The line separating prediction markets from the stock market continues to blur. You may remember the well-known prediction market, Intrade, that allowed people to speculate on all sorts of future events. “Will a certain candidate win the next election? Who will win the Academy Awards?... Predict correctly and you can win real money profits,” the advertisement states on their website.
Although the well-known prediction market has since closed, no longer offering the ability to speculate on American Idol contestants or who will win the next presidential election, the financial industry is helping to fill the gap by innovating ever more creative solutions.
As Sober Look reported earlier:
Stuck in a 6.5% mortgage? Would like to refinance, but don’t have sufficient equity in your home? Welcome to the wonderful world of “financial innovation”. You can do what some businesses do when they are in this situation: sell “shares” in your house to investors… Who are these investors willing to co-own your house? Anyone who wants a piece of the housing market. This strange investment platform is called PRIMARQ… When the house is sold and the bank is repaid, the investor and the "homeowner" share the proceeds. Investors can participate in specific neighborhoods or types of properties or invest in a diversified pool.
In a prediction market like Intrade, it would be very simple to bet on whether property values in a certain area would reach a certain level. Go “long” Houston, “short” Detroit, for example. With PRIMARQ, however, it appears that “investors” will now be able to do this on a regulated exchange. If this takes off and becomes liquid enough, it may only be a matter of time before we see ETFs, double-longs, ultra-shorts, and options for major housing markets or even your local neighborhood.
Perhaps even certain celebrities will join the fun and issue shares of their sprawling mansions to the public?
Question is, as occurred during the 90's with technology companies, could this merely create artificial value and drive certain neighborhoods or housing markets into stratospheric bubble territory? I'm sure we'll find out.
In case you're thinking the housing market has already gotten ahead of itself, just wait until you finally hear Jim Cramer yelling on CNBC whether to go double-long on Elon Musk's or Kim Kardashian's house.
