Yesterday, mainstream news outlets quoted London bookies as proof that Brits would vote to remain in the EU. Their rationale was if odds makers were paying 4 to 1 if Brexit happened that it was a long shot at best.
THEY WERE WRONG
First the news story. One article was titled:
“Bookies Say It’s Almost All Over as Gamblers See No Brexit”
In fact, shortly after a large bet on Bremain was placed, the odds changed roughly to what you see below:
U.K. Brexit Vote:
- Remain: 2 to 7 (bet 7 to win 2)
- Brexit: 11 to 4 (bet 4 to win 11) - source: Ladbrokes
Stocks then surged after the MSM articles and new odds were published.
With odds like that you’d be nuts to think the Brits would vote out of the EU.
Time to sell Gold and buy Stocks right? WRONG.
Their Mistake:
Here’s the thing: Their assessment was dead wrong. Bookies adjust odds based on amount of money bet. Their odds are a reflection of their risk. So just because the odds are 100 to 1 doesn’t mean more people are betting against something. It means more money is being bet against it. And last I checked it is 1 person 1 vote.
To make it clearer if you don’t have a gambling habit:
- 1000 people bet $1.00 each on a Brexit
- 1 person of considerable wealth bets $1MM that the UK will remain.
The Bookie
The bookie must adjust his odds to get more money to bet on the other side. If he doesn’t adjust his odds and attract bets the other way, he will have “naked risk”. Bookies are middle men, they don’t make bets.
The Brexit
What matters as far as voting goes is the number of bettors. So in our example 1000 voters vote Brexit. One person picks Remain.
The Bottom Line
- Bookie Odds show money is being placed on a Remain- approx. 4 to 1 odds currently
- Bookie bets placed show more people are betting on Brexit- approx. 58% yesterday and today
- People vote, dollars don’t (not yet anyway)
Should you sell gold and buy stocks? We can give you a hundred reasons not to. But that is not the subject of this article. If you choose to sell gold and buy stocks do not do it because of a bookie’s Brexit odds. Right now it’s a toss up.
-Soren K.
Image credit: abceconomics.com
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