Thursday, 14 May 2015

I'd rather be happy than right: 2015 personal election review

Well that didn't go as expected.  With the luminous exception of Scotland, I was completely wrongfooted by how the election result turned out.  I could argue that so was everyone else but that would be a bit of a cop out.  It's my turn to eat some humble pie.

So what did I get right and what did I royally mess up?  The best place to start must be my end of year predictions:

These were, in order:

1. There would be a hung Parliament
2. It will be neck and neck between the Lib Dems and the SNP which would be the third party.
3. UKIP would get a good poll rating and few seats to show for it.
4. The Greens would take precisely one seat: Brighton Pavilion.
5. The debates would take place, basically in the format put forward by David Cameron.
6. The election campaign wouldn't change very much.
7. There would be a Labour minority government.
8. All of the leaders (except Nicola Sturgeon) would be in peril of losing their jobs.

Not good, are they?  I was right about UKIP and the Greens, half right about the debates (the format changed considerably) and right about the pressure on the leaders apart from David Cameron - though Nigel Farage's bouncing resignation was an innovation in British politics that I hadn't expected.  But for the rest, I was hopelessly wrong. 

There's no point sugaring the pill, this was a terrible set of predictions.  What went wrong?

Despite being very aware that polling was an unreliable friend and likely to be particularly unreliable this time with the rise of UKIP and the SNP and the crash of the Lib Dems, I still relied heavily on the opinion polls.  I think I acted correctly when I put together these predictions - you have to make use of the evidence that you have got in the absence of concrete reasons to doubt that evidence.  At the turn of the year, I had no such concrete reasons.

In fact, my year-end predictions were largely what I expected right up to 10pm on 7 May 2015 (but by that stage I expected the SNP to far outstrip the Lib Dems, though even then not by as much as in fact happened).  The polls had remained static, even though the mood music from both main parties and the campaign itineraries of the two main party leaders suggested something different from the polls.  That failure to revise my expectations was less forgivable.  Ed Miliband would not have been campaigning in North Warwickshire and David Cameron would not have been campaigning in Twickenham and Bath if they didn't believe that the election was far adrift of where the polls suggested.  One of them might have been wrong.  Both of them were most unlikely to be.  I should have taken more notice.

So I wasn't right.  But I am still happy.  Why?  Because my betting produced the returns I was looking for from them.  How did I turn a profit when I had been such a poor prophet?  I need to break this down into asset allocation, stock selection and timing.

As of 10pm on Thursday night, my portfolio of fixed price bets was comprised in the following categories:

1. Scottish constituency bets, almost all on the SNP
2. English constituency bets, the great majority on the Conservatives, but not exclusively if I saw bets that I thought offered disproportionate value on other parties
3. Hung parliament (I'll come back to this)
4. Labour most seats
5. Labour minority government
6. Laying David Cameron as Prime Minister after the election and backing Ed Miliband as Prime Minister after the next election
7. Miscellaneous others

I had placed some spread bets, but this time I didn't put huge sums at stake that way.  My focus was elsewhere.

You can see from the bets that I placed that these were partly indirectly hedging.  Relative longshot Conservative constituency bets were inconsistent with bets in categories 4, 5 and 6 in particular.  By selecting constituency bets that I felt were likely to outperform each party's run-of-the-mill seats for the same odds, I hoped to maximise returns.

I did so well on my Scottish constituency bets that everything else pales into insignificance.  They comprised roughly 80% of my winnings.  This was a triumph of asset allocation - all those hours I spent poring over the likeliest SNP wins proved entirely superfluous in the end (indeed, at an early stage I had managed to back the SNP to win Edinburgh South, the one seat that they did not take, though having obtained odds of 25/1 on that possibility I can scarcely be too upset).

But I did OK elsewhere also.  On Thursday morning, I thought that most of my English constituency bets on the Conservatives were heading for the virtual ashtray.  But on Friday morning, they largely came up trumps.  My strategy of seeking out value on both sides of the fence left me ahead.  Here, stock selection was more important.  And I did OK, particularly as regards the battle between Labour and the Conservatives.  

Labour took ten seats from the Conservatives.  Of these, I had placed losing bets on the Conservatives holding City of Chester, Hove and Ilford North.  But conversely I did bet on Labour taking Brentford & Isleworth and Ealing Central & Acton.  I avoided betting on the other five either way.  Meanwhile, I successfully backed the Conservatives (at fairly long odds) to keep many of their other most marginal seats, and while I'd backed Labour to take some other seats, I am not embarrassed by my choices there either.  Taken as a whole, I think I did a pretty fair job of identifying which Conservative seats might underperform and where Labour might outperform against the Conservatives.

In other battlefields, the story was much closer to neutral overall (I did conspicuously badly with UKIP).  But I did best where I'd bet most.  

I made one other critical decision early on Friday morning which was worth a four figure sum to me.  After seeing the exit poll, I was aware that it was in doubt whether the Conservatives would merely be the largest party or whether they might get an overall majority.  Following the results in Nuneaton and Swindon North, where the Conservatives had outperformed the exit poll in each case, I reversed my previous position on no overall majority and backed the Conservatives getting an overall majority at fairly long odds.  Timing was everything on this. 

If this all sounds too smug, please return to the top and reread my serving of humble pie.  I will.  Overall, I made a complete hash of my predictions.  Fortunately, I got away with it.  This time.


John Harvey said...

You got pretty much everything wrong, shows you long-winded blog posts don't really count for much if your logical reasoning is all wrong.

The fact you made a few quid from bets you never expected to come in doesn't change a thing. It's like your local weather forecaster saying "yes, it rained all day yesterday when I said it would be sunny, but at least I covered my ass by putting some bets on it raining".

For what it's worth, I made a stack making a single spread bet: Tories above 290. The direction of the election was pretty clearcut from a month out, while you were crowing on here about hung parliaments.

Don't give up the day job. There's a reason why this blog exists in a tiny dark corner of the internet. Re-read your list of 8 predictions at the beginning. Holy cow, you should just close the blog today and be done with it.

midwinter said...

Betting is all about value. Backing selections that are overpriced. Consequently the fact that unexpected bets won clearly does change a thing.

Very few people got much right about the election. Congratulations to Mr Harvey on his wonderful spread bet but personally I've more respect for someone who gives their opinion and a line of reasoning before an event takes place.

And frankly the prices the SNP were recommended at would have made so much money that any other losers would have been irrelevant.

An enjoyable read as ever. Thankyou.