Having spent many years of my youth involved with various forms of gambling, particularly horse racing, I often heard about “the smart money”. I usually scoffed at it, since I was 17 years old and I was smart. So I thought.
Many years later and I now know differently. The smart money is very conservative and follows the odds with discipline. The smart money never has a 20 to 1 winner. It simply wins most of the time, mostly at short odds. The smart money never gets emotional and is never in a hurry. It waits for when the odds are right and then pounces — but calmly.
And the smart money, in this year’s US presidential election, is on Barack Obama.
The election at this point looks very evenly poised, so it’s likely that odds against Mr Obama winning are probably just a little less than even money. Even money, which means you get twice what you bet if you win, is the theoretical price for a 50 per cent chance. In a real two horse race, however, where both are expected to have an equal chance, the odds against each horse would be less than even money – say, nine on 10 – so that the total probability added up to about 105 per cent, leaving a spread of five per cent for the bookmaker.
Thus, all other things being equal, the odds for either of Mr Obama or Mr Romney winning would be nine on 10 (or, more likely 85 on 100). However, by virtue of being the incumbent, Mr Obama is probably the favourite and would likely fetch odds of seven on 10, or in a bad poll week, even 75 on 100.
Now, coming to the smart money, remember it has no morals or politics or views; it simply plays the percentages. Historically, the incumbent has won four of the last six (and three of the last four) US elections where an elected president was in the race: Nixon (yes, he was re-elected), Reagan, Bill Clinton and George W Bush (“Dubya”). This success ratio of 66 per cent translates, in betting terms, to “half money” or five on 10.
Any price better than that – even seven on 10 – would attract the smart money, which is why I believe the smart money would definitely be on Mr Obama.
Of course, there’s other money, like mine — let’s call it the slightly foolish money.
The slightly foolish money respects and learns from the smart money but, unable to restrain its emotions or morals or politics or views, tries to fine-tune the decision. (There is also completely foolish money, which is not even aware of the smart money and simply bets its belief: me, at the race track as a kid.)
The slightly foolish money would note that the two sitting presidents who lost were Jimmy Carter, who was walloped by Reagan, and George H W Bush (“Daddy”), who was handily beaten by Bill Clinton. It would further note that both the losers had terrible handicaps. Jimmy Carter had a horrendous economy and persisted in pushing the suicidal notion (for a US president) that America needed to apologise for Vietnam and a lot else. George H W Bush was masterfully uncharismatic and eminently forgettable — I remember, at my interview for US citizenship, I was asked who the vice president of America was; to my amazement and terror, I couldn’t remember his name for what seemed like a very long time. I did finally remember, obviously in good time, since I was offered citizenship.
Providing further confirmation, the slightly foolish money would also note that each of these sitting ducks was blown away by real stars — Ronnie Reagan was, in fact, a movie star; Bill Clinton was Mr Charisma (and, as we know, much more). They turned out to be great leaders, who are remembered and loved to date.
In the current race, the slightly foolish money would acknowledge that Mr Obama does have the handicap of a dreadful economy. On the other side, Mitt Romney, his challenger, looks like he could give George H W Bush a real run for his money in the forgettability sweepstakes. He comes across not just as a cold fish but shifty to boot, as he continues to try to avoid the issue of his personal taxes hoping it will go away. Selecting Paul Ryan as his running mate is a masterstroke, but, while it will put pressure on Mr Obama, particularly in the vice-president debates, in all likelihood it will mostly serve to highlight Mr Romney’s mediocrity.
Putting all this together, the slightly foolish money would noisily follow the smart money, possibly spoiling the odds.
The fully foolish money will simply bet its heart, or its politics.
And the smart money will win, as it usually does.
