Morning roundup

The morning's closing of the browser tabs:

• Labour is determined to push its resource management reform through before the election. National and ACT say they'd repeal it if elected. The current Resource Management Act is bad, but the new legislation looks worse - though it's hard to tell. The National Planning Framework that would set out how all the different outcomes and priorities might be weighed against each other still hasn't been released. 
• In a better world, the NZ Commerce Commission could go after NZ Independent Community Pharmacy Group for cartel behaviour...
• Economics on rooftop solar don't really seem to stack up. But lots of utility-scale investment going on. 
• Good piece on how the government's consultation on ETS changes around forestry erodes property rights. "On the ground, I’m being told by angry Māori landowners and foresters that the Government’s actions feel like “yet another punch in the face”."
• Betfair currently says that it's about 70% likely that the next election results in a National Party Prime Minister. 
• Excellent piece by Bronwyn Howell and Dave Heatley on the effects of price regulation for NZ universities. 

Information disclosure requirements

I was trying to fill in Wellington election papers. I remain a conscientious non-voter at central government level, but councils are more like local clubs. And Wellington is such a freaking mess. 

In most other areas where people make choices, there are all kinds of government regulations mandating information disclosure - even if there are plenty of easy sources of information.

When we bought our car, there was the compulsory sticker on fuel economy and running costs. But you hardly need that. A quick Google search will give you fuel economy comparisons between cars. 

Food has compulsory nutritional labelling and ingredients listing. 

You can't go out and buy insurance without getting a lengthy and tedious compulsory disclosure statement from your insurance advisor. Piles of compulsory climate disclosures are coming. 

So surely surely it would be dead simple to look up the voting records of incumbents. Wellington uses a ranked voting system. So I wanted to punish everyone who had voted for the convention centre, or the expensive library rebuild, or who had ever voted against housing (whether intensification or expansion), and reward those who'd done the opposite, while sticking new challengers between those. 

And similarly for Greater Wellington Regional Council. Punish everyone who voted for the draft Plan Change 1 on the Regional Spatial Plan that basically bans new subdivisions. 

But while government mandates tons of often-superfluous information disclosure in other sectors, it is impossible to tell how councillors voted on different issues unless you know when the vote happened, in which committee, and are happy to wade through council minutes to find it. 

A snippet from my column in the Herald this week:

But because no voter is particularly likely to change the outcome, few would spend the time and effort that would be required to gather the information needed to cast an informed ballot.

While it would be relatively simple for councils to set up and maintain websites tallying each vote, rather than burying them in impenetrable minutes, it has not happened.

Compulsory information disclosure is most warranted when the public interest in a better-informed decision is high but the private incentive to gather information is low.

Central government believes we need fuel economy stickers on car windows – despite the ease of finding the same information online. The case for requiring councils to provide basic information on councillors' votes is stronger than the case for fuel economy stickers on car windows, and it hasn't happened.

We can't be certain that making it easier for local voters to reward and punish incumbents based on their voting records would substantially improve turnout or improve local government outcomes.

But surely it's worth trying. Democracy depends on voters being able to "throw the bums out" when necessary, but that requires being able to tell who they are.

It should be a lot simpler.

One fun game in ranked-ballots. Clearly unfit people sometimes put their name in the hat. People who, if elected, might result in central government appointing a Commissioner instead. 

If you'd prefer a Commissioner rather than some set of candidates for mayor, ranking the unappointable person ahead of that set of people is basically a game of chicken with Central Government...

The election asylum

New Zealand is mostly the Outside of the Asylum. The rules around what you can and can't do on election day - not so much. Lots of things are banned.

Back in 2011, I'd written:

How about using clever special characters to tweet the binomial formulation of the voter's probability of decisiveness and thereby discouraged mathematicians' turnout? How about tweets pointing to George Smith's tracts against voting coupled with text saying "Don't read this, he's wrong"?

Would a blog post very neutrally specifying the mathematics of decisiveness under MMP implicitly be encouraging abstention and consequently be banned?

Is it possible that it's legal to phone your friends and offer a ride to the polling place while noting the merits of your preferred candidate, but illegal to post the same offer to a Facebook group of the same friends?

So many questions. But I'm far too cowardly to test things on Saturday. Pretty much anything I say on Saturday could be interpreted as being intended to encourage abstention, because I've a long track record of encouraging abstention.

And I remember when iPredict started worrying that allowing trading and consequent public prices on election day would breach the rules, and so froze trading on election day. If early on the morning of election day, one of the candidates were caught in an embarrassing situation with a goat that would likely affect the election results, you couldn't trade on it. If I remember right, they opened things up again when the polls closed.

Duncan over at The Spinoff has a great piece highlighting the absurdities.

The classic I-just-voted-here’s-me-looking-good-with-a-sticker selfie is allowed and encouraged. But don’t you dare say who you voted for. Voting is a private and shameful thing that legally we should all be ashamed of. So keep it to yourself or you’ll be getting a visit from your local social media police who are in fact the real police.

To summarise, don’t wear a mask of a politician’s face; don’t wear that Labour x Supreme collab tee that you kind of regret paying money for; and don’t write a status about why everyone should vote for Greens/TOP/National because this far into the election campaign, no one cares. Also all those things are illegal.

But you know what’s great? You can vote today if you want. And if you want, you can do any and all of the things listed above. In fact, you can do anything you want right up until 11:59pm on Friday 22nd September. What’s the difference between posting a political status at 11:59pm and posting one at midnight, you ask?

Like I said, it’s dumb.

Not part of the Outside of the Asylum.

Iwi, Kiwi, Canuck

John Ansell's reach is long: the billboard campaign he ran for Don Brash has been picked up in Canada.

Here's Ansell's 2005 billboard:

There were a series of others, always with the very simple 'Tax / Cut' or 'Waste / Not' framing. [Update: they're all here!]

Peter McCaffrey retweeted the latest Canadian incarnation, from Alberta's Wildrose spinoff of the Alberta Progressive Conservative Party:

This apparently isn't the first appropriation of a great billboard idea. A few others were sent me by an email correspondent. I'm not sure if these were actually used in the 2006 Canadian election, or if they were mocked up by party activists.

All of these kept the very simple contrast.

The NDP's version (again - I don't know whether it was from activists or the party proper) was a bit ... cluttered.

It reminds me of Homer's attempt to chime in during "Who needs the Kwik-E-Mart".

Boris Johnson's even been in on the theme, but with the appropriate style.

Kiwi electoral ingenuity, taking over the world. And Alan Bollard thinks we're bad at marketing. On the other hand, I doubt anybody paid royalties to Ansell...

Final Arbitrage Tally

The final tally for the InTrade arbitrage:

• Lost $NZD 636.77 at iPredict going long Romney. I should have lost $679.68, but backed out of some of my Romney position when things were looking clear. I'll count $679.68 as arbitrage loss; I did take on some minor risk in reversing some of my Romney position. 
• I made a series of credit card deposits to InTrade, ultimately reaching the $5000 US limit. My NZ card was charged $6209.96 for the USD$5000 deposit.
• I sent BetFair AUD$1000 to buy Romney; BNZ charged NZD$1286.51 to my card. I'll add $15 AUD to that to cover the money I there pulled from my standing account as BetFair charges 1.5% on deposits. So NZD $1305.81 lost at BetFair.
• Total costs then were NZD $8195.45
• InTrade wired me USD$7373.65 - my deposit, plus my winnings, less the $20 my account was in the red when I deposited, less a $20 bank wire fee charged by InTrade. This turned into NZD $8915.89, less a $15 wire charge from BNZ: $8900.89. 
• It took a fairly long time to get the money out of InTrade; I requested the withdrawal on the 7th of November; it arrived on the 19th of November. Fortunately, the credit card isn't due for a couple more days. 
• Somebody charged me an implicit currency exchange fee: Yahoo Finance cites rates of $0.818 for Monday, 19 November; $7373.65/$8915.89 = 0.827. This matters on these kinds of plays: had I been charged the interbank rate rather than somebody along the way taking a cent on the exchange rate, I'd have received $9014.24 instead of $8915.89. Because of the long lag between the withdrawal request and the relative volatility of the $NZD, you need some reasonable expected gains to be sure you don't lose out. Every one cent move in the $NZD costs about $100. If I'd only had expected arbitrage gains of $200, the realised amount could halve or increase by 50% ridiculously easily. 
• $8900.89 - $8195.45 = $705.44 net profit.
• UPDATE: Wow. I entirely forgot this one. I've a BNZ Platinum that gives me $1 in Airpoints Dollars for every $90 spent. So I get $91 in AirPoints dollars. 

I phoned IRD. They count this as winnings on betting and those aren't taxed. I did note that iPredict is a futures exchange for regulatory purposes in New Zealand; they didn't much care. The woman on the phone said that if I were trading on these every day so that it were more like income, then it would count. But one-offs like this are fine. I didn't ask how it would be treated if someone set up a Kiwisaver fund that accepted investments for trading on these markets.

Because it took almost two weeks to get my earnings out of InTrade, I was exposed to unhedged currency risk, making this not a pure arbitrage play.

Lesson: it's worth having standing accounts across a range of trading platforms. It takes far too long to set up an account to only do it when an opportunity comes up. Arbitrage gains are real, especially when a whale lands like the one that seemed to be trading at InTrade propping up Romney's price. But it takes a reasonably large price spread across markets. A one-cent spread covers the bank's exchange rate charge one-way; a two-cent spread covers two-way bank exchange rate charges; a three-cent spread covers the exchange charges plus half of BetFair's deposit fees; a four-cent spread leaves you a small amount of arbitrage gain but exposed to currency risk.

And be careful if you're financing this on the credit card: if the expected payout date plus a fortnight is after your credit card is due, your costs are going to be higher.

Final arbitrage position statement

InTrade will not allow me to deposit more than $5000 in a 30-day window, so I can't arbitrage any longer. My current positions:

• 739 shares on Obama at InTrade bought at USD$6.74 per share on average. 
• If Obama wins, I net USD$2389 less credit card exchange rate losses two ways.
• If Romney wins, I lose USD $5001 and credit card exchange rate losses one way.
• AUD$1000 on Romney at BetFair at 4.4.
• If Obama wins, I lose USD$1053 and credit card exchange rate losses one way.
• If Romney wins, I net USD$3335 less credit card exchange rate losses two ways.
• 2959 shares on Romney (mix long Romney short Obama) at iPredict, average price NZD$0.2297.
• If Obama wins, I lose USD$563
• If Romney wins, I gain USD$1849

On net, then, if Obama wins, I'm up $773. If Romney wins, I'm up $183. Less credit card exchange rate fees and realised currency risk in both cases. I expect Obama to win, so I don't mind having an unbalanced position. I'm currently cheering only for that the election be decisive and not go into endless recounts or Supreme Court challenges that push the payout until after my credit card comes due. If you're a voter in a swing state, I strongly encourage you to go with whatever everybody else seems to be doing.

I'd like to resist the temptation to play at range trading on iPredict during the day so I can get a clean final outcome, but I doubt I'll be able to.

Previously: Barriers to Arbitrage (why most folks may not be doing this); Documenting the Arbitrage.

In other news, it's fun to compare these two Twitter searches [ht @LyndonHood]:

• "if Obama wins New Zealand": about 19 people claiming they'd come here if Obama wins.
• "if Romney wins New Zealand": about 14 people claiming they'd come here if Romney wins.

In both states of the world, it's optimal to move to New Zealand. Tiebout gives you the only vote where you're guaranteed to win.

Documenting the arbitrage

The ongoing price difference between InTrade and BetFair offends me. So I decided to do well while doing good. InTrade verified my paperwork. I sent them some money. The Bank of New Zealand delayed things because sending $3k to one 'internet gambling' site followed by an attempt at $1k to another [their term; I say they're futures markets] was deemed suspicious - and rightly so. But, it meant that I had to wait until their call centre opened up at 6:30 am to start playing.

Once you make the plays and figure out the charges, it's fairly obvious why price differences between these two markets can persist. Recall that it isn't easy to set up the accounts in the first place.

I sent AUD$1000 to BetFair. They took a 1.5% credit card fee out of that. I put $1000 on Mitt Romney to win at 4.4 [I had a standing account balance]. If I win at BetFair, they charge a commission on winnings. Since I do not trade frequently, I get no discount on that. So if Romney wins, BetFair will take 5% of my winnings. This adds up on an arbitrage play.

I sent USD$3020 to InTrade. They took $20 to clear a negative balance that was sitting there. InTrade charges a $4.99 monthly fee to keep an account and recently changed the rules so that dormant accounts of zero balance are not charged fees; it was simpler for me to pay the $20 than to set up a new account. I'll just have to remember to withdraw everything from my InTrade account when the play is completed so that it doesn't just erode back down to zero. But I'm going to count that $20 as part of the cost of the overall play. InTrade charges zero fees other than the monthly trading fee. Fortunately, InTrade underprices the candidate who is likely to win. I bought 448 shares of Obama at $6.69 per share.

The tally thus far [updated with a couple of corrections]:

Item	Amounts	Totals
Position	$1,000 AUD + $2,997 USD	$4,034 USD
Account Fees	$15 AUD + $20 USD	$36 USD
Cost:		$4,070 USD
If Obama wins (gross)		$4,480 USD
If Obama wins (net of costs above):		$410 USD
If Romney wins (gross):		$4,400.00 AUD
Less 5% charged on winnings:		$4,230.00 AUD
Net earnings if Romney wins:		$318 USD

I'm unfairly charging the $20 fee against InTrade. But once you put in the 1.5% credit card fee and the 5% tax on winnings, it's not hard to justify a reasonable price spread across the two markets. So my earlier tweet was wrong - in particular, it missed the 5% winnings tax at BetFair. If Obama wins, I'll do well. If Romney wins, I won't lose anything except my time.

So why does the price spread across markets persist?

1. It's a hassle to set up accounts
2. BetFair's tax on winnings limits arbitrage opportunities. 

There's still a bit of free money sitting in the price gap between markets, but I don't really see it being worth putting more money in given BetFair's fee structure. 

I have a fair bit of cash balance sitting at iPredict; I'm placing a large order long Romney and short Obama there - iPredict is currently saying a 77% chance of an Obama victory. They charge trading fees capped at $5 per month per trader, a 1.75% fee on credit card deposits (irrelevant for me as I have cash sitting there), and a withdrawal fee of 2% if you have positive earnings (sunk for me, but relevant for you if you don't have an account there). 

I've standing orders at iPredict selling Obama at $0.76 and buying Romney at $0.24. If anybody takes those up, I'll send more money to InTrade to lay it off. But this involves the hassle of keeping an eye on the iPredict order book so I can move quickly if something happens in the election that moves the odds.

Arbitrage isn't supposed to be easy....

Note: I do have some unhedged currency risk: if the USD/AUD exchange rate moves substantially against me, or if the NZ dollar appreciates substantially against either, I could in some worlds lose a bit. Suppose that a surprise Romney win makes the Australian dollar tank against the US dollar. My winnings in Oz, converted to US dollars, won't look so nice.

Update: I switched to offloading Romney risk onto iPredict, New Zealand's election stock market. It's thinner than BetFair, but if you put up a big order, it might be picked up. And iPredict's tax on winnings is lower than BetFair's - 2% withdrawal fee if you have positive earnings.

Current position then is:

• +2114 Romney at iPredict at $0.24 ($NZD, mix of long Romney and short Obama)
• +670 Obama at InTrade at $6.71
• $1000 on Romney at 4.4 at BetFair.

If I haven't screwed up the spreadsheet, and net of all expected fees, I'm up about $120 USD if Romney wins and up $710 USD if Obama wins. Total stakes USD$5950. So a short period return of 12% if Obama wins, 2% if Romney wins. I expect Obama to win, so I don't mind that exposure. 

Remaining risks not here accounted for: 

• Currency exchange risk: If the US dollar tanks on an Obama win (exceedingly unlikely), I'll take a hit; if the Australian dollar tanks on a Romney win (exceedingly unlikely), I'll also take a hit. Or, if exchange rates just happen to move substantially between now and settlement. The $NZ is relatively high now though - it would be surprising if it spiked upwards.
• If the bank's spread on exchange rates is wide enough, 2% gains on a Romney win turn quickly to zero percent. 
• iPredict isn't a perfect hedge: the other markets pay off on Obama and Romney; iPredict pays out based on which party wins. 

Update: Final arbitrage position statement.

Election blackouts

I'd almost forgotten this fun bit of Canadian election law. If you live in Toronto, you'll get election results from ridings in the Eastern time zones as the polls close. But if you blog about them before the polls close in British Columbia, you're violating the election laws.

Realistically, Elections Canada cannot possibly enforce a nationwide ban on premature Tweeting or blogging or Facebooking of election results. It's the equivalent of King Canute commanding the sea to go back.

Nonetheless, John Enright, who speaks for Elections Canada, says his agency has no choice but to administer the law as written. Citizens are allowed to phone or text friends, or send private e-mails. But posting to a Facebook wall, to a webpage or to Twitter will be considered a violation.

You can phone or text friends (not transmitting to the public), but you can't Tweet to friends. What if you have a closed account so only "friends" can see your tweets? And what if you're not particularly discriminating about who your friends are? How many friends can you tell before your private conversations become public transmissions?

The law's worried that voters in the West either gain strategic advantage over those in the East if they can condition their voting on outcomes in the East or that voters in the western time zones are unduly affected by bandwagon effects. It's not crazy. It was always disheartening to turn on the TV in Manitoba to be told what government the Ontarians and Quebecois had foisted on the rest of us; it's unclear though that being told that in real time would have had substantial effect. It's conceivable that folks Ontario westward might have been more inclined to vote Reform in 1993 on seeing the complete decimation of the Tories in the Atlantic provinces and that a few ridings in the West where the Liberals or NDP came up through a split Tory/Reform vote would have had some Tories flipping to Reform.

But what evidence is out there from the States suggests there's little to worry about. America spans slightly fewer time zones and doesn't restrict election night broadcast of results from the East. At most, early poll results may depress turnout where the election is an unexpected landslide. The losses from that seem rather less than the intrusion on democratic speech imposed by broadcast restrictions. The strongest case I've heard made is that folks in the Florida panhandle in 2000 were put off by early incorrect reports that the rest of Florida was to be a landslide. But that only mattered because Florida was effectively a single district for purposes of the Electoral College; no Canadian electorate boundaries span time zones as best I'm aware. Maybe I've missed something on the two-minute lit search, but if there's no strong evidence from the US that folks in California are seriously affected by hearing how New York voted, it's hard to make the case for continued broadcast restrictions in Canada.