Prediction Markets Update (September 25, 2008)

The 2008.PRES.OBAMA Intrade contract now trades at 56.7, whereas the 2008.PRES.McCAIN Intrade contract is currently trading at 43.5 (compared with 54.6 and 44.9 respectively as reported on yesterday’s update).

The state-by-state contracts continue to imply that Mr. Obama currently holds a 269-227 “lead” over Mr. McCain (based upon my cutoff price point of 55 for allocating Electoral College votes). As was the case yesterday, I continue to put Nevada (5 Electoral College votes), New Hampshire (4 Electoral College votes), Ohio (20 Electoral College votes), and Virginia (13 Electoral College votes) into the “swing” state category based upon this criterion. currently gives Mr. Obama a 307.8 to 230.2 advantage over Mr. McCain.

Addendum: September 25, 2008 Electoral College Vote allocation

Barack Obama (269): California (55), Colorado (9), Connecticut (7), Delaware (3), District of Columbia (3), Hawaii (4), Illinois (21), Iowa (7), Maine (4), Maryland (10), Massachusetts (12), Michigan (17), Minnesota (10), New Jersey (15), New Mexico (5), New York (31), Oregon (7), Pennsylvania (21), Rhode Island (4), Vermont (3), Washington (11), and Wisconsin (10)

John McCain (227): Alabama (9), Alaska (3), Arizona (10), Arkansas (6), Florida (27), Georgia (15), Idaho (4), Indiana (11), Kansas (6), Kentucky (8), Louisiana (9), Mississippi (6), Missouri (11), Montana (3), Nebraska (5), North Carolina (15), North Dakota (3), Oklahoma (7), South Carolina (8), South Dakota (3), Tennessee (11), Texas (34), Utah (5), West Virginia (5), and Wyoming (3)

Bloomberg News Investigates: How Ratings Brought Down Wall Street (Part 2)


An exclusive two-part BLOOMBERG NEWS report investigates how flawed AAA ratings on mortgage-backed securities that turned to junk now lie at the root of the world financial system’s biggest crisis since the Great Depression. The BLOOMBERG NEWS report shows how — driven by competition for fees and market share — rating companies Moody’s and Standard & Poor’s issued top ratings on debt pools that included $3.2 trillion of loans to homebuyers with inferior credit between 2002 and 2007. Without those AAA ratings, the report shows, insurance companies and pension funds wouldn’t have bought the products. Bank writedowns and losses on the investments totaling $523.3 billion led to the collapse or disappearance of Bear Stearns., Lehman Brothers and Merrill Lynch, and compelled the Bush administration to propose a $700 billion Wall Street bailout.


Former S&P Managing Director Richard Gugliada:
“I knew it was wrong at the time,” says Gugliada, 46, who retired from the McGraw-Hill Cos. subsidiary in 2006 and was interviewed in May near his home in Staten Island, New York. “It was either that or skip the business. That wasn’t my mandate. My mandate was to find a way. Find the way.”

“The rating agencies’ models were too flawed and cut too many corners, and the raters got pressured by the bankers,” says Tonko Gast, the chief investment officer of the $5.1 billion New York hedge fund Dynamic Credit Partners LLC, who reverse-engineers the raters’ models as part of his investing strategy. “That’s how the race to the bottom was kind of invisible.”

Kai Gilkes, 40, a former S&P quantitative analyst in London:
“The discussion tends to proceed in this sort of way,” he says. “`Look, I know you’re not comfortable with such and such assumption, but apparently Moody’s are even lower, and, if that’s the only thing that is standing between rating this deal and not rating this deal, are we really hung up on that assumption?’ You don’t have infinite data. Nothing is perfect. So the line in the sand shifts and shifts, and can shift quite a bit.”

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