Box Office Analysis – Train Your Dragon & Hot Tub Time Machine

Well, it seems that How to Train Your Dragon came even below the $47.5 Million I needed to hedge some of my losses. Really disappointing. I was really surprised because it had a high theater count, 3D Ticket Sales, and good reviews. I think this goes to show that good reviews or buzz for some movies does not equate into higher than expected box office.

Here is how I did with my predictions last week. I’ve made some changes to how I measure how well I performed. Before I was posting my results like this (Difference between my Prediction and Actual Box Office Gross / My Prediction). I should have been posting like this. (Difference between my Prediction and Actual Box Office Gross / Actual Box Office Gross). I will be editing my previous posts to reflect this change as well. Reflecting this change, for 2010, my predictions are currently on average 23.22% from the actual.

Movie	Prediction	Actual	Absolute (%) Difference
How To Train Your Dragon	$57.96 Million	$43,732,319	32.53%
Hot Tub Time Machine	$17.35 Million	$14,020,502	23.75%

Here is Box Office Tracking for Clash of the Titans, Tyler Perry’s Why Did I Get Married Too?, and The Last Song. Will we see a box office success with movies converted to 3D? Clash of the Titans will tell.

Movie	MTC	RS
Clash of the Titans	$76 Million	$82.5 Million (Low 80’s)
Why Did I Get Married Too?	$22 Million	$22.5 Million (Low 20’s)
The Last Song (5-Day)	$23 Million	$15 Million (Mid Teens)

Sun Tzu and the Art of War

Amazing how you can find advice on trading from such ancient texts. If you haven't read the Art of War, I suggest you do. It contains great advice that can be used in multiple areas of life such as business and politics.

Section IV: Tactical Dispositions

17.) In respect of military method, we have, firstly, Measurement; secondly, Estimation of quantity; thirdly, Calculation; fourthly, Balancing of chances; fifthly, Victory.

18.) Measurement owes its existence to Earth; Estimation of quantity to Measurement; Calculation to Estimation of quantity; Balancing of chances to Calculation; and Victory to Balancing of chances.

Intrade Predicting a Conservative Victory in the UK Election

With the Parliamentary election in the U.K scheduled to take place before or on June 3, 2010, the Intrade Prediction Market is forecasting a high chance that the Tories will have a victory over Prime Minister Brown and the Labour Party.


Recently, the Labour party has been trying to make a comeback and the Conservatives have lost 2 points in the most recent YouGov poll which apparently is the most reliable poster in the U.K. There seems to be a significant chance that the Tories win the election but not an outright majority. According to Intrade, the probability of such an event traded last at 44%.

Box Office Predictions – Train Your Dragon and Hot Tub Time Machine

This weekend we have How To Train Your Dragon aiming for the #1 spot. With 3D ticket prices and 4055 locations including IMAX, it should be able to break $50 Million. Hot Tub Time Machine will be fighting Alice in Wonderland for the #2 spot and might be able to break $20 Million, but I don’t give it much of a chance to do so. On Intrade, I went long on How To Train Your Dragon at the $47.5 and $50 Million strike points.

Movie	Opening Weekend Prediction
How To Train Your Dragon	$57.96 Million
Hot Tub Time Machine	$17.35 Million

Box Office Analysis – Predictions for Past Two Weekends

For the Weekend of March 12-14, 2010.

Movie	Prediction	Actual	Absolute (%) Difference
Green Zone	$17.82 Million	$14,309,295	18.80%
She’s Out of My League	$10.14 Million	$9,775,278	2.30%
Remember Me	$10.89 Million	$8,089,139	13.46%
Our Family Wedding	$9.65 Million	$7,629,862	31.46%
--	--	Opening Weekend Average	16.41%

This Last Weekend of March 19-21, 2010 where I did not do well with Diary of a Wimpy Kid at all.

Movie	Prediction	Actual	Absolute (%) Difference
The Bounty Hunter	$19.14 Million	$20,686,423	3.32%
Diary of a Wimpy Kid	$13.26 Million	$22,126,166	41.25%
Repo Men	$11.67 Million	$6,126,170	95.88%
--	--	Opening Weekend Average	46.82%

Box Office Tracking – How To Train Your Dragon & Hot Tub Time Machine

Big numbers for Dragon, not so much for Time Machine. Both tracking services got Diary of a Wimpy Kid wrong and might be over compensating for How To Train Your Dragon. Guess we’ll find out.

Movie	MTC	RS
How To Train Your Dragon	$48 Million	$35 Million (Mid-30’s)
Hot Tub Time Machine	$14 Million	$12.5 Million (Low Teens)

Intrade Not Participating in Republican Nomination Market

Midas Oracle - Does InTrade participate on its own prediction markets?

Apparently not. A poster on the Intrade Forum going by "baker.alex" wrote his first post in the forum claiming to be the trader that automatically shorts the the Republican Nomination contracts.

Original thread at midasoracle.org

"So the actor has to a) not care about the transaction fee and b) have limitless margin. Intrade fits the bill for both of these. a) they don’t care about transaction fees because they are ultimately collecting them and b) if you only short when the bids are summed to over 100, it’s essentially an arb."

Until mid-April 2010 Intrade will refund market taking and expiry fees for arb trades - details here

Some products with a single guaranteed outcome are linked for cross-margining purposes. If you collect at least $10 by shorting all three contracts for the 2012 presidential election then you will not have any funds frozen. The contract rules will tell you if a product is not linked (e.g. 2012 republican presidential nominees)

Intrade provides an API for developing trading applications. I am running a bot to take out market imbalances and as far as I'm aware Intrade is not competing with me.

Is Greg Mankiw Against the Fractional Reserve System?

One of the aspects of the financial industry that I feel is most ignored and yet most responsible for the financial mess we are currently in is the fractional reserve system. I don't understand how it makes sense for banks to lend money they don't have have. Honestly, if you think about it, all the fractional reserve system does is allow banks to borrow money from their customers and not pay them for it. Unfortunately, it has been around so long that some people can't even imagine a financial system without one. As if having people pay to securely store and transfer their money would suddenly become unprofitable. It makes me pretty happy then to see someone who isn't an Austrian Economist discuss the Fractional Reserve System. Not that I don't like the Austrians, Frederich von Hayek is my favorite economist. It's just good to see someone in the mainstream raise some concerns.

Mankiw vs. Greenspan: How Much Leverage Do Banks Need to Be Useful?

The conversation between Alan Greenspan and some of then nation’s most prominent economists at the Brookings Panel on Economic Activity on Friday was deemed “not for attribution” by the organizers. But Greg Mankiw, the Harvard economist, has posted his response to Greenspan on his web site. You can read it here.

He largely agrees with Greenspan, but differs on one key point: “The issue concerns the importance of leverage to the viability of a financial intermediary, Mankiw says. “Alan proposes raising capital requirements and reducing leverage, but he suggests that there are limits to how much we can do so. If we reduce leverage too much, he argues, financial intermediaries will be not be sufficiently profitable to remain viable. He offers some back-of-the-envelope calculations that purport to show how much leverage the financial system needs to stay afloat.”

Comments on Alan Greenspan's "The Crisis"

Indeed, I think it is possible to imagine a bank with almost no leverage at all. Suppose we were to require banks to hold 100 percent reserves against demand deposits. And suppose that all bank loans had to be financed 100 percent with bank capital. A bank would, in essence, be a marriage of a super-safe money market mutual fund with an unlevered finance company. (This system is, I believe, similar to what is sometimes called “narrow banking.”) It seems to me that a banking system operating under such strict regulations could well perform the crucial economic function of financial intermediation. No leverage would be required.

Box Office Predictions – Bounty Hunter, Diary of a Wimpy Kid and Repo Men

This weekend The Bounty Hunter seems set to be the #1 Opening Weekend movie but will fall well short of Alice in Wonderland’s 3rd weekend. Combination of Gerald Butler and Jennifer Aniston might get a decent opening weekend but I think it will fall short of expectations and not go over $20 Million dollars. Diary of a Wimpy Kid might have a chance to challenge the Bounty Hunter thanks to online ticket sales but all other indicators seem to point into the opposite direction. With little competition for young males, Repo Men might break $10 Million. On Intrade, I went short on the Bounty Hunter at $20 Million and Diary of a Wimpy Kid at $14 Million. I have a little going long on Repo Men at $10 Million but not very many takers this weekend.

Movie	Opening Weekend Prediction
The Bounty Hunter	$19.14 Million
Diary of a Wimpy Kid	$13.26 Million
Repo Men	$11.67 Million

Last Night’s Volatility on the Obama-Care Contract

Here’s the list of trades last night which now makes it look like Obama-Care had a 25%+ increase today. It was mentioned by @allahpundit and @benpolitco on Twitter this morning.


In total 57 contracts were shorted for really low prices at an average of 49.41%. Not a giant amount of volume considering there have been 11,800 contracts sold with regards to Obama-Care. It also appears that the market has recovered to previous trading levels in the 60's. Last night's price dip may have been due to a couple of different reasons.

1.) A new trader shorted contracts for low prices because he was too impatient to wait for other traders to put up better bids.

2.) A trader misinterpreted a news article fresh off the press, thought the fundamental value of the Obama-Care contract was much lower than it was and in order to make a good profit he thought he must short every contract he could before everyone else. (I've been guilty of doing this myself.)

3.) A trader who was previously going long on the Obama-Care contract before when the price was steady and cheap at around 30% wanted to liquidate his position immediately. Even though he could sell for higher prices, he is still making a profit from his original position.

If last night's trades were part of some "Market Manipulation" then it clearly didn't work very well because the price returned to stable levels by 6:02AM. Less than four hours after the huge dip in prices.

Little to No Evidence of Market Manipulation on Intrade

There have been a couple of articles on the net about market manipulation of the (OBAMACARE.PASS.JUN10) contract on Intrade. This has all started because of a Business Insider article written by Joe Weisenthal linked here. John Delaney provided this quote when talking about the ObamaCare contract which started a flurry of wild speculation.

..it is a reasonably active market but atypically a lot of the trade is coming from the DC area when normally we might see trade coming from all the major urban areas.

Now it is being used by some as evidence for "market manipulation" when little to no evidence exists of such a manipulation. Intrade is a prediction market and those traders that stand to benefit most are those that have the most accurate information. What a surprise then to learn that those who are betting most on legislation in Washington D.C actually reside and live in Washington D.C!

In this video linked by Midas Oracle, Max Keiser rambles on about how prediction markets are constantly manipulated and how Intrade is a "virtual currency market." He seems to have little understanding about how Intrade actually operates. As anyone who trades on Intrade can tell you, it takes real American dollars.

The Obama-Care contract on Intrade has traded pretty normally from what I have seen and the current escalation in price can pretty much be traced back to the day that Obama announced his final push on Health-Care on March 3rd. It has risen slowly, steadily, and gone through multiple support and resistance levels. The current thinking in Washington seems to agree that passage of the Health-Care bill is likely. Not to mention that Nancy Pelosi and most of the Democratic leadership is claiming that they have the votes. From what I can tell the current price seems to come from the current consensus that this bill is likely to pass.

Box Office Tracking – Bounty Hunter, Diary of a Wimpy Kid, and Repo Men

Alice in Wonderland could be #1 again this weekend. None of the movies coming out this weekend look like it could give Alice a challenge.

Movie	MTC	RS
The Bounty Hunter	$20 Million	$25 Million (Mid 20’s)
Diary of a Wimpy Kid	$13 Million	$15 Million (Mid Teens)
Repo Men	$12 Million	$15 Million (Mid Teens)

Intrade Blog Roll

• The Atlantic - Betting on Health Care
• Wiser Than The Crowd breaks down the recent Health-Care Maneuvering - Parliamentary maneuvering
• Business Insider - Why Regulators Are Allowing Movie Betting, But Don't Allow Sports Or Politics Betting
• Money Metal Bets continues to speculate on Tiger Wood's return to golf - Tim Finchem's Fake Out

Box Office Predictions – Green Zone, League, Remember Me, Family Wedding

I know these are late but I have been busy all day and wasn’t able to post these until now. I went short on the Green Zone at the $17.5 Million and $20 Million price points. 

Movie	Opening Weekend Prediction
Green Zone	$17.82 Million
Remember Me	$10.89 Million
She’s Out of My League	$10.14 Million
Our Family Wedding	$9.65 Million

Understanding Prediction Markets

For some time now, there has been a debate about how useful Prediction Markets can be. Some will say that the odds reflected on prediction markets have to be incorrect, otherwise how would anyone, myself included make a profit? They will use examples of where the price on Intrade differed from what actually happened and use it as proof that prediction markets are inaccurate. Likewise, proponents of prediction markets will use examples of “successful” predictions made by the market as evidence that they are more accurate then other forecasting tools such as polls and expert opinions from the media. Both these arguments are incorrect.

Prediction Markets are useful because they usually reflect the current odds of an event happening, at that current time, all other things being equal. For example, Tiger Woods currently has an 80% chance of returning to the PGA tour by the end of April. Would it be an incorrect prediction if Tiger Woods does not actually come back? No. Like all things about the future, there is some uncertainty. Even the high price that Tiger Woods is currently trading at, tells you that all is not certain. A lightning bolt could strike and kill him on the golf course, his wife could change her mind and forbid him to play at last minute. There is still a 1 in 5 chance of him not coming back. As anyone who has played poker can tell you, a 20% chance of being beaten on the river will happen from time to time.

The usefulness of prediction markets comes from the aggregation of information into a price/probability that the brain can easily understand and interpret. This is why Intrade and prediction markets can be useful. Sometimes the odds will not be accurate, but the point is there is an incentive to change the price if it does not reflect the current odds of an event in the future. Prices on Intrade are valuable pieces of information by themselves, but they must all be taken with a grain of salt. The future is uncertain. No one can tell you with any certainty what is or isn’t going to happen. That is why those who seek out information, think rationally, and trade logically will profit.

Box Office Tracking for the Weekend of March 12-14, 2010

Four movies coming out this weekend, none of which look to beat Alice in Wonderland’s 2nd weekend.

Movie	MTC	RS
Green Zone	$17 Million	$17.5 Million (High Teens)
She’s Out of My League	$10 Million	$12.5 Million (Low Teens)
Remember Me	$7 Million	$5 Million (Mid Single Digits)
Our Family Wedding	$10 Million	$12.5 Million (Low Double Digits)

Weekend Box Office Analysis – Alice in Wonderland & Brooklyn’s Finest

Well, this weekend went pretty well with the Oscars and the Box Office this weekend. Even I was surprised by the huge Opening Weekend by Alice in Wonderland. The model seems to do better then average when predicting movies over $50 Million but seems to have a harder time with movies that gross less than $15 Million. Not a bad thing considering that movies that open larger on Opening Weekend are usually the ones that are traded the most. Here are the results of my predictions for the past two weekends.

Movie	Prediction	Actual	Absolute (%) Difference
Alice in Wonderland	$98.14 Million	$116,101,023	24.20%
Brooklyn’s Finest	$9.72 Million	$13,350,299	40.08%
--	--	Opening Weekend Average	32.14%

For the Weekend of February 26-28, 2010.

Movie	Prediction	Actual	Absolute (%) Difference
Crazies	$17.09 Million	$16,067,552	12.87%%
Cop Out	$25.88 Million	$18,211,126	9.82%
--	--	Opening Weekend Average	11.35%

Box Office Predictions & Bets – Alice in Wonderland & Brooklyn’s Finest

This weekend Tim Burton’s Alice in Wonderland looks to crush the Box Office. It’s got the Disney label, Johnny Depp, 3D, good buzz on the internet with twitter and internet ticket sales that are on fire. Fandango reported yesterday that Alice in Wonderland represents 88% of all sales. Last week it was already at 33%. The last movie to have internet sales like that was Avatar. Alice in Wonderland also seems to be at more locations and screens nationwide.

For Alice in Wonderland I have 10 contracts going long at $80 Million at 52.6% and 10 contracts going long at $90 Million for 35% over at the Intrade Prediction Market. No bets on Intertops this weekend.

Movie	Opening Weekend Prediction
Alice in Wonderland	$98.14 Million
Brooklyn’s Finest	$9.72 Million

My Thoughts and Bets for the 2010 Oscars

The Oscars have finally come around and unfortunately there seem to be few good betting opportunities due to how favored some of the contestants are.  I have bet in only two events, Best Picture and Best Actress. 

For Best Actress, Sandra Bullock seems to be the favorite and should be considering she has won many awards, and more importantly the Screen Actors Guild  award. The SAG being the biggest and most important constituency of voters in the Academy.  I have 15 Contracts going Long on Sandra Bullock at 60%. 

For Best Picture, the new preferential ballot presents challenges to successfully predicting the winner but I am convinced that Avatar has little to no chance.  The only big award that Avatar has won for Best Picture was the Golden Globe and that is voted on by a bunch of foreign journalists.  The Academy is mix of players inside the Hollywood Industry, a giant mix of all the Guilds. 

In the course of my research for Best Picture, I was able to find an online poll using the preferential ballot taking votes from a number of online forums.  There were 151 ballots from a mix of forums, with Avatar not even coming in 3rd.  Considering this was an online ballot from users on the Internet, I was surprised to see Avatar do so poorly.  If Avatar can’t win an online poll, how can it expect to win the Oscar for Best Picture?

Inglourious Basterds was actually the winner of the poll and beat the Hurt Locker.   Could this not also happen at the Academy? I know the poll isn’t scientific but I think it illustrates how Inglourious Basterds might be extremely undervalued right now.  One Oscar pundit certainly believes so and considering Inglourious Basterds won the SAG award for Best Ensemble, I think it has a good chance of winning the Oscar for Best Picture. 

I have 100 Contracts going Long on Inglourious Basterds at 6%.  I have decided to hedge this bet by getting 20 contracts going long for the Hurt Locker at 54.6%.

Box Office Tracking – Alice in Wonderland and Brooklyn’s Finest

Alice in Wonderland is surprising me a lot. I was expecting a weekend around $50 Million+ for the new Tim Burton flick but now it looks like it is heading into $75 Million+ territory. Brooklyn’s Finest seems to be getting completely overshadowed and ignored. Breaking $10 Million for the weekend would be beating expectations.

Movie	MTC	RS
Alice in Wonderland	$88 Million	$75 Million (Mid-70’s)
Brooklyn’s Finest	$8 Million	$5 Million (Mid-Single Digits