Placing Your Bets For 2012

With 2012 upon us, it’s the time of the year for predictions. And no matter where you look, optimism is in short supply. The front-page headline in today’s Financial Times in London screamed “Economic Consensus Foresees a Bleak 2012.” In the newspaper’s survey of 83 economists, three times more respondents thought the economic outlook would deteriorate than thought it would improve in 2012. Economists haven’t been this pessimistic since 2009 — the same year the U.S. market rallied 26.46%.

Making predictions — optimistic or pessimistic — is easy. Putting your money where your mouth is another thing.

Investors across the globe try to make money from their predictions by placing bets on financial markets — stocks, bonds, currencies and commodities. Here in the United Kingdom, there is a different way. Most major shopping streets (“high streets”) are populated by “betting shops” that allow you not only to bet on your favorite sports team, but also on future political and financial events. These betting shops operate much like casinos in Las Vegas. They are “the house.” And “the house” only stays in business if it wins, day-in, day-out. So when “the house” gives you odds on, say, the break up of the euro, think of it as the “street smarts” of a casino putting its money on the line versus the “book smarts” of economists, who are more often commentators on the sidelines rather than actual participants.

With that, here are the odds on various economic and political events from U.K. betting shop William Hill. Since bet calculations aren’t intuitively obvious, I’ve included how much you’d win and profit from placing a $10 bet on each idea.

Here are a couple of caveats. As “the house,” William Hill can change these odds any time — and may have done so by the time you read this write-up. And if you are a U.S. citizen, and like the odds you see below, you’re out of luck. William Hill won’t take your online bets.

Events in Europe

1. Will the euro disappear during 2012?
Odds: 4/1; Yes — bet $10 and you’ll win $50 for a profit of $40.
Odds: 1/7; No — bet $10 and you’ll win $11.43 for a profit of $1.43.
Bottom line: When push comes to shove, odds are that the euro will stick around.

2. Will Greece exit the Euro in 2012?
Odds: 5/6; Yes — bet $10 and you’ll win $18.33, for a profit of $8.33.
Odds: 5/6; No — bet $10 and win $18.33 for a profit of $8.33.
Bottom line: This situation looks as close to a 50/50 bet as you can get. But you can make 83.3% on your money if you get it right either way.

3. Which country will be the first to leave the euro zone?
Greece — 1/4 odds — bet $10 and you’ll win $50 for a profit of $40.
Italy — 7/2 odds — bet $10 and you’ll win $45 for a profit of $35.
Germany, Portugal — 10/1 odds — bet $10 and you’ll win $110 for a profit of $100.
Spain — 12/1 odds — bet $10 and you’ll win $130 for a profit of $120.
France, Ireland — 20/1 odds — bet $10 and you’ll win $210 for a profit of $200.
Belgium — 25/1 odds — bet $10 and you’ll win $260 for a profit of $250.
Bottom line: I’m surprised the odds on Greece leaving the euro zone are so low, given that the odds on the previous question about its exit from the euro zone are much higher.

U.S. Political Events

1. Who will be the winner of the Iowa Caucuses?
Mitt Romney — 4/5 odds — bet $10 and you’ll win $18 for a profit of $8.
Ron Paul — 11/8 odds — bet $10 and you’ll win $23.75 for a profit of $13.75.
Rick Santorum — 11/2 odds — bet $10 and you’ll win $65 for a profit of $55.
Newt Gingrich — 20/1 odds — bet $10 and you’ll win $210 for a profit of $200.
Rick Perry — 33/1 odds — bet $10 and you’ll win $340 for a profit of $330.
Michelle Bachmann — 50/1 odds — bet $10 and you’ll win $510 for a profit of $500.
Jon Huntsman — 100/1 odds — bet $10 and you’ll win $1,010 for a profit of $1,000.
Bottom line: Mitt Romney is the favorite in Iowa tonight — but not by much.

2. Who Will Win The Republican Caucuses?
Mitt Romney — 2/7 odds — bet $10 and you’ll win $12.86 for a profit of $2.86.
Ron Paul — 15/2 odds — bet $10 and you’ll win $85 for a profit of $75.
Newt Gingrich — 9/1 odds — bet $10 and you’ll win $100 for a profit of $90.
Rick Santorum — 18/1 odds — bet $10 and you’ll win $190 for a profit of $180.
Jon Huntsman — 20/1 odds — bet $10 and you’ll win $210 for a profit of $200.
Rick Perry — 33/1 odds — bet $10 and you’ll win $340 for a profit of $330.
Michelle Bachmann — 50/1 odds — bet $10 and you’ll win $510 for a profit of $500.
Bottom line: Mitt Romney’s nomination is almost a foregone conclusion. No one else is even close.

3. Who Will Win the U.S. Presidential Election?
Barack Obama — 4/5 odds — bet $10 and you’ll win $18 for a profit of $8.
Mitt Romney — 6/4 odds — bet $10 and you’ll win $25 for a profit of $15.
Newt Gingrich — 16/1 odds — bet $10 and you’ll win $170 for a profit of $160.
Ron Paul — 16/1 odds — bet $10 and you’ll win $170 for a profit of $160.
John Huntsman — 40/1 odds — bet $10 and you’ll win $410 for a profit of $400.
Rick Santorum — 50/1 odds — bet $10 and you’ll win $510 for a profit of $500.
Rick Perry — 66/1 odds — bet $10 and you’ll win $670 for a profit of $660.
Michelle Bachmann — 80/1 odds — bet $10 and you’ll win $810 for a profit of $800.
Bottom line: The money is still on Barrack Obama to win re-election.

Which Party Will Win the U.S. Presidential Election?
Democrats — 4/6 odds — bet $10 and you’ll win $16.67 for a profit of $6.67.
Republicans — 10/11 odds — bet $10 and you’ll win $19.09 for a profit of $9.09.
Independent — 80/1 odds — bet $10 and you’ll win $810 for a profit of $800.
Bottom line: It’s going to be a close race but the odds still favor the Democrats.