Kilroy Was Here
July 13, 2004
IEM Market Update
The Kilroy Trading Service Weekly Market Update on the Iowa Electronic Market

Current values at last trade.

Presidential Winner Take All Market (PWTA)

We here at the Kilroy Trading Service (KTS) believe that Kerry is undervalued at this point and our analysts mark Kerry as a BUY rating. Kerry is polling very well in both battleground and the so-called "blue" states. Democrats are supporting Kerry in higher percentages than Republican's are supporting Bush.

For similar reasons, we mark Bush as a HOLD. While Bush might be slightly overvalued at this time, history has supported incumbants, and, with the string of bad news, any positive news at all is likely to help the Bush effots.

Overall, the market has traded the Bush-Kerry bundle at 0.995 cents. There are 13,704 shares outstanding of Bush and Kerry.

Presidenital Vote Share Market (VS)

KTS has Bush as a SELL at this point in time. In the last election, Bush won 47.87% of the vote. With Bush polling worse among rural voters, and with a good chance of a lower Republican turnout, Bush is valued too highly.

KTS has Kerry as a HOLD at this price. As long as Nader is in the mix, it is difficult to see how Kerry can beat Gore's 48.38% in 2000. However, if Nader continues to have trouble getting on the ballot, we may raise our guidance on Kerry to a BUY.

Overall, the market has the Kerry-Bush bundle trading at $0.993. There are 11,376 shares outstanding in the VTS market.

Senate Control Market

KTS has RS.gain as a SELL. With our analysts' views on the presidential election, we foresee a negative coattail effect on the Senate as a whole.

KTS has RS.hold as a HOLD. Currently, we believe that this contract is fairly valued.

KTS has RS.lose as a BUY. If the Kerry-Edwards ticket remains strong and the Democratic base more energized, we foresee a greater chance of a Senate pickup here.

Also note, since Senate races are all statewide races, we forsee Senate races to be more competitive than House races. With most House districts gerrymandered in favor of the incumbant, House races will be harder to contest.

Overall, the market has the entire Senate bundle trading at 0.989. There are currently 771 bundles outstanding in the market.

House Control Market

Our analysts are currently revising the opinions on the House Control market. We need to take into account the effect of the Texas redistricting in the current House race. We anticipate to have beter analysis on next week's report.

Overall, the market is trading the entire House bundle at $0.993. There are currently 524 bundles outstanding in this market.

Congress Control Market

The RH_RS is currently rated as a SELL by our analysts. In analyzing the underlying Senate and House Control markets, we believe that this contract is severely overvalued. Our current target on this contract is $0.465 a share.

The RH_NS contract is currently rated as HOLD. We feel that this contract is slightly undervalued, but, due to the thinly traded nature of the contract, we cannot give this a BUY rating.

The NH_RS contract is currently rated as a BUY. Again, we believe that the market as a whole has failed to see the relationship between the underlying House and Sentate markets and as a result has undervalued this contract severely. In our minds, with RS.gain and the RS.hold contracts in the Senate control market currently trading at a combined $0.569, we do not see how the NH_RS contract can be priced LOWER than the NH_NS market. Our current forecast for this contract is at $0.10 per share.

The NH_NS market in contrast is rated as a SELL. We believe that the current underlying markets do not justify this lofty rating. Our forecasted price at this time is $0.074.

Overall the market is trading the entire Congress bundle at $1.008. There are currently 786 bundles outstanding in this market.

These opinions are for entertainment purposes only and should not be construed as advice for how to invest your money.

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