From Scots Magic, 1939.
To begin you write a prediction on a card and leave this in full view of the audience with the writing hidden. You next hand out to five spectators, five envelopes, each containing a card, on every card is printed the name of a racehorse. After these cards and envelopes have been examined, the holders are requested to seal the cards in the envelopes. A spectator is now requested to collect the envelopes and mix them. You now take the envelopes and state that you will move one from the top of the packet to bottom for each letter in each horse's name - that the envelope that falls on the last letter will be discarded, and that the last envelope left will be considered the winner. You proceed as stated until only one envelope remains. This is handed to a spectator to open, and the name of the horse read out. This matches your prediction.
Five cards, five envelopes, a card to write your prediction on.
On each of the five cards write the name of a race horse. Each name must have five letters only, such as Mirza, Pasch, or the like. Place each card in an envelope and mark one of the envelopes with a small dot, also note the name of the horse within.
Pick up the card and write the name of the horse you mentally noted and lay it down without letting the audience see what you have written.
Hand out the envelopes, ask the spectators to open them and read the cards and remember the name of the racehorse. Have the cards replaced, collected and mixed.
Take back the envelopes and note where the marked one lies. If it is second from the top, leave it there. Otherwise, while explaining what you are going to do, casually cut the marked envelope to second from the top.
Now, if you spell each horse's name - as called out to you randomly by those who held the cards - placing an envelope from top to bottom for each letter, and discarding the envelope that falls on the last letter of each name, you will be left with the envelope that contains the horse you predicted at the outset.