Betting on Hillary

A Web site lets you actually invest in -- and profit off -- the candidates of your choice.

Published May 3, 2000 4:00PM (EDT)

When New York Mayor Rudy Giuliani announced last week that he had prostate cancer, his political stock dropped. Yes, literally. And yes, people lost real money.

Before Giuliani's press conference Thursday morning, Rudy stock was trading at 50 cents on the Iowa Electronic Markets, run by the University of Iowa's Henry B. Tippie College of Business. After his announcement at 10:05 a.m., buyers started selling.

By 10:20 a.m., his price had plummeted to 10 cents -- the lowest price possible. By noon, the stock had crept back up to around 30 cents, where it stayed all weekend, and seems to be holding.

The markets started in 1988 as an academic experiment by three Iowa professors who looked at Jesse Jackson's presidential race in Michigan and realized his primary win had never been predicted in the polls. The trio decided to set up a system that would create a better, more accurate predictive model -- and tried to lure people to log on, invest in politicians and maybe make a little money.

It's certainly an idea that seems inevitable. With corporate money funding politics, why not just turn the races over and let the market decide who will lead? And, of course, what more logical incentive is there to become involved in politics in these boom times than the promise of profiting off of politicians?

The people who run Iowa Electronic Markets even like to boast that they often predict winners -- and losers -- more accurately than popular opinion polls. In the 1996 presidential election, the markets came within two-tenths of Clinton's win of the popular vote (Clinton over Dole, 49.24 to 40.71 percent). That was also the year the markets had a record number of investors -- 8,000.

That's not enough people, of course, to create a market big enough to make anyone rich. Each trader is limited to spending $500. But the odds are both obvious and, to the idle political junkie, somewhat attractive. If you bought $500 worth of Hillary stock on Tuesday, when she was trading at 50 cents, you make out with $500 in November when she wins. If you bought stock in Rudy instead (30 cents), you could make $700 if he becomes senator.

The hottest stock this year, of course, already soared and went bust: John McCain. Mitch Wiegner, a trader in Chicago, made about $15 on McCain. "I made it before the South Carolina debacle. A friend is a CNN junkie and he said, 'Get out,'" says Wiegner. So he sold. Now, he is looking at the Giuliani/Clinton race as a possible investment.

"That one is getting really interesting," says Wiegner. "I'm going to have to look at it closely."

Unlike Wall Street, volume is relatively low, allowing a small number of players to manipulate the prices. There's also no way -- yet -- to force losers to pay up; traders now only make promises to pay before they get to play.

But that's likely to change as the market grows. So far this election cycle, almost 6,000 traders have invested $125,000 -- placing their money on myriad politicians and races, including George W. Bush, Al Gore, Reform Party candidates and even the 2000 Mexican election. There's a special market that trades over who will control Congress. (Traders are betting on a Democratic House and a Republican Senate at 51 cents a share.)

George Neumann, a professor of economics at the university and a founder of the markets, says that they can tell that the Web site receives visits almost daily from the White House, as well as from the Clinton and Giuliani campaigns.

Gore spokesman Chris Lehane, who has often said that "some candidates are blue-chip candidates; others are like junk bonds," should be happy to know that his candidate is 4 cents ahead of Bush as of Tuesday afternoon. But it's the Senate race in New York that has continued as the most volatile and certainly the most interesting.

Giuliani campaign spokeswoman Juleanna Glover Weiss says, "It's certainly an entertaining phenomenon to watch. But in term of the viability of candidates, it's simply a reflection of the conventional wisdom. I think it's something that's viewed more out of curiosity than any sort of serious attention."

Then Weiss asked how Giuliani and the first lady were trading in the markets. When told the current stock quotes, she replied: "Let's put it this way, there is no studied attention by this campaign to that phenomenon."

That's certainly easy to say when your man's stock is tanking.

And Giuliani's dive certainly reveals the coldhearted aspect of the market. In fact, the last time the markets saw such a severe dive over a candidate announcement was when it was reported that Bill Bradley had an irregular heartbeat.

"It's much like what we saw when Bradley announced he had a heart problem," says Jeanine Pfuntner, operations manager of the Iowa Electronic Markets. At the time, Bradley's stock fell from 23 cents to 13 cents and, obviously, never really recovered.

Says Pfuntner: "If people think if you are going to die, they don't want to elect you."

And they certainly won't invest in you.

By Suzi Parker

Suzi Parker is an Arkansas writer.

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Hillary Rodham Clinton