Betting On A Major Meltdown
At a time when politicians have hit rock bottom in public esteem, Britains bookmakers have succeeded in elevating the UK general election to Aintees Grand National steeplechase. The betting bonanza is also stoking interest in the longest election campaign in recent history.
If election tedium has not set in already, try thinking of it as the Martell Cup Chase at Aintree. That way its likely to be pounds more fun and, with luck, profitable, points out Leeds-based political odds complier, David Brown of William Hill.
Bookmakers profits are now racing ahead after a lean spell when the National Lottery was launched. Britains biggest bookmaker, Ladbroke exults; The big money is back and the election is really shaping up to be a winner.
This view is shared by Graham Sharpe, Manager, Media Relations, William Hill, who estimates that more than $12 million will be staked before May 1 on predicting how many seats each party will win, how many women MPs there will be (60 last time, 95 to 100 is the market this time) or who will succeed John Major as Conservative leader if the Tories lose (Welsh Secretary William Hague is 3/1 favourite).
As the market leader in political betting, William Hill enjoys a 25 per cent stake in the betting cake and estimates it will take roughly $3.5 million in bets in the run-up to the election.
In any horse race, the greatest profit lies in ante-post betting days before the race, when bookies offer generous odds to tempt unwary punters. However, for the backers of Tony Blairs New Labour, should his party win, it will be a case of a sweet political result, but not so tasty paybacks on the wager.
As all seasoned turf accountants know, two-horse races with a long odds-on favourite do not make for hefty returns. Ladbrokes is currently quoting Labour 1/6 on winning the election. This means that if a punter bets $600 on Labour and the party is returned with an overall majority, he stands to win $100 before tax. The nine per cent betting levy is charged on the total payout of $700 (winnings plus the original stake) leaving the punter a measly net profit of just $37 on a bet of $600.
However, this has not stopped William Hill, part of Brent Walker, from taking a hefty bet from an anonymous Essex Lady. On the line is a $95,000 double to win $13,000 on Labour at 1/7 and Rangers at 1/12 to top the Scottish Premier Division. Another punter took $25,000 out of his building society and backed Labour when the odds were 1/4. He stands to win $6,000, a bigger gain than leaving his money in the society.
As the runners round the first bend with a long race in front of them, one bold punter has placed $200 at 250/1 on Lady Thatcher succeeding John Major as leader of the Tory party. According to the grapevine, this punter is inspired by Nostradamus's prediction that; In the year 1999, she who has been case out will return to lead again. If correct, the payout will be $50,000.
Some punters do not need Nostradamus and are inspired by good old fashioned loyalty. Dennis Ball, has placed a $20 bet with William Hill on his brother, Labour counsellor Christopher Ball, becoming the Prime Minister in the next 40 years. William Hill is not unduly perturbed about having to make the $20,000 payout.
Even Screaming Lord Sutch, the longest serving leader of the Monster Raving Loony Party fancies himself as Britains next Prime Minister. He has wagered $5 at 15 million/ 1 with William Hill. Currency trader Jason Lock who works for the French firm Banque Paribas also raised a few eyebrows by walking into Ladbokes in Oxford Street and placing a $10 bet at 33/1 on Blair having a number one hit record before the end of the year. As is well known, Blair is a pop music fan and listed the Spice Girls Say Youll be There as one of his favourite tracks.
As a youngster Blair harboured hopes of reaching the top of the charts with his band Ugly Rumours, points out Lock. The odds on Blair turning up on the top of the charts with his band Ugly Rumours, points out Lock. The odds on Blair turning up on the top of the charts has now shortened to 5/1. Seasoned punters have spurned these wacky bets in favour of new fangled spread betting, which used to be restricted to rugby and cricket scores. This allows punters to take speculative positions throughout the run up to the elections and works like spreads in financial markets.
A punter can currently buy Labour seats with leading spread betting specialist, IG Index, for $10 a seat. For every seat Labour wins above 355 which would give it an overall majority of 51 the punter pockets $10, for every seat that falls short, the punter loses $10.
The margin between 349 and 355 gives the firm is profit. The allure of spread betting is that the stake is not fixed, and so, by a quirk of the law, winnings are not subject to tax.
Both IG Index and Ladbrokes have set up helplines for novice gamblers that talk them through the intricacies of betting on their political hunches.
Petrick Jay, political odds complier, IG Index, says: Our single biggest problem is educating people. But I think spread betting has played a major role in this election. Political betting forms less than one per cent of the firms turnover in a five year period. However, the figures leapfrogged to 25 per cent in April.
Despite the fact that the biggest gains are available through spread betting, the fastest growing part of the industry, it is also considered a shortcut to bankruptcy. It is definitely more volatile than the derivatives market but punters can hedge their positions accordingly, points out Jay defensively.
There is a powerful argument to suggest that the bookies odds are a better indicator of the parties fortunes than the opinion polls. Certainly, the bookies made a far better job than the pollsters of predicting the result of the 1992 British election, putting the two major parties neck and neck on the day before polling.
Brown cities the reason; When people conduct opinion polls they have to collate the responses. This takes time so the information gets dated. On the other hand, betting odds which are more akin to real-time prices, such as stock quotes, are accurate as they depend on demand and supply. If there is a surge of money we balance the odds. Last time there was a late surge of support for the Tories and we reflected this in compiling our odds.
A Major meltdown is not in dispute, but the election result will be much closer than the opinion polls suggest, according to the weight of money being punted at the bookmakers. Volumes of best being struck have risen appreciably this time and the belief of the British punting public is that the Tories will do much better than the political analysts have so far forecast.