Win or lose, LEAVE is under-rated on Brexit markets

Five weeks out from our most important vote in over 40 years, the detached nature of political conversation says much about the condition of UK politics.

On one hand, a substantial minority are deeply engaged in the Brexit referendum. It is the central political discussion among the type of people that care about, follow or participate in politics, that vote reliably in local elections. Few are undecided. Many made their mind up decades ago.

On the other, there is the wider electorate. A vast number of whom are undecided and complain about the lack of reliable, neutral information. Another vast number have no interest in politics and aren’t even registered to vote. Anecdotally, I see no evidence yet of the Brexit debate capturing their imagination.

Plenty of these groups will, of course, take more interest as the date nears. Brexit will dominate media coverage during the final fortnight and the debates will surely attract big audiences.

The behaviour of the unmotivated and undecided will ultimately prove decisive, and there’s a strong logic that suggests they will tip the balance in favour of REMAIN. The effect of every main political party besides the unrepresentative UK Independence Party, international financial institution, foreign government, most big businesses and trade unions  warning of dark Brexit consequences must take its toll.

A narrow win for REMAIN, following a fear campaign against abandoning the status quo would fit the historical trends of UK politics. In the 2014 Scottish Independence Referendum, we saw a late swing to NO after similar dire predictions of economic gloom and uncertainty.

Likewise, the default campaign narrative of every General Election is for the government to fearmonger about the opposition. The British electorate has consistently favoured at least the image of pragmatism and stability over ideology and radical change.

However if the British do vote to stay, it will be out of pragmatism rather than an emotional connection to the EU or a belief in the project. In that sense, it is profoundly different from the Scottish referendum, where unionists are proud to be members of the UK. To the British, EU membership has always been fundamentally about trade.

This indifference presents a problem for REMAIN backers. It stands to reason that Brexit supporters will vote. They’ve waited 40 years for the chance and David Cameron called this referendum to appease them.

Brexit supporters also tend to be older, and much likelier to vote in all types of election. Historically, they have made up over 40% of the electorate, sometimes leading on the question. We haven’t seen a poll for a few days but three of the last four showed LEAVE ahead, on at least 45%, with around 11% undecided.

In contrast, REMAIN supporters tend to be younger and less likely to vote. There are plenty of potential distractions in June to prevent them from doing so. The Euro 2016 football championships and Glastonbury Festival are taking place at the same time. There is no greater scourge of pollsters than differential turnout and I wonder how accurately they will be able to measure it.

We also shouldn’t assume that the government’s fear campaign will be so effective. All across the world, we see that voters distrust the government and establishment. They are ever more savvy about scaremongering and apparently ever more inclined to trust outsiders.

Nor do the leading REMAIN politicians hold much sway. David Cameron and George Osborne are reduced figures since winning the election last May, and are involved in an increasingly bitter fight with at least half of their party. Beyond Conservatives, neither are popular. Cameron’s claim that leaving the EU could lead to war, or Osborne deriding Brexiteers as conspiracy theorists could do more harm than good.

These doubts lie behind my latest bet, advised on Twitter earlier.

Backing LEAVE to earn over 47.5% at 2.5 strikes me as much better value than 3.4 to win the referendum with over 50%. On the same turnout as the last election, the differential equates to around 800,000 people. The bet could win despite a relatively decisive defeat.

Given that LEAVE is already polling regularly in the mid-forties, they would not need to win many of the undecideds at all to reach 47.5%, even before differential turnout comes into play. The last split without undecideds showed them winning 51-49.

Previously, I’d only had the one bet, on REMAIN getting between 50 and 55%. As detailed below, this new bet effectively changes my trading position to LEAVE getting anything over 45%, with anywhere between 47.5 and 50% earning double the profit, as both positions will win. A cover bet to secure an overall profit should be available at a later stage. Watch out soon for a more detailed explanation of my trading strategy, and how I expect it to develop over the next five weeks.

Updated Trading Position

LEAVE below 45% = 90 units loss

LEAVE 45 – 47.5% = 100 units profit

LEAVE 47.51 – 49.99% = 200 units profit

LEAVE wins = 10 units profit

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