More proof that humans are smart

This is about human-powered computing, and in particular, a game that Google uses to get people to tag images for them for free. It's quite interesting.

The Power of Predictive Markets

This is from the blog at casualobserver.net, a client of Inkling and a predictive market site dedicated to politics:

Gaithersburg, MD – Nov. 10, 2006 – CasualObserver.net, the only political stock market dedicated to midterm election coverage, today announced the results of its predictions for the 2006 midterm elections. CasualObserver.net covered 72 of the most competitive House, Senate, and Gubernatorial contests across the country and correctly predicted:

Democrat takeover of the Senate

82% of all races tracked on the site

90% of Gubernatorial races

100% of Senate races

74% of House races

Hotly contested and critical MO, MT and VA Senate races

In a head-to-head comparison CasualObserver.net’s race predictions were more accurate than those of a leading polling organization that was ranked number one by Slate magazine for accuracy in the 2004 Election. CasualObserver.net’s combined accuracy rate for the Gubernatorial and Senate races was 94.59% versus 91.89% for Rasmussen Reports. Rasmussen did not report on House races. The CasualObserver.net pricing data used for comparison were collected Election Day morning and thus reflected the aggregated opinions of traders prior to the release of any exit polling or raw vote numbers.

CasualObserver.net was launched in April as an interactive forum for political pros and armchair pundits to express their opinions on who the winners would be in the 2006 midterm elections. Rather than taking the typical periodic opinion poll approach to determine the likely winners, CasualObserver.net created a virtual stock market where candidates were traded like stocks. Unlike opinion polls where random respondents react to poll questions, CasualObserver.net was comprised of active, engaged traders who shared their opinions by making smart trades. The CasualObserver.net marketplace not only gathered opinions on who would win, but allowed each user to demonstrate how confident they were in their opinion, and how events and circumstances change that opinion over time.

A Lesson on Diversification

As many of you probably know already, Britney and K-Fed filed for divorce. Too bad I had invested all of my Inkles saying that they would stay married by December 31, 2006. I lost over 20,000 Inkles and must start from square one. I had about 3oo Inkles left. So remember, don't put all of your eggs in one basket.

Some Changes to Inkling

In case you haven't noticed, Inkling Markets has had a few changes including individual discussion boards for each market and a slicker markets directory. Be sure to check it out if you haven't already. The link is to the right.

It's Heisman Time

Market: Who will win the 2006 Heisman Trophy?
Stock: Troy Smith
Risk: Depends on what you think OSU’s chances against Michigan are.

Many people will agree that Troy Smith hasn’t been better. His touchdowns (21) and yards (1,715) are unbelievable, but it's his touchdown-to-turnover ratio that really turns heads. This year he has thrown 21 touchdowns and only 2 interceptions. Smith is winning big road games (Texas, Iowa) and has shined against tough competition (Against Texas, Iowa, and Penn State). Smith's efficiency and decision making are what set him apart. The Heisman is Troy Smith’s to lose. OSU is averaging just under 35 points and allowing only just above 8 points. The only way I see Troy Smith losing the Heisman is if OSU loses to Michigan (or some other opponent, but Michigan has the best chance), but even still he has a good chance, and with OSU’s stats, I don’t see them losing.

It's been a while

Sorry about the lull in posting over the last couple of weeks. I've been quite busy with other obligations and haven't found the time to post. Also, as I make this blog for free, please support Mad Inkles by visiting the sponsors at the top of the page. Just one ad-click per visit is enough to make a difference. Thank you readers for your continued readership!

From the Google blog

Here is an (old) article from Google's blog about how it used predictive markets. It's a quick read and a good primer for anyone still confused about predictive markets.

"We designed the market so that the price of an event should, in theory, reflect a consensus probability that the event will occur. To determine accuracy of the market, we looked at the connection between prices of events and the frequency with which they actually occurred. If prices are correct, events priced at 10 cents should occur about 10 percent of the time."

--From the Official Google Blog

Digg me

If you like this blog, please digg it. Here's the link.
Just click the digg button if you've already signed up with the site. If not, could you? Please? Well that's enough asking from me.

Catch the end of September gravy-train

One simple way to earn some Inkles is to play off the calendar. Many markets end during this great month of September. Here is a listing of some of those markets and some of my picks:

Market: Apple rumors (The next generation)
Stock: (to short) Apple iphone in September
Risk: Zilch

Short this stock! As someone who constantly watches what new Apple products will come out (from sites such as www.engadget.com, www.gizmodo.com, and www.ilounge.com), I can assuredly tell you that there will not be an iPhone anytime soon, let alone in September. Short this stock as much as you can. Take some Inkles from the morons who would bet $20 on an iPhone anouncement.

Market: Gold vs. Oil Outperformance Market
Stock: Gold vs. Oil
Risk: not sure

To be honest, this is a market I have not been following. However money.cnn.com says that as of 9/22/06, gold costs $595.40 per ounce while oil costs $60.55 per barrel. The refernce prices on the Inkling markets are $650.30 for gold and $71.12 for oil. That's a 9.2% drop for gold versus a 17.4% drop for oil. With those numbers, a bet on gold doesn't seem so bad.


Market: "Jackass #2" vs "All the King's Men"
Stock: Jackass #2
Risk: Depends on how much credit you give predictive markets

According to the much more popular predictive market, Hollywood Stock Exchange, Jacksass #2 is trading at around 66 HSX dollars while All the King's Men is trading at a much lower 19 HSX dollars. I would trust this market especially with such a high margin on that. Right now, on Inkling, Jackass #2 is at around 75 Inkles. That should amount to more than a 33% rate of return. But buy now as this market ends September 26.


I've mentioned this market before, so I'll just point you to it: Apple vs. Google.

Some Facebook Speculation

Some Facebook speculation . . . "Will YouTube or Facebook be purchased first over the next year?"

Market: YouTube vs. Facebook Up For Grabs
Stock: Facebook
Risk: medium/high

Facebook just got a buyout offer from Yahoo! for $900 miliion. If Facebook founder and CEO Mark Zuckerberg goes for the deal, you can make some mad Inkles. The stock is at around $50 so the prospect of doubling an investment doesn't seem so bad. Just don't buy too much of this stock as it is pretty risky.

Top Trader

I am now a top trader of the week! Number 5 to be exact.
I'm apple1.

Low risk, high yield. Read on.

Market: Cubs 2006 Win Total
Stock: at least 60 games; at least 65 games
Risk: none at all

Buy equal shares of both stocks. As of 9/16/06, that would cost you about 80 Inkles. Look at the market page and look at the other stocks. Now look at the Cubs' record. You'll see that they have 59 wins and 89 losses. Since there are 162 games in a season, this means that the Cubs have 14 games left. If they lose all 14 games, then you're out of luck. But if they win just one more game, you're guarunteed decent profit. Once they win one more game, the Cubs can only have more than 60, or more than 65 wins. No more, no less. Either the Cubs lose 14 games straight (which would be ridiculous) or you make at a minimum 25% rate of return. I like.

UPDATE: The Cubs just won their 60th game. Now my little caveat about some risk is meaningless. Go ahead, by some.

Apple vs. Google

I have an inkling about this one. If all goes right this should be some easy money. . . I mean Inkles.

Market: Apple v Google Outperformance Market
Stock: Apple Outperforms Google
Risk: low/medium

This market asks the question, which will perform better, Apple or Google? Performance is defined as percent increase in share price as of 5/26/05. Here is a chart comparing Google's and Apple's share price percent change. Apple only needs to hold its lead on Google until September 30. That's only 11 more trading days. Right now, Apple Outperforms Google is trading at around 73 Inkles. If Apple does hold its lead, you'll get a 37% rate of return for 11 days of investment. Now the stock market is trickier (at least for me) to predict than other events (ie, sports, technology etc). So you may not want to dump all of your Inkles on this one. Try not to go higher than 50% of your Inkles available.

When in doubt, hedge your bet.

Market: MVNO Business Model
Stock: ESPN,Helio,Amp'd
Risk: depends/read post for details

This market simply asks, which of the following cell phone companies will go out of business first. The choices are Virgin Mobile USA, Helio, Amp'd Mobile, ESPN Mobile, and Movida. Let's take a quick look at each of these companies' profiles.

Virgin Mobile USA
This company is not going out of business (at least for a long, long, long time). They've had 3,000,000+ subscribers since the beginning of 2005. Virgin has been in the US MVNO market the longer than anyone else (about four years). They have carved out a rather large niche with its prepaid service. Virgin Mobile USA should be eliminated from any consideration for this market.

Helio
This company aims to take the Korean cell phone model to the US. It focuses on providing a rich data experience. Its key feature is that it is the only carrier that allows its users to access Myspace on the phones. However, its business model has been problematic. First off, they take a huge loss on each new subscriber ($300)and its phones are very expensive ($250-$275). This brings up another problem for Helio: one of its two handet manufacturers has filed for bankruptcy. Helio's founder Sky Dayton has said that his company will need around 3,000,000 subscribers to recoup the its investment. However, Helio has been reported as having fewer than 10,000 subscribers. Yikes. Helio's problem is that it is overly ambitious. It thinks that it can take the US market by storm and bring a foreign business model onto US soil. Helio has also anounced that it will open retail stores where users can "hang out". This is ridiculous.
Keep Helio under consideration.

Amp'd Mobile
Amp'd, like Helio, focuses on a rich media experience. And also, like Helio, is plagued with low subscriber numbers. However, it does have a pre-paid plan. Also, its phones are cheaper.
Keep Amp'd under consideration

ESPN Mobile
This phone pretty much caters to sports bums. We all know them. These are the people who have NFL Sunday Ticket, check their fantasy team stats compulsively and just cannot get enough Sportcenter. This seems good, but their subscriber numbers are low.
Merril Lynch expects them to sign up around 30,000 subscribers which is waaaay below estimates of 240,000.
Merill Lynch is no moron. Trust it, because while you're betting inkles, Merill is betting in real Dollars.
Keep ESPN Mobile under consideration.

Movida (sorry, no English site)
Movida is part of Sprint's attempt to tap into the 40,000,000 strong Latino American population. With prepaid plans and being the first to enter such a market, don't expect Movida to go bust anytime soon.
Remove Movida from consideration.

This leaves us with Helio, Amp'd, and ESPN. This is also where you will hedge your bet. As of Sep. 13, Helio traded for 23 Inkles, amp'd 25, and ESPN 21. My recommendation: buy all three of those. It's too tough to definitively determine which company sucks the most. So hedge your bet. One share of each company on Sep. 13 would cost a total of 69 Inkles. Once on of these three goes out of business, this "triple share" will be worth 100 Inkles. You will get about a 45% rate of return. This is riduculously high considering the low risk involved. Let's not kid ourselves here. There is no, no, no way Virgin Mobile is going under anytime soon. We also know that Mexicans will appreciate the first carrier catering to their Spanish-language needs. And we do know that these other three companies are doing awful.
Happy hedging.

UPDATE: ESPN Mobile is dead.

Britney and the K-Fed

Will Britney Spears' marriage last to the end of this year?
If you think so, then you can make some mad Inkles.

Market: Britney Vs. The K-Fed
Stock: Yes, they will survive
Risk: low/medium

With the news that Kevin Federline has now entered the rap world with a record deal and that Britney gave birth to the couple's second child, it seems that this marriage isn't ending anytime soon. And even if it does seem doomed for failure, it only has to last for about 3.5 more months for you to earn Inkles. As of September 12, the stock was around 62 Inkles. That translates into a 61% rate of return should the couple last by January 1st, 2007. Not too shabby for fewer than four months of investment.

UPDATE: I was flat wrong and paid the price.

My First Pick

Well here is my first stock pick:

If you've just signed registered with Inkling, and you don't know where to dump all those Inkles, I have a sure bet for you.
Market:AL East Winner
Stock: New York Yankees
Risk: virtually none

As of 9/12/06 the Yankees are at around 96 Inkles a share. They are also 10 games ahead of second place Boston. Unless something ridiculous happens to the New York Yankees, the will win the AL East. Love them or hate them, the Yankees will earn for you a roughly 4.1% return on your investment by the end of the regular season (or sooner should they clinch the Division title).
Note: You should by this stock ASAP as the price will get higher and higher, thus lowering the margin of profit.

Welcome

Well, here's the first post of what I hope to be will an informative blog on the world of predictive markets.
My market of choice is Inkling ( www.inklingmarkets.com ) so I will typically be writing about markets on that site. This blog gets its name from the currency on Inkling which is called Inkles. The "Mad" comes from the CNBC show "Mad Money" hosted by none other than the great Jim Cramer.

I will try to post in a timely manner and I invite you to leave comments and engage in discussion.

Thanks, and I hope you come back soon.