The graph above shows the price of a contract paying $1 if Sir Roger Douglas's Private Member's Bill allowing the youth minimum wage to diverge from the adult minimum wage were to pass first reading. This wouldn't drop the youth minimum wage but would allow future reviews of the minimum wage to set a different rate between adults and youths. I figured this likely would lead to erosion of the real value of the youth rate over time rather than any sudden cuts.
I thought there was at least a 25% chance of the bill passing first reading: it seemed likely to me that Key would let it get through first reading, see what evidence would be presented, then stick his finger up in the wind to see what public opinion said about the evidence presented at committee. And so I bought fairly heavily, but at prices below the $0.33 or so where it stabilized for the last couple weeks.
National's weekly caucus meeting was Tuesday morning. At 11:03 Tuesday morning, somebody went in and put in a sell order for $60, running the order book down to $0.0001. As the market maker had a slight glitch, it didn't re-seed the book with sell orders all the way down; instead, the low ask stayed at $0.2315. At 11:54, somebody bought at that ask price; the price bid up again to $0.256. Tuesday evening saw more determined selling, with a few big sell orders against the order book: the first for 140 units at 18:33, another for 160 units at 19:09, 40 units at 19:45, 100 units at 19:46, 210 units at 19:47. There were a couple of small price rallies, but it came down to the $0.01 mark again this afternoon at 14:35.
A very plausible interpretation is that somebody came out of the National Caucus meeting and started selling like hell. [UPDATE: Caucus closed at 11:40. So somebody started trading DURING THE MEETING.] An alternative interpretation is that a noise trader came in at a time that made it look like a very well informed trader, and everybody subsequently herded. I find the former more likely because of the succession of hard runs down the book.
So a best guess is that National's decided not to support the bill. I wonder at what time they'd have informed their coalition partner, because they seem to have decided to tell the market almost immediately. I wonder whether information travels through Parliament more quickly via iPredict than through normal channels.
But I'm heartened that the market seems to aggregate information so quickly. A victory for iPredict, even if a loss for Crampton.
Aha: last minute check of the forum confirms that National won't be supporting. Cowards. What a waste of a government. At least they're not saddling us with a Commonwealth Games.
Update: Maybe Key's just saving up his political capital for the budget. He's been saving it all up since 2008, so he should have room for a lot of good stuff in there: serious welfare reform, serious tax reform (top rate below 33 percent), serious spending cuts even if they're only scheduled for implementation later on. Getting harder to remain optimistic though.
