Double Blind

… published at 11:59pm to be compliant with any potential violations of the Canada Elections Act.

Prediction:

Conservatives – 130
Liberals – 94
Bloc Quebecois – 49
NDP – 33
Independents (Andre Arthur, Bill Casey) – 2
Green ZERO – Green supporters can thank Elizabeth May for this. They had a legitimate chance of winning a couple seats this election, but incompetent leadership really cost them. This was starting from signing an incredibly stupid deal with the Liberals in an unwinnable seat for Elizabeth May, to continuing to undermine her own party’s brand name by encouraging strategic voting. The Greens really had a good chance to take a couple seats in Ontario, but they totally squandered this opportunity and will get the zero result they deserve.

Regional Splits:
Atlantic Canada – Cons 6, Liberals 21, NDP 4, Ind 1
Quebec – Cons 8, Liberals 16, BQ 49, NDP 1, Ind 1
Ontario – Cons 44, Liberals 48, NDP 14
SK/MB – Cons 23, Liberals 2, NDP 3
Alberta – Cons 28
BC – Cons 21, Liberals 5, NDP 10
Territories – Liberals 2, NDP 1

Here is where my risk profile is structured:

1. Conservative plurality (i.e. Conservatives to get more seats than any other party in Parliament).
2. Minority government result.
3. Bloc Quebecois to get roughly more than 9% of the popular vote.

I estimate after Tuesday that my ESM account will be valued roughly at $1240.

Unfortunately this election there was no great opportunity to take a good long-odds type risk that I thought would actually be feasible. Most of this election I was making some fairly low-risk plays. There were a few intra-election trades with respect to the NDP that made some cash and the intention was to compound that, but the liquidity wasn’t there.

So out of the $70,400 invested in the ESM (this also includes my $1000), I’m estimating I managed to skim 0.3% of it after this election, assuming that the chickens that I have counted materialize (before the eggs have hatched).

My next post will have an election prediction, with respect to parties and provinces.

Election 2008 will likely be known for the lack of spectacular performances (with the exception of Gilles Duceppe). Both the Conservatives and Liberals have absolutely failed, but Stephane Dion has absolutely topped the gaffe-o-meter with this doozy of a video:

Now, having watched others, being on television is tough. Try putting on your webcam and speak coherently for a minute and you’ll find it’s a tough experience. So when media interviews people in real life, frequently they’ll allow retakes as long as what was said wasn’t terribly politically incorrect.

The leaders are extremely tired – just watch the bags underneath the eyes of all the leaders, and when sleep-deprived, stupid things are said and done. This “interview”, however, won’t be winning Dion any votes in English-speaking Canada.

There are five trading days left (excluding today) since the ESM will close on Monday, 10:00pm.

My ESM account is approximately $1,144 at the bid.

I am still kind of frustrated at the lack of liquidity of certain contracts, but I have managed to get partial fills on the Bloc popular vote contract (which should be valued at around 10%). In addition, the Liberals had a seat count that was slightly undervalued, and I have covered that bet and liquidated it for a mild profit. Now the market appears to be fairly valued.

Right now the ESM is predicting the following… note these will not add up to 308 seats/100%.

Conservatives – 123 seats, 33% popular vote
Liberals – 87 seats, 29% popular vote
NDP – 45 seats, 20% popular vote
Bloc – 47 seats, 9.5% popular vote
Green – 0 seats, 8.8% popular vote

Note in terms of independents, there is pricing for the Greens to get half a seat.

I think this is a fair valuation, although I think the Conservatives are ever so slightly underpriced, not enough to warrant taking market action on.

If the next election results in this type of parliament, it will be interesting to see the political juggling that will go on… if the prime minister thinks that parliament was dysfunctional before this election, wait until after.

My account is presently $1,081.52 at the bidding price.

Generally, most of this was achieved by trading the majority government market. There was also some residual gains made from the Bloc Quebecois’ recent surge in popularity in Quebec, but liquidity on the Bloc contracts (both seats and popular vote) was not sufficient for me to get much volume filled in. Since my capital consists of about 1.7% of the ESM market, it isn’t as easy to move around as it would be if I had 0.17%.

I also have a substantial portion of Conservative Party plurality contracts which have accrued their expected gains (especially after Harper’s performance at the debates), but this has been a surprisingly difficult contract to liquidate – although my own valuation for these contracts is at around 99%, the actual trading price currently is 96.8%.

If somebody out there has a credit card and wants to make a very inexpensive 3.3% return on a nearly risk-free investment over a period of two or three weeks, then I would recommend that they pour some capital into that market. This would serve two interests – mine and yours!

If I cannot get a better price than roughly 98.5% on those contracts, I will hold them to expiration. I am rather disappointed at the liquidity premium that the market is asking for with those contracts.

Look what I read in my inbox today…

i) MR DION IS DOWN BECAUSE OF HIS PERSONALITY, ENGLISH AND HIS POSITION ON
CARBON TAX, AND BAD PARTY. BUT IF WE TAKE FOUR THINGS FROM HIS CHARACTER
THEN HE IS VERY EFFECTIVE.

The rest of the email was equally insightful.

I think right about now would be a relatively good time to get into US equities – Wachcovia originally had a takeover deal from Citigroup, but now Wells Fargo is trying to barge into the deal. The other conclusion, perhaps, is that Wachcovia was somehow better than the rest of the insolvent firms.

If banks were all insolvent, then how come we have rivals that are trying to price these assets? Obviously the world isn’t ending in the marketplace.

There has been a huge “flight to liquidity” which is reflected in existing stock prices, so you will find the smaller cap issues to be better bargains.

Interest rates are likely to decrease from current levels – there will likely be a rush to yielding securities (i.e. go for dividends and income trusts, before they are taxed in 2011). Personally, I think Rogers Sugar Income Fund is a steal at the moment, but obviously the market disagrees.

Most of the commentary you are listening to over the internet, radio and television say that one of Layton, Harper or Dion won the English language debates.

This is garbage.

The true winner of the English debates, and indeed Election 2008 is going to be Gilles Duceppe.

Like it or hate it, Duceppe and the Bloc have done more to ruffle feathers in the Canadian scene than Jack Layton or Elizabeth May could ever hope to dream about. The fact that most people in British Columbia don’t care about Quebec is irrelevant to Duceppe – and rightfully so.

The Bloc has been the ultimate “catch-all” party for the people in Quebec that don’t subscribe to either of the four other parties’ ideals.

I have stated before that Duceppe is a master politician. The last couple days, and indeed this election, will prove it.