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Is now the time to bet on the Tories?

January 4th, 2005

    …or will the price slip further

Following the decline of the Tories in the spread betting markets and the new version of the Martin Baxter seat calculator with a tactical unwind element a number of people have asked whether we consider that the party is now a good buy.

    We think that the current spread level is based on the depressed opinion poll ratings for the party and the ongoing poor publicity that Michael Howard is getting. We do not see either of these factors, which are inevitably interlinked, changing in the short to medium term.

As we have argued strongly we believe that the polls are over-estimating Labour and under-stating both the Tories and Lib Dems. We also do not believe that next time that the seat/vote ratio will work as favorably for Labour as it did in 2001.

The new Baxter calculation provides a platform for evaluating a number of scenarios and what is interesting is that the tactical unwind element is magnified the closer the Tory and Labour vote shares are to each other.

We think there is a good case for saying that the Tories will exceed the current buy level of 197 seats but should you bet now? This depends on your view of future market sentiment.

As we get closer to the election the “pool” of punters probably becomes less politically aware and will take much more notice of poll levels and, no doubt, seat predictions based on uniform national swing calculations. In our view these elements could depress the Tory price further. Waiting is a gamble because the spead could increase but one that is worth taking.

Our strategy is to hold on a bit longer. The lower the price you buy the lower the risk and the greater the potential profit.

Mike Smithson






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