hi mpa5220,
nice idea for a market. can you give us some greater indication of how you intend to pay this out? In other words, what stages need to be completed for you to pay out? Thanks.

aj, my inclination is that the Constitution is amended when 3/4 of the states ratify the proposed amendment. Are there any other suggestions?

Sounds like an actual amendment with no payout until the market ends in 2020 unless amended before then. Otherwise, just a good place to park Inkles with a theoretical Inkle a day price increase.

disclosure: I have plenty of Inkie incentive for what I’m about to write….

I’m really shocked that this market hasn’t increased dramatically. As I write this, it’s trading at a value which represents the middle of 2009. A little background…

The most common method for passing a Constitutional amendment requires (from about.com):

“that both houses of Congress approve by two-thirds votes a resolution calling for the amendment. To become effective, the proposed amendment must then be "ratified” or approved by the legislatures of three-fourths of the states. Congress typically places a time limit of seven years for ratification by the states."

It doesn’t seem likely to me that any potential amendment will even get the required agreement by both houses of the U.S. congress by 04/2009….much LESS 2/3 of the states.

Shouldn’t we all trade this one up?

AJ – I’d agree with you that this should trade to the moon. The chance of a constitutional amendment passing in the next 5 years is close to ZERO and, frankly, close to ZERO for the 14 year term of the market IMHO. If 5 years is right, the theoretical price is ~1800, at 2020 payoff date, it is ~5000.

However, to drive the price to 1800 Inkles from the current (as I write) 400, it will take ~ 7.7MM inkles (7000 shares at average price of 1100). I’m guessing that is a large part of the current “market cap” of Inkling Markets. To get to 5000…… And, oh by the way, no payoff likely until 2020 so massive liquidity tie up for a long time.

My concern in buying in at current prices (even though I do have enough Inkles now to be more patient than just playing this week’s sporting/political events) is that all I am likely to be doing is providing a profitable exit opportunity for those who entered when the market started leaving me stuck in the 2020 liquidity trap. Frankly, there are any number of nearer terms markets which should produce better “returns” combined with reinvestment opportunities that should arise over the next 14 years. Most of my Inkles are tied up there.

In other words, great idea for anyone who got in on the ground floor. Sucker bet for anyone that gets in now unless you have inkles to burn.

By the way, my “market participation” was buying and selling 20 shares yesterday after doing the math. As I write, I hold 0 shares though that does not mean I will not trade this in the future. Were I bolder, this could be an amusing short in anticipation of current holders/early entrants needing to free up liquidity and selling…

wstritt,

Great analysis. You make this market sound like a Ponzi scheme. There is/are major flaw(s) exposed by this market and the “man on the moon” market. These types of markets will be useless in accomplishing their goal of predicting the future.

A great way to expose this flaw even more so would be to create a market called “When will Jan. 1, 2020 occur?” and make it clear that payoff will occur on Jan. 1, 2020 just to make sure that it actually occurs ;). I’m guessing that market would “predict” the occurance of 2020 somewhere around 2009 or 2010 just like this market.

But what is the flaw? If this market used real money instead of Inklings, then it would be more worth waiting, right? Maybe the flaw is Inkflation?

Also,

Maybe the problem with this market could be corrected with dividends. Each share holder would be paid 1 inkling per share per day that passes in which the event did not occur (and the stock price would correspondingly drop by 1 inkling per day). How would that affect things?

mpa5220 – I apologize if you read my comment to suggest this was a Ponzi scheme. Not my intent at all. Just comment to AJ on why this might not trade to a truly predictive value given a limited inkle world.

My first gut reaction is that some mechanism to be able to “borrow” against the value of the stock (or at least the locked in value) could be a partial solution to long dated payouts in this type of market. Not having thought through all of the implications, it strikes me that your dividend solution would certainly help, but may not be the perfect solution for this type of market given an inkle limited world.

For example, there is the question of whether an inkling a day would be adequate to incent someone to invest in this stock versus the opportunity to churn investments in shorter term markets. For example, 400 inkles for a share here that in a week will get me 7 inkles versus 4 shares of Obama wins South Carolina @ 88 that is likely to pay off 48 inkles to the good on Saturday/Sunday. While the 7 is a lock and there is clearly risk with Obama, if the goal is to gain inkles, maybe you go Obama (or some other market you feel good about).

Obviously, the higher the price, the larger the opportunity cost, though for someone with a lot of inkles, it may be a good play, and, in any event, should help attract more buyers.

“I apologize if you read my comment to suggest this was a Ponzi scheme. Not my intent at all.”

No offensive is taken (and no sarcasm was intended by my comments).

“there is the question of whether an inkling a day would be adequate to incent someone to invest in this stock versus the opportunity to churn investments in shorter term markets”

In response, I believe that the primary problem is not so much the lack of incentive in this market, but instead the problem is too much opportunity in the shorter term markets.

I agree wholeheartedly – too many short term inkles to be had. If there were more traders or probably more importantly, more inkles in circulation relative to the number of markets, there would probably be less to be made in shorter markets driving migration to longer markets.

Also, as I noted in my October comment on the discussion boards, better market design that prevent free inkles “after the fact” might help as well though given the nature of some markets, that could be tough to execute.

This market should be traded WAY up. As of today, it’s trading at 9/27/09—-just over one year from now. There is no set of circumstances in which that is an accurate prediction. Despite some of the negative discussion earlier, I think we can all agree that this market is currently trading below its proper value.

(note: I am heavily invested in this market, so I have plenty of reason to want trading. Nonetheless, it seems silly to me that others aren’t profiting from the market as well.)

The problem is liquidity. If I buy more shares, when will I get my inkles back? This sort of long-term market might benefit from time frames. One answer could be 2009-2012; another 2013-2016; etc. As it stands, I might have to wait 12 years.