Filtered Polling Data: HUNG PARLIAMENT

Inputting the latest ComRes and ICM polls into Sample Miser gives a projection of Conservatives 40.52%, Labour 34.23% and the Lib Dems 16.81%. This translates into a hung parliament with the Conservatives the largest party with 303 seats, Labour second with 284 seats and the Lib Democrats with 30 seats. I’m still sceptical about these polls but it looks like the Lib Dem leadership contest has caused a movement away from Labour to the Lib Dems. However, I’m pretty sure that Labour will have re-established a lead by the end of the year.

Betting Journal: Arbitrage

I bought 14 contracts on the Democrats to win the 2008 election, 14 more contracts on a 3rd party victory and 14 on a Republican Congress in 2008. Although I’ll produce a longer article tomorrow, I believe that if the GOP wins they will almost certainly recapture the House. Although this is not a pure arbitrage opportunity, the unpopularity of the Democratic leadership in Congress means that I predict that it is 90-95% likely to succeed, making it a good destination for the bulk of my payroll.

For the record I suggest that you buy equal numbers of the following contracts; Democrat victory (63-63.1), Independent victory (1.5-1.6), Republican control of House of Representatives (11-20).

Why Mitt Romney will not win the Iowa caucus

Four reasons to bet against the former governor of Massachusetts

As I mentioned two days ago, I have bet against Romney winning the Iowa Caucus. I have done this for the following four reasons.

1. Romney’s supporters are less likely to vote

The decision to move the Iowa caucus to January 3rd (or earlier if New Hampshire holds its primary in December) will mean that those whose commitment to voting is weak will be much less likely to spent an evening caucusing than before. Looking at the crosstabs on the latest Rasmussen poIl, and taking only those certain to participate in the caucus, Romney’s lead shrinks to only 2 points above Huckabee (24 to 22), which is well within the margin for error.

2. Romney’s poor national polling figures will have an impact

Despite the large amount of money that he has spent on the contest, Romney is still performing badly in national polls. According to the weekly Rasmussen tracking poll he is joint fourth with Huckabee, who has run a shoestring campaign. More importantly, he is 6 points behind Thompson, his other rival for the right of the party. The national trend lines from Pollster.com are only slightly better, with Romney in fourth place, 4.2 points behind Thompson. Of course, national figures don’t directly translate into success in specific states. However, it would be impossible to completely ignore Romney’s weakness in this area and it definitely will have an impact on the voters in Iowa, especially if he falls behind Huckabee.

3. Things can only get better for Fred Thompson

Fred Thompson has currently been running a poor campaign, paying little attention to Iowa (and New Hampshire) and producing an underwhelming performance in the Michigan debate. However, as he gets into his stride, as his improved performance in Florida suggests that he will recapture some of the support that he lost earlier this month. He also recognised that he needs to begin actively campaigning in the primary states more often. This should chip away at Romney’s support.

4. Romney’s support has peaked.

Although this goes against the Pollster.com trend-lines, which show Romney’s support trending upwards, I believed that Romney’s support can only go down. As of early October, Romney has had the airwaves in Iowa all to himself, since no other Republican has run a single television advert in the state. Since this is obviously going to change, it will be interesting to see whether Romney ratings will start to fall when Thompson begins putting commercials on television.

Filtered Polling Data: LAB Majority 12

Inputting the latest MORI poll and putting the updated data through Samplemiser gives the following predicted voting shares: Conservatives 40.85 Labour 38.45 Lib Dems 11.16. Martin Baxter has changed the methodology on his predictive website so this actully predicts a slighly worse outcome for Labour, despite the fact that the voting shares are more favourable for them. Specifically, Baxter’s new model predicts 331 seats for Labour, 283 for the Conservatives and 9 for the Lib Dems (putting the previous figures into Baxter’s site gives Labour 323 seats, Conservatives 289 and Lib Dems 11).

Betting on McCain

Bought 10 contracts of McCain in New Hampshire. I’ve got $169.06 in cash in my intrade account.

Betting Journal: Betting against Romney

Sold short 7 contracts of Mitt Romney in Iowa. Also bought 10 contracts of Thompson in New Hampshire and 10 contacts of Huckabee in NH.

What does Stephan Colbert’s 13% tell us about 2008?

How the suprising level of support for the comedian could indicate the potency of an independant bid.

One of the more amusing stories of this election campaign was the decision of the comedian Stephan Colbert to announce a ‘bid’ for the Presidency, stating that he would run in both the Democrat and Republican primaries in South Carolina. Even more amusing was the fact that several polling organisations took him seriously enough, or had enough time on their hands, to run several polls with him as one of the stated choices. The most interesting of these polls was a poll by Rasmussed that showed he would get 13% of the vote in a national head-to-head with Giuliani and Clinton. Although I am hardly going to say that he has a serious chance, I believe that the poll reflected more than the disengagement of the young from politics.

Indeed, if you look at the crosstabs you can see that although 28% voters in the 18-29 age bracket support Colbert he still gets the support of 19% of those aged 30-39 and 10% of those aged 40-49. Although his support generally comes from those who describe themselves as liberal he hurts Giuliani the most. Although I am not for a moment suggesting that Colbert is a serious candidate, I strongly believe that this shows the potential for a more serious third party candidate to make a stab at some serious support. It also shows that the centre of the Republican party is not firmly committed to Giuliani. Both of these things should be pondered by Giuliani’s main rival for the Republican centre, Senator John McCain. This suggest that there is some value in the 1.4-1.5 on a third party victory in 2008.

Filtered Polling Data: LAB Majority 18

Filtering recent polling data through SampleMiser gives a (small) Labour Majority. The main movement seems to be from the Lib Dems to the Tories.

Putting polling data from the YouGov poll in August 31 to the recent YouGov poll produces the following predicted vote shares: Labour 37.98% Conservatives 41.01% and Liberal Democrats 11.01%. Putting these figures into Baxter gives an electoral projection of 334 Labour seats, 288 Conservative seats and no Liberal Democrats. What is more interesting is that, apart from a fall in late September and a bulge on October 12th, the combined Liberal and Conservative shares of the votes have been around 50-52% for the last two months. This seems to suggest that the contraction of the Labour lead since the non-election was due to Lib Dems switching to the Conservatives.

Although this could suggest that a sizable proportion of Lib Dems are weak Conservatives (and as such are prepared to vote tactically for the Tories) it also suggests that even the events of the last few weeks haven’t changed the fact that Labour have moved into the high 30s. Indeed, if Labour are in this situation after an drubbing from the media, we can expect to see the government ahead of Cameron before the end of the year. Punters should use this as an opportunity to take a punt on both a 2008 election and a Labour victory.

What can we learn from the Weekly Rasmussen Poll?

An interesting theory about the Republican contest

Yesterday, I added to my position on John McCain so that I have a relatively large part of my bankroll resting on both John McCain and Fred Thompson. I did this because I think that the true probability of John McCain winning the Republican nomination is about 15%, and is certainly higher than the 7.4 that I was able to buy at. I have to admit that, after studying the polls, my previous estimation that John McCain was only 10% likely to win the nomination was a bit too pessimistic. This is not because of the frequent press speculation that, ‘McCain is back’, the positive words said about him recently in magazines like the American Spectator or because I think that he is the strongest candidate Instead, this comes from a new theory I have about the race.

Earlier this year the political analyst Dick Morris came up with the idea that the early Republican primaries were a semi-final that would narrow the pack, but not decide the race. I have to admit that I was sceptical, until I saw several interesting patterns in the weekly national tracking polls since Mike Huckabee entered the contest. Firstly, if you correlate McCain’s and Giuliani’s votes you get a negative correlation of -0.6, suggesting that they are fishing for the same pool of voters. Similarly, if you add McCain’s and Giuliani’s votes together to get a ‘centrist’ bloc, and do the same for Thompson, Romney and Huckabee to get a ‘conservative’ bloc, you find that the ‘Conservative’ share of the vote since August is around 38-44% and the Centrist bloc is 32-39%. Both blocs seem to be stable, with a low weekly variance of around 2%.

So, what does this mean for the contest? Well, it means that both McCain and Thompson have made a big mistake by letting themselves be outflanked on the left and right respectively. It also means that Giuliani hasn’t become popular per se, it is just that McCain is siphoning less votes from his candidacy than Romney or Huckabee are from Thompson. It also suggests that McCain can knock Giuliani of the contest by beating him in Iowa while can Thompson do the same to Romney and Huckabee. So, one possible scenario is that Thompson wins the Iowa primary with Huckabee second, Romney third, McCain fourth and Giuliani fifth. Giuliani and Romney drop out while Huckabee is mortally wounded (if he can’t win in Iowa where can he win)? The race then becomes a two-way contest between Thompson and McCain with New Hampshire and South Carolina deciding the contest.

However, it is important to retain some perspective. McCain might be the best candidate and it is possible that he will pick up the pieces if Giuliani fails. However, he currently has to run his campaign on funds borrowed against his general election money (some of the money that he raised can only be used in the general election because it was over the donation limit for the primaries. It should also be remembered that if Iowa is two contests, for the centrist and conservative crowns, then it is imperative that McCain make sure that he finishes ahead of Giuliani there, otherwise his candidacy, at least for the Republican nomination, will be effectively over. The burden of expectations is not so high for Thompson because he merely needs to finish ahead of Romney.

McCain also need to demonstrate that he is still a centrist in principle and that he is prepared to reach out to Democrats and Independents, possibly by demonstrating that he willing to roll back some of Bush’s more egregious tax cuts for the wealthy. His campaign is also partially dependant on Romney and Thompson continuing their attack on Giuliani. McCain should also make sure that he keeps on the radar of the media and so doesn’t fall back into single figures. It also goes without saying that McCain needs to keep the faith on Iraq, and avoids the ‘declare victory and get out’ trap that some on the right seem to falling into. Even if the McCain supporter who posted in the comments section of the previous post that, ‘what McCain lacks in money, he makes up for in effort’, is true, the effort still needs to be directed correctly.

Update (28/10) When I posted I typed (for some strange reason) that ‘Thompson wins the Iowa primary with Huckabee second, McCain third and Giuliani fourth and Romney fifth’. As a poster pointed out, this is clearly nonsense, so I’ve amended it to what I wanted to say.

Betting Journal: Thompson vs McCain

I have decided to add 21 contracts of John McCain to my position, reducing the ready cash in my intrade.com account to $224.19. I’ll explain why I did this in a longer post but when filtered the Rasmussen tracking polls through Sample Miser (reducing their MOE to 2%) I found that if you add McCain and Giuliani’s share of the votes to from a ‘centrist’ bloc and Thompson, Romney and (since last week) Huckabee’s shares to form a ‘conservative’ bloc you get a high degree of stability. This suggests that McCain should be fighting Giuliani for the control of the centrist bloc and Thompson, Romney and Huckabee should be fighting for the right. Although McCain has run a poor campaign and Thompson has been underwhelming I still think that after the dust settles the contest will between those two.

What about Fred?

He’s second in the polls, he’s got a lot of money in the bank and the support of the base so why do the markets think that the chances of Fred Thompson getting the Republican nomination are barely more than 1 in 10?

As many of you know, I believe that the strongest candidate the Republicans could field is John McCain. He’s moderate and unlike Giuliani could actually excite Democrats and Independents disillusioned with the current direction their party has moved in. However, although he did relatively well in the last debate, McCain has generally run a strategically flawed campaign, trying to pitch his message to the right, alienating his support among moderates and independents while meeting a wall of scepticism on the right. I still think his chances are better than the markets are suggesting (which is why I am keeping my McCain positions), though I think the best chance McCain has at the moment is to run (with Joe Lieberman) as a independent. Therefore, as I posted on this web-log, I have placed a large bet on Thompson getting the nod from the GOP.

The first thing to remember is that, although the conventional wisdom is that Thompson’s candidacy has been a dud, he is still breathing down Giuliani’s neck. Indeed, until the Michigan debate, he was actually consistently ahead of the former mayor of New York in the respect Rasmussen tracking poll. It is also interesting that even though his performance in the debate caused him to go from a two point lead to an eleven point deficit, Thompson has now pulled back much of the momentum that he lost and now is only five points behind Giuliani. Although it is too early to say whether the Florida debate will cause things to narrow even further, he looks to have made the decision to go on the offensive against Giuliani, a decision that might be the turning point of the contest.

Indeed, one of the main things in Thompson’s favour is that there are very few plausible alternatives beyond him, Giuliani and McCain. Although Mitt Romney has been quietly picking up endorsements of the religious right, the legacy of his ever changing positions on abortion (and sadly his religion) really handicaps him. At the same time he is a living demonstration of the reason why executives don’t make convincing politicians. Although Huckabee has a strong emotional appeal to the religious right and has been running a very strong low budget campaign the fact remains that if he doesn’t win Iowa (or a least run a strong second) his campaign will be over. I also think that the Republicans are intelligent enough to realise that his economic plans and his extreme social conservatism are toxic outside the Deep South, while we can expect a lot of scrutiny of his antiwar stance as the contest goes on.

I also believe that Giuliani is not as strong as most people believe. Although he has run a tight campaign and been helped by the poor strategic decisions made by McCain’s staff, his support is limited to liberal Republicans rather than to the independents and ‘recovering Democrats’ that McCain appealed to in 2000. Consequently, when Thompson (or another candidate) starts going after ‘Julie-Annie’, as many on the right refer to the ex-mayor, Giuliani may not be able to weather the storm.

What do you think? Any comments are welcome.

Interesting artbitrage opportunity

Although I am staying out the various Al Gore markets on Intrade.com I have noted two interesting arbitrage opportunities:

1. The price on Al Gore winning the Democratic nomanation is 5.2-5.6 while the price on him getting into the race in the first place is 10-15 (with the last price trade taking place at 10). This suggests that Gore has over a 50% chance of winning if he gets into the contest (which is simply unrealistic).

2. The price on Al Gore becoming the next President is 5.3-5.5, roughly the same as the chances of him winning the nomination (which is patently absurd).

Of the two, the first arbitrage opportunity is the most illogical. After all, he could not win the nomination and then run as an independant while the chances of him being drafted as a candidate during the convention are next to nothing. However, although I believe that this is certainly a year for a viable independant candidacy, I feel that another fan of climate change legislation (if he doesn’t win the GOPs nomination) will fufill that role. Furthermore, the price on an independant victory is still only 1.4-1.7 making a mockery of the prices.

Betting Journal: Putting some money on Thompson

I have just bought 20 Fred Thompson contracts at 11.4 and 20 at 11.5, leaving my free trading funds at $240.76.

Betting Journal: Betting on an Edwards withdrawal

Having made my call, I’ve decided to back it with hard cash so I’ve bought 3 contracts on John Edwards dropping out of the Democratic presidential primaries by December 31st 2007 leaving me with $288.56 in my trading account.

Brownback bites the dust

Which other candidates will drop out of the contest before the Iowa caucus?

The withdrawal of Senator Sam Brownback from the contest was not unexpected. Having got little traction in either the national polls his candidacy was essentially finished in August after his poor showing at Ames. However, this does raise the question of whether any more candidates are going to start dropping out of the field. On the Republican side it seems likely that Duncan Hunter’s campaign is going nowhere, and I would guess that he lacks the desire of either Ron Paul or Tom Tancredo to remain in the contest as a fringe candidate. Additionally, I wouldn’t be suprised to see Joe Biden dropping out soon. In terms of the offered markets on early withdrawals I am going to recommend that you put some money on John Edwards withdrawing. His campaign is going nowhere, even in Iowa, and he has already been forced to accept federal matching funds. His price on a withdrawal before the end of this year (7.8-10 at Intrade.com) is therefore a bargain, especially if the Iowa Caucus is moved to late December.