Wouldn't Junk Bonds Be More Appropriate?

New at Reason: Don't see any future with Howard Dean? Then maybe you should take a future on Howard Dean. Ron Bailey invests in Iowa Electronic Markeets.

Comments

[Jason Ligon]

Hard to think the markets are up to speed. Gephardt beats Bush if he gets the nod???

[Warren]

"The proper interpretation of this figure is that Bush will get 58.7 percent of the two party vote and Dean will get 41.3 percent, according to Neumann."

HUH!? If that quote is right, then Neumann needs to retake prob. and stat. There is nothing of vote totals in those numbers. If the explanation of those numbers in Ron's article is correct, then they represent the market odds of a candidate winning in a given pairing. Investors may favor Bush to win even if they believe he will receive a minority of the votes.

[Ron Bailey]

I'm sure that whatever faults there are in the calculations they are mine. However, if you use the formulas as outlined, you will get the same results. One can have a low probability that a guy, say Kerry, will get the nomination--that is, Kerry doesn't appeal to likely Democratic primary voters. However, he might have a high probability of beating Bush because he appeals to a wider spectrum of the voting public. As I say, if there problems with the calculations, I'm sure that it's because I misunderstood Professor Neumann.

[Ron Hardin]

Junk bonds are a means of capitalizing just like every other kind. The name has taken its media clich? meaning, like pit bull has; but it's far from the right description.

[Brad S]

Ron Hardin - I agree. Another name for junk bonds is "high yield bonds". As with most things in life, it's all in how you spin it.

As for the article about the IEM - I've always been fascinated with the IEM, primarily because it is a sort of crystal ball into the future, provided courtesy of the free market. Here's a question that maybe Ron Bailey knows the answer to: how well has the IEM predicted the outcome of past elections?

[Andy D.]

Tradesports.com, which I had thought was defunct until today, has similar bets available. Dean's running at 60% to be the Democrat candidate and Bush is running at 65% to win reelection. Tradesports doesn't seem to do bets on any "if Bush vs. Dean, then..." bets, but it's system is quite good. You can even look at charts of the history of a particular bet... Dean's been hurtling upward recently.

[Oscar]

Brad S. and Ron -- whatchoo got against junk??

[Tim Cavanaugh]

Jesus Christ Almighty, is a pun worthy of all this colloquy?

[Brad S]

Tim - the point is, the phrase "junk bonds" only captures half the story. In an efficient market, junk bonds are no better or worse than any other bond, even Treasuries. The only difference is that Treasuries, with essentially no risk and very low yield, appeal to risk averse investors while junk bonds, with high risk and high yield, appeal to less risk averse investors. I submit that calling high risk, high yield bonds "junk bonds" is akin to calling Treasuries "low yield bonds".

[Tim Cavanaugh]

High yield bonds are called junk bonds because they hold the debt of bad credit risks. Junk bonds give high yields because they hold the debt of bad credit risks. The joke in the headline stands.