Friday, March 13, 2009

American Idol Trading: Adam Lambert v Danny Gokey

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For those of you who don't know, American Idol is a quiet little television show where young adults sing songs and viewers get to call in and pick winners. This year's season is just getting started with the main portion of the competition and after Wednesday's elimination we have 11 competitors.

There is a service called Intrade in which people can make "bets" ala the stock market on many things in society - generally it has been used for making wagers on political outcomes but the front page today has top bets such as
  1. Will the U.S. Suffer a Depression By the End of 2009 (US GDP to fall 10% from Q4 2008 to Q4 2009)
  2. Will the U.S. Unemployment Rate in Dec 2009 be Greater than 9%?
But enough about silly economics... that's for boring blogs. We're all about infotainment here. (just call us CNBC online)

One thing you can bet on is the eventual winner of American Idol and I propose there might be a very easy "trade" here. First a quick background on this year's season - there are only 4 people who I can see having a reasonable chance of winning the whole thing - Adam Lambert, Danny Goeky, Lil Rounds, and a potential wildcard in Allison Iraheta. With that said, I think the odds are 95% that the winner is either Adam Lambert or Danny Goeky.

Lambert is a flamboyent dude with some levels of pitch in his voice that are almost unhuman for a male. He has the stage presence and "look" already. He already is mixing up songs from their traditional setups which generally the judges fall over each other for ("you're so original!") and they have already called him the most current artists they have, and probably ever have had on the show. And to top it off he already has some (ahem) controversy swirling around him. He is a lock for the final if not the winner - to put this in political terms he would appeal to the BLUE states. Below is his take of Satisfaction by the Rolling Stones



Goeky is America's sweetheart (kinda looks like Robert Downey Jr) - he lost his wife a few weeks before auditioning and American Idol has taken that angle almost to the point of exploitation; at least in these eyes. He has a "good" voice, is a church choir director, and in most years would be a favorite... but the backstory again has made him the inspirational favorite. I thought he was a shoo in during the Hollywood Week because his performances were great and the show literally seemed to revolve around him. In political terms this is the RED state candidate - moms in the heartland of America will be fawning over him. Below is his take of Hero by Mariah Carey



Now here is the kicker... in previous years sometimes the "hands down" favorite met a stunning premature ending. An obvious example is Chris Daughtery who has gone on to be a huge mainstream artist but left a few weeks before the season finale. Guess what - that is no longer an issue. In a new twist introduced this week the judges are able to save one contestant in case the audience gets it wrong. So your risk of surprise exit drops substantially.

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So let's go back to Intrade - they have a category for American Idol Winner... with Intrade you can buy and hold to the end or as the show continues on, sell in the future before finding out the ultimate conclusion. If you hold to the end you either win or lose - by winning your "contract" is worth 100... if you lose it turns to 0. So you have risk to carry all the way to the end - a more conservative way to play is to buy early favorites and then hope the contract value increases as other contestants are eliminated and the pool gets smaller.

As we look "today" (when I write this) Lambert has a bid of 31.5 & ask of 32.4; Gokey has a bid of 25.2 & ask of 27.7. Effectively you can do a pair trade and buy both guys for 60 bucks. So as I stated above, you can hold both during the competition but sell them maybe 2-4 weeks before the finale if they continue to be leaders and as others drop out - both their contract values "should" increase to some degree.... unless one of the 2 major leaders on the female side turns into a rock star the a month or two from now.

But the "easier" bet, if you truly believe one will win is simply hold both contracts until the end. One will turn to 0, one will turn to 100. You paid 60 to buy both their contracts. You win 40 no matter what happens or 67% return on your money in under 3 months. Obviously if neither wins - you lose. But I believe it would be a low probability event from what I've seen so far.

I'm neither long Lambert or Gokey but am seriously considering this proposition. We'll check back in a few months to see how it would of worked out.

Always a bull market somewhere....

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As an aside, as I scour the internets I came upon this remarkable talent - I don't know whatever happened to him, but he has got some mad skillz.


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