: Why hasn't the government pursued U.S. gamblers? They accounted for roughly half of the estimated $12 billion in annual world-wide revenue for offshore casinos last year, according to research firm Christiansen Capital Advisors. Some gamblers are fearful they might soon become entangled in the government's widening probe, but legal analysts say there's no federal law that explicitly bars individuals from placing bets online, and few state laws that do.

For its part, the Justice Department said it is focused on the online gambling businesses, not individuals. "There is certainly not a law that expressly prohibits a bet by a casual bettor," said a Justice Department official in a phone interview. "We think that is more for state law to decide."

and

Legal analysts said it is unlikely federal prosecutors will target individual bettors, in part because the government prefers to leave prosecution of such cases to the states. And, like New York, few states explicitly bar the casual bettor from wagering online. Even in Washington state, which recently made it a felony for a person to gamble online, state officials said it's unlikely they would prosecute casual bettors.

Gambling experts said one of the few reported cases of an American being prosecuted for online gambling involved Jeffrey Trauman, a North Dakota resident. In 2003, Mr. Trauman, a professional bettor, pleaded guilty to a misdemeanor for violating a state law that limited legal gambling to wagers at a tribal casino or sanctioned charity. He received a $500 fine and one-year deferred sentence.

"It is politically difficult or unwise to go after consumers if they're not significant gamblers," said Bill Eadington, a professor of economics who runs a gambling-research institute at the University of Nevada, Reno. "One can make a case that if an individual bettor is moving hundreds of thousands of dollars, he may be a target."

Arresting gamblers would bolster the federal government's efforts to curb the activity, said Lawrence G. Walters, a Florida attorney who represents offshore casinos. However, he said, "there could be Constitutional problems with attempting to regulate a local activity, such as the placement of individual bets by people in their own home."

Of course, congressional restrictions on money exchange between TS and its willing customers is still a problem.

I am removing my link to Raw Story

My good friend in the Pit, sellSELLsell, referred me to this Drudge news alternative, and I thought it would be good for balance on the blog. But the headline "Frist family firm sold for $21.3b" for this story is inaccurate, as HCA is a publicly traded company where 350 of 387 million shares are floated for public ownership.

This blog has a bias, in advocating for more interest and trading liquidity at TS. That is why I hit the Republican party here, where it is acting against the purpose of this blog. In everything else, I hope the blog is accurate and balanced and conflict-free as much as possible.

And sellSELLsell, please continue your valuable input. Perhaps we can find alternatives together to maintain and improve the balance of this site.


UPDATE: Turns out sellSELLsell has a great website, shining a bright light on money for the needy.

How much is Bill Clinton helping Joe Lieberman's chances?

Apparently, not very much:


Price for Connecticut Democratic primary for Senate 2006 at TradeSports.com


(Via Drudge)

Monday, July 24, 2006

Jason Ruspini is Paul Revere

when it comes to the Gambling Prohibition Act. An excerpt

Very often, moral concerns have been expressed that gambling is wasteful and diverts people from more productive activities. Alongside this idea, one would formerly hear that gambling instills a poor work ethic, or encourages "idleness", or places too much emphasis on chance over providence. Even here, real interests can be masked. Although the English laws of 1699, 1826 and 1906 were claimed to help the poor, there is reason to suspect that their establishment had more to do with maintaining the status quo and keeping the poor in their place. The higher classes had more to lose, and so had less of a need for variance than the poor. The 1906 law, orginally known as a "class law", was eventually recognized as outdated and unenforceable, and was discarded in 1960 when the Betting and Gambling Act legalized betting shops in the UK.
Read the whole thing. I said something similar, without the benefit of Jason's high intelligence quotient, here.

Hey, we got cited in Economics and Social Policy IV

The Boring Made Dull says "caveatBettor chips in". Thanks!

Slate gives us a backhanded compliment

Wait, there's no compliment at all here. Just shilling for Citibank, I suspect. Maybe the writer of this hatchet piece, Daniel Gross, should read up a bit here first, before shoveling this probable organic source of methane.

If anyone is an amateur in any particular subject matter, it usually is the journalist, especially one who works for the New York Times. (via Instapundit)

UPDATE: While Gross angers TS professionals, Citigroup is upsetting European nations. (via Wall St Folly)

Sunday, July 23, 2006

Why Don’t Americans Suck at the Tour de France (but do at World Cup)?

Stephen Dubner's theory is here.

Price for Tour de France 2006 Outright Winner at TradeSports.com


I think whoever cries the most, sucks the most. It was culture shock for me to see so many losers cry in the World Cup. Must have been brainwashed by these types of movies as a kid.

And then there's this guy. Enuff said?

Friday, July 21, 2006

Wow, FOREIGN xenophobic bears


See, I keep telling the perpetual bears (there is nothing wrong with being a bear some of the time) that the trade deficit equals the capital surplus. (via Marginal Revolution)

UPDATE: Another common bear argument made in the Pit is that the USD has lost 95% of its value since 1913. That is absolutely correct. If you held $1 from 1913, it would only be worth 5 cents today. But let's say you held $1 of DOW and reinvested dividends. You would have take out average annual inflation of 3.5% as well, but that would be more than offset by the average dividend yield (about 4%) over the last 90 years. Adding in the capital gains, you would have $100 today, which would have been worth $2000 back in 1913.

And if you were short $1 of DOW back in 1913 and you still haven't covered, then you would owe $2000 in 1913 dollars.

In sum:

Long $1,000 USD in 1913 ==> up $50 today
Long $1,000 DOW in 1913 ==> up $100,000 today, after inflation
Short $1,000 DOW in 1913 ==> you owe $100,000 today, after inflation, or $2 million in 1913 dollars

Data sources: Bureau of Labor Stats for CPI; Dow history here.

Thursday, July 20, 2006

A post honoring the self-employed

Well, at least the ones who can read. Except, there is no example of a person with negative return on human capital.

This is the first post of mine that doesn't in any way stand to bring more interest and liquidity to TS. But it is completely relevant to how there is such a disparity of quality among the chatters in the Pit.

UPDATE: I should share with you that, while I esteem no earthly heroes, Fischer Black ranks on my list of top guys. A good introduction to the capital asset pricing model and Black can be found here with one of his early collaborators, Jack Treynor. So, authentic traders, this segue to the world of risk will equip you in providing better liquidity to the TS markets.

The British Open, in full swing

For those of you who haven't checked out the British Open, I recommend it highly. I understand that some like a 3-hour span of high-frequency high-liquidity in-game trading. Golf is slower paced. But there is a lot of liquidity, with the market maker showing 300 per side, and it rare to spot him withdrawing bids and offers.

And as with all the majors (the others being the Masters, the US Open, and the PGA Championship), it's FOUR whole days of fun.

Given the huge interest in the World Cup last month, I'm thinking that you get 4 big tourneys a year with a distinct international cross section (instead of just one every 3 years), plus plenty of smaller ones to trade every season. And you'll have something to chat about with future interviewers and doctors down the road.

Finally, the women's equivalent looks a little softer than the WNBA.

UPDATE: The top 3 contracts, what are you waiting for?

Price for The Open Championship Outright Winner. Jul 20-23 at TradeSports.com




Price for The Open Championship Outright Winner. Jul 20-23 at TradeSports.com



Price for The Open Championship Outright Winner. Jul 20-23 at TradeSports.com



I'm long all 3, getting crushed on FIELD.

Expanded trader ratings and market marker indicators

I'm still just a silver star.

UPDATED: Even better news for a few: A MUTE BUTTON for the chat.

Tuesday, July 18, 2006

Tell me why, tell me why

As I browse through the AEI-Brookings Joint Policy Markets compendium (which is fantastic), I feel like something is missing. Namely, an insider's view. Who are the players who create the data and fuel the pricing mechanism that these many esteemed professors are publishing about? What are these people really like? More importantly, what common drivers bring the thousands of TS customers to the market to trade?

Not having researched it, but having instrospected and experienced and communicated with other traders in the Pit and Forum, I think I can boil it down to two primal drives:

1) The need to win. TS is not so much a place where people want to make money--there are other ways and places to make more money, with better historical odds. Money is important, though, because it is the final scorekeeper, whether someone trades one or one thousand of a single contract. At any trade size, each person who takes risk wants to know that they can be a contender, that they can enter the arena and prevail. And it is a contest of intellectual strength. Can I make more calls than the other guys, can I get better risk adjusted returns, can I be in the minority who can steadily grow their account, can I manage risk and save myself from losing it all? Whoever survives proves to be the fittest. As with anyone who sees the relevance of Darwin's thoughts on natural selection, TS is no place for someone who thinks affirmative action breeds strength. Rather, win, or die trying.

2) The need to be right. An even higher aspiration than wrestling with one's fellow man, there is something in each one of us that wants to be able to predict the future. To see farther, to understand more, to know Truth. If we can make the call to go left vs right, to take the shortcut, to go for it on fourth down, to see the incoming missile and get to cover in time, we can save ourselves and our loved ones. We'd be qualified to lead others to safety, and even to the Promised Land. And this need, to be proven correct, helps to explain the dialogues in the Pit and Forum, and why they get a little testy at times.

I concede that there is a dark side to trading: it's gambling addiction. There's a dark side to winemaking: alcoholism. There is even a dark side charity: enabling codependency.

But let's all celebrate the quest for victory, and for transcendence. And appreciate the futures markets that help us realize both aspirations.

Shot through the heart and you're to blame

You give sports a bad name.

From today's WSJ:

U.S. authorities said an arrest warrant was issued for Gary Stephen Kaplan, the founder of the company, who was charged with 20 felonies. The indictment seeks forfeiture of $4.5 billion and various properties from Mr. Kaplan and the co-defendants. His brother, Neil Scott Kaplan, was arrested in Fort Pierce, Fla., U.S. officials said.

The 22-count indictment was unsealed Monday in St. Louis, where a federal judge also ordered BetOnSports to stop accepting bets placed from within the U.S.

Several of the defendants live outside the U.S., which will make them hard to catch, said U.S. Attorney Catherine Hanaway in St. Louis. "This is a tough crime to prosecute,'' she said.

Mr. Kaplan is a former New York area bookie who moved his operations to the Caribbean after being arrested on gambling charges in New York in 1993. Despite the move, the U.S. has remained Mr. Kaplan's main market, officials said. He is now living in Costa Rica and owns 15% of the company, according to the indictment.

The indictment charges Mr. Kaplan with failing to pay federal wagering excise taxes on more than $3.3 billion on U.S. wagers. It also says undercover agents took bets from some of the defendants' companies, which allegedly transported equipment used in transmitting betting information across state lines and from Florida to Costa Rica.

Authorities also charged that Mr. Kaplan's group fraudulently claimed that Internet and phone wagering on sporting events was legal and licensed.

Monday, July 17, 2006

My head is spinning from reading this

AEI-Brookings paper, from this scholarly collection. There's a lot of foreign language excerpts (hold on, an educated voice just told me its called math).

But one of the takeaways is interesting: the information market works better if insiders provide liquidity.

... we show that the decision maker’s intervention in the securities market enhances social welfare. In general, without decision stakeholders, noise traders, or hedging demands, there will be little trade in a securities market. In this case, informed traders will have no incentive to acquire costly information or reveal it in prices.

I wonder if that will actually increase interest from the little fish. Like me.

UPDATE: More on stakeholders, including the legal questions, from Jason Ruspini.

NoMaN, box office shark, is back in town

Weekend update, here.

Voter turnout in primaries may be low this year

From USA Today, (via Raw Story (via sellSELLsell, from the TS pit) ).

UPDATE: But Professor Bainbridge says that fund raising may be higher this year, and that's ok. Sort of.

Sunday, July 16, 2006

Spitzer stalks Mankiw, from Princeton to Harvard Law


Price for New York Governor Race at TradeSports.com



But TS traders "love" him for governor, nonetheless.

Great comments on the incoming Empire State leader at the professor's blog. I don't think Eliot and Greg could be more different, though.

Stock Market Volatility on the Upswing

The CBOE Volatility Index (VIX) is heating up. The VIX measures the implied volatility of the S&P 500 options market over the next couple of months, and after trading in a historically low 10-15 range since 2004, it spiked up to 23 last month. It may break 20 again this week.

Assuming constant liquidity and spread, a market maker of index contracts should theoretically be able to make a higher return. And those theoretically higher returns are also available to everyone else who trades, too. I suggest you look at the most liquid contracts, for instance, the at-the-money DOW +/- contracts for the day. The hourly and touch contracts tend to dry up more quickly.

Friday, July 14, 2006

TS, know thy customer. Customer, know thy contract!

I think that this stipulation
You are obligated to contact the exchange by email to help@tradesports.com if you have any questions regarding this contract before you enter an order. Questions after the fact may not be entertained.

is evidence of lessons learned from this controversy. I predict more improvements (depending on your perspective) to come.

Lieberman's Kiss


Price for Connecticut Democratic primary for Senate 2006 at TradeSports.com


This kiss, this kiss, unsinkable, hot off the Drudge press portal. You weren't thinking this kisser either, I'm sure.

But wasn't Judas' kiss a kiss of deceit? I think any journalist who makes a biblical reference should probably audit a Sunday School class. Even a kiddie class would do.

UPDATE: Boxer to campaign for Lieberman. Dem voters mad, campaign financiers hopeful.

UPDATE: Ugh, it wasn't Shania I wanted, it was Faith. I fixed the link. Or maybe it was Shania.

Thursday, July 13, 2006

Hollywood cooks the weekend books, rumor has it

Grain of salt required. But the rumor is being spread by Steven Levitt. Those of you who play the box office receipts should stay on top of this.

Dow Matchup in the pit, Jul 13

Wurtzy says "buy -200s", while Fazz says "sell -100s". Let's see what happens.

I predict they'll push.

UPDATE: -166.89. Push.

North Korea Contract Bombs


Price for North Korean Missile Test at TradeSports.com



Most of TS contracts are intuitive, and relatively easy to understand. The types of contracts that can get cloudy are the Current Events contracts (some popular current ones right now include bird flu in the US and an Iran airstrike). But these are also the type of contracts a reinsurance player would love to use to hedge, if the trading liquidity ever got to sufficient levels.

One notable controversy has been brewing ever since the first North Korean missile test. The contract states

The contract(s) will expire at 100 if (including but not limited to): North Korea launch a test missile and it leaves North Korean air space on/before 11:59:59pm ET on 31st July 2006

The contract(s) will expire at 0 if (including but not limited to): There is no such launch by the time/date specified in the contract or if there is a launch but it is confined to North Korean air space.

For the purpose of the contract, North Korean airspace is defined as the controlled and uncontrolled airspace over the North Korean territory and territorial waters.
For expiry purposes, the source used to confirm a test missile being launched and leaving North Korean airspace will be the US Department of Defence.

It is generally accepted now that a missile did leave NK airspace. However, the DoD has not clearly confirmed it. And the contract ran up from July 4 through 7, only to retrace back down in the following week. In hindsight, tying this contract to the explicit confirmation by the DoD was not the best idea. Hey, stuff happens.

But some of my acquaintances have an interest in the contract, and tensions have been running high. For the record, I do not have a position on the contract, nor have I ever transacted any of this contract.

UPDATE: TS has posted this update in the Forum (via Ace_Rothstein, in the pit).

I invite comments on the situation.

Wednesday, July 12, 2006

Some reasons why the Internet Gambling Prohibition Act is poor law

#1 Certain forms of gambling--stated and unstated--are exceptions to the law
So internet poker is a terrible threat to families, but internet horse race betting merits papal dispensation? Yes, makes perfect vulgate sense. And while internet poker has negative social value, casino poker is a states rights' matter or falls under the Indian Gaming Law, so the positive social value is the positive social value. Tautologies do make the best laws.

Personally, I find the most insidious form of gambling to be state lotteries. They admit taking a huge vig of up to 30%. They don't advertise that the jackpots are taxed another 45%--different state agencies and all, its just too complicated. I'm not sure any internet gambling site can ruin a family as fast as a state lottery, given the same starting bankroll. A 60% rake??? Tony Soprano doesn't model his games after internet gambling sites; he fattens his family by being Mr. Powerball.

UPDATE: Diem says (in comment), "Now lets look at how the Government treats sports gambling. It makes it illegal EXCEPT when they are the sole beneficiaries (race tracks and lotteries). They in effect create their own monopoly on gambling. What are the repercussions of said actions? Exactly what the Sherman Act and Clayton Act was designed to protect us against." caveat says, "Diem For Congress."


#2 Internet gambling is too closely related to securities trading to prohibit one activity and not the other

Risk/Reward :: Risk/Reward
Rake :: Commission
Ante :: Minimum Account Balance
Fold :: Stop Out
Broker Dealer :: Dealer
SEC :: State Gaming Commission
CNBC Squawk Box:: ESPN Poker Championships
Boiler Room starring Ben Affleck :: Rounders starring Matt Damon

I concede that investing in a low-fee index fund has better expected returns than gambling--productivity and innovation are growth drivers; come along with me little girl, on a magic Ricardian ride.

But bond trading is just like internet poker--there is always a winner, a loser, and transaction costs paid out to intermediaries. Society needs credit? Yeah, and baby needs a new pair of shoes.


#3 Internet Gambling and Athletics are both Celebrations of Competitive Excellence
Just ask Mike. Don't ask Pete, though; MLB is majorly beleaguered these days. Who is the best, and how do we know for sure? Title IX niceties aside, we've been expecting our boys to grow better, stronger, faster even before Darwin took a sketchpad to Galapagos. Hunters and warriors, scratchin' and spittin'. Guys are instinctively driven to tell a better joke, relate a higher conquest. We draw a little blood in contest, and we bleed a little. And we trash talk and laugh about it afterwards.

But now the incredulity of John Patrick Mason's, "Your best? Losers always whine about their best. Winners go home and {pluck} the prom queen" (from this aphoristic collection) hits too close to home. I figured the internet gambling arena would be welcomed by the non-violence folks, because the blood is digital now ... but then again, some peaceniks fist pump when they see violence perpetrated upon their sworn enemy, or at least look the other way and snicker when it happens.

Instead of losing a hundred bucks and an eye by channeling my masculinity into a day of paintball, how about just a couple of hours and a 20-spot trading the World Cup in-game? And I can even take out the trash and change a diaper during halftime.


#4 Regulated gambling on the internet will effectively reduce illegal gambling elsewhere
This may not sound very libertarian, which hopefully is out of general character for me on domestic issues. But illegal markets are generally distorted (as are regulated markets, of course). They are also difficult to prosecute, as transactions can take place in dark alleyways with unmarked bills involved. And they are expensive for the state: how many undercovers does it take to shutdown an illegal market? And if the answer is "too many", why have the law in the first place?

See, if the government doesn't take its laws seriously, it sends a confusing signal to its citizens: You are electing and paying us to make and enforce laws on your behalf, but its really just a boondoggle.

A legal supply of online gambling sites accomplishes two things, at least for a government trying to enforce good legislation: One, it diverts participants away from illegal gambling markets, which tend to price higher risk premiums into transactions. The illegal market is creatively destroyed. Two, just as in securities markets (a corollary to Reason #2, above), electronic transactions and events can be stored and investigated without hiring a brigade of cops and transporting them here and there. Just hire a surveillance technologist from an exchange for a few weeks.

Mankiw weighs in on "gambling"

He's against it.

Greg Mankiw is the ultimate confluence of SMART, NICE and RESPONSIBLE. And he looks a little like this guy without his glasses?

But I suspect that he will not be making this little blog's Friends Of Tradesports list anytime soon, at least not until the Libertarian and Utilitarian voices bring the Moralist in him back to equilibrium.

Hmmm, I free associate equilibrium with, um, the unfettered price mechanism. Maybe the behavioral guys at UChicago could design an experiment for the voices in his head ... the voices in my head are arguing over beer and pretzels (so I'm in the control group).

And at TS, we're not all gamblers. (via MarginalRevolution)

UPDATE: Welcome, readers of Greg Mankiw's Blog. As a regular reader of Dr. Mankiw, I appreciate his link, and I hope that you find something here of value to you, perhaps when it comes to the predictive information markets, the processes of Tradesports markets, and/or glimpsing some of the market players

Levitt, Hanson, Frank

No its not a law firm or classic rock wannabee group ...

I just added Robin Hanson to this

I'm a cowboy, on a stale floor i trade


unwanted, on a park bench in shade

To the pit regulars, the good guys: This riff's for you.

Quote of the day

From one of the writers I admire most

I suspect, perhaps unfairly, that “I love being American” is as deep and profound a statement as “I love the warm feeling of freedom I get when I pee in the pool.”

For those of you who trade the Box Office contracts

Welcome to the landmark legal case of


Don't let the plaintiff or respondent names confuse you; this is an insightful view into the culture wars and how it might affect box office receipts. (via Instapundit).

For box office receipts analysis and contract recommendations, read NoMaN, the former play-by-play announcer of the Dow in the pit.

Tuesday, July 11, 2006

A green circle (newbie) mistake

I added a trackback utility, Haloscan, and it blew out the first comments from Buc, Dood, and Drugtest. Sorry guys. Hopefully the quality improves continually.
commenting and trackback have been added to this blog.

Gyspies, tramps, and thieves

"Gambling" has negative connotations. So people who don't kick the tires or look under the hood might think an acquaintance who dabbles at TS is trapped in an inevitable dysfunctional spiral, like other behavioral addictions.

But there are more than gamblers and speculators at TS. There are traders. And what separates the traders from the gamblers is the driver to trade--namely, information (over impulse). Now there certainly is noise--in any market--as well as information, so that leads to negative expected profits. But there is also informational advantage. And data modeling.

So what's the difference between the securities markets and TS? Besides tied-in dollars, not too much, I'd say.

Friends of Tradesports

Frankly, anyone who pays a 4 cent contract expiry fee to TS is already a supporter of TS. But it might be worth noting some of TS's friends of noble stature. I'll be adding to this list in the future:

1. Steven D. Levitt, U Chicago econ prof. He blogs about TS in great detail, with some recent examples such as the World Cup and the Fed Reserve Governor. Leavitt is the co-author of the bestseller Freakonomics and a John Clark Bates Medal award (MVP of economists under 40) winner.

2. Gary Becker, U Chicago econ prof and Nobel laureate; and Richard Posner, U Chicago law school prof and Federal justice. They are, obviously, among the highest regarded in their respective fields, and both promote the benefits of legalized internet gambling on their blog.

4. Justin Wolfers, Wharton business prof. He has amassed a volumnious stack of research on information, political and sports markets, as seen on his home page. Here are some great quotes on Tradesports and CEO John Delaney from a Salon interview, summing up the value of markets in his view--less bias.

5. Robin Hanson, GMU econ prof. He is among the leading theorists studying the accuracy and efficiency of predictive information markets. A nice brief of his ideas, which align with TS, can be found here (via Eric Crampton).

6. Barney Frank, Rep. from MA. His statement to Congress advocates for freer markets and less government intervention. He even quotes von Mises and Hayek, which should shame RINOs in the House. (Via Instapundit).

7. Jeffrey Alan Miron, Harvard econ prof. He has outlined his Nine Negative Consequences of Government Intervention, and is in process of drilling down on each one. (via Don Luskin)

Congress meddles against information markets

On the TS Forum, I see that DarkHorse's cries of totalitarianism in America do not completely miss the mark.

Like Fazzagh said on the TS Chat this morning, write your representative. Otherwise, you'll have no one to blame but the guy in the mirror.

And you go, Barney!

(Note: DarkHorse is a regular contributor to the Forum. Fazzagh is a regular contributor in the Pit)

Monday, July 10, 2006

What's wit TS?

hello, world

If you want to briefly share how you joined TS, please comment.

Back in 2005, I was looking to hedge my golf pool risk. I had heard about Tradesports (TS) from articles and papers that discussed information in markets, and often saw actual TS markets quoted as indicative information. I asked a golf colleagues about TS, and he had opened an account a long time ago, and verified to me that you could put your money in and (most importantly) get your money out. So I opened an account, and started doing a few trades.

Later, I noticed that the chatters at TS would often focus on Dow Industrial Index contracts, and began to join that discussion. After nearly a year of participating in the chat, I thought it might be interesting to blog about. We'll see.

It's definitely too soapy of a melodrama to entertain the way Oliver Stone's Wall Street did a couple of decades ago, but the pit is still full of characters who trade. (Plus a few poseurs who don't trade, but demand everyone to listen to them anyways). There's a dandy dysfunctional dynamic among the regulars, too, a bit like the characters from this old sitcom ...

In the beginning ...

I needed to register to post comment on

Jeff Matthews Is Not Making This Up

But reading Guy Kawasaki's interview with the head of Technorati makes me think I should actually start posting to a weblog. So here goes.