Romney moves back into the lead … by 0.3%.

Mitt Romney is still in dire trouble.

Inputting the latest Iowa ARG survey sees a virtual dead heat between the two Romney and Huckabee, with Romney now in the lead. The full projections are: Romney 27.38 Huckabee 27.08 Thompson 13.54 Giuliani 9.36 McCain 8.47 Paul 3.09. Romney and Thompson are still in trouble and McCain needs to get cracking. However, there does seem to be some light at the end of the tunnel and he should seriously consider putting in more than a nominal effort in the Hawkeye state. Pushing Giuliani into fifth place is too good an opportunity to pass up and it would a shame if Rudy beat him by a few hundred votes, which would be the difference between a nominal organisation and no ground organisation at all.

Betting Journal: Sold Thompson and bought Huckabee

Because of recent events I need to properly recap the trades that I have made over the past few days. I have sold 31 contract of Fred Thomspon in total (bringing me down to 30) and bought 13 contracts on Huckabee. In total I have:

100 contracts of GOP.NOM.SANFORD
30 contracts of GOP.NOM.GINGRICH
30 contracts of GOP.NOM.THOMPSON(F)
39 contracts of GOP.NOM,.MCCAIN
13 contracts of GOP.NOM.HUCKABEE
-10 contracts of GOP.NOM.PAUL
12 contracts of DEM.NOM.CLINTON
80 contracts of PRESIDENT.FIELD.2008
9 contracts of UK.LABOUR
9 contracts of HOUSE.GOP.2008
-7 contracts of REP.IOWA.ROMNEY
– 7 contracts of REP.NH.ROMNEY
10 contracts of REP.NH.HUCKABEE
10 contracts of REP.NH.MCCAIN
10 contracts of REP.NH.THOMPSON
10 contracts of DROPOUT.DEC07.GIULIANI
3 contracts of DROPOUT.DEC07.EDWARDS
10 contracts of DEM.VP.WARNER
10 contracts of DEM.VP.WEBB
10 contracts of DEM.VP.KERREY
10 contracts of DEM.VP.NUNN
10 contracts of DEM.VP.DASCHALE
10 contracts DEM.VP.FIELD

and $1.62 in cash.

Obviously, many of those contracts are only in my portfolio because I am unable to get rid of them but I am confident that collectively they are woth more than my initial sum of $500.

Are these the two biggest losers from the debate?

McCain wins on substance but Huckabee wins on style.

My gut reaction from reading the transcripts is that the Republican party is in serious ideological trouble. I accept that as left of centre Blairite (the British equivalent of the DLC) I am biased but I believe that the Republicans can only win the election by emphasising the War in Iraq and offering a platform of achievable reforms as an alternative to Clinton’s bombast and Obama’s inexperience. However, as the National Review Online (the US equivalent of the Daily Telegraph) put it, ‘Based on the tone and answers given tonight, you would think that the Republican Party seethes with a blistering resentment of immigrants, with only the briefest of pauses to distinguish between those who are illegal and legal. You would think that the only tax plan that they like is the Fair Tax, and that they would like to somehow eliminate all taxes and let somebody else figure out how to fund the parts of the government that are actually needed. Guys, I thought we were small-government conservatives, not no-government anarchists’.

However, I do have to admit that Mike Huckabee was impressive. He triangulated like another governor of Arkansas and he managed to appeal to the centre, without changing his views on social issues. He managed to combine home-grown homilies with the rhetoric of Dick Morris. If he can overcome his support for the National Sales Tax, he could actually pull this thing off. John McCain was also impressive, although he needs to move further to the centre and start using some of his rhetoric in the debates that he uses on the campaign trail, especially about immigration. I like the fact that he seems to have moved away from the fringe on taxation, though he needs to be more radical and go back to his original position on the Bush tax cuts. Romney and Giuliani were unimpressive while the campaign of Fred Thompson seems to be over.

In terms of the Iowa polling, if you include the new Rasmussen poll and filter it through Samplemiser you get the following: Huckabee 27.38 Romney 25.16 Giuliani 12.19 Thompson 10.93 Paul 5 McCain 4.12.

Romney under fire as the gap closes further

The gap in Iowa between Huckabee and Romeny shrinks further.

Putting the latest Strategic Vision poll into Samplemiser produces the following projections: Romney 26.13 Huckabee 23.96 Giuliani 13.95 Thompson 10.17 John McCain 6.98 Ron Paul 5.02. Both Romney, McCain and Thompson really need to improve their positions if they don’t want the following primaries to turn into a Giuliani versus Huckabee contest. I have to say that I am happy that I am betting against Romney! My advice to McCain is that he needs to go after Giuliani and focus on his lobbying work, while Thompson needs to make sure that he is still visible.

Betting Journal: Sold 15 contracts of Thompson

I have started to draw down my position on Fred Thompson winning the GOP nomination, beginning with the sale of 15 contracts this morning. If he doesn’t bounce back in tonight’s debate I am going to reduce my position further.

Filtered Polling Data: Conservative majority of 54

Putting the latest ICM poll and all the other polls since August produces a Conservative majority of when the data is put through Samplmiser. The predicted vote shares are Conservatives 39.94 Labour 27.52 Lib Dems 17.83. This produces a projection of 222 seats for Labour, 352 for the Conservatives and 45 for the Lib Dems. The only good news for Labour is that the Conservative share of the vote seems to be stuck at around 40% as voters move from Labour to the minor parties and Lib Dems.

Betting Journal: SOLD 5 contracts on Romney winning New Hampshire

I just bet against Mitt Romney winning New Hampshire selling short 7 contracts on him winning there. This has reduced the amount of free cash that I have in my account to $1.24, with over 99.8% of my cash tied up in positions.

Is this another great arbitrage opportunity?

Why does the market give Romney a greater chance of winning New Hampshire than Iowa?

One of the most puzzling things in the betting markets believe that Mitt Romney has a much greater chance of winning New Hampshire than of winning in Iowa. For instance, Intrade.com has him at 67-80 to win the Granite state but at only 43-49 in Iowa. Although this might be logical in a superficial way, after all he was the governor of nearby Massachusetts and he has a considerable lead in that state. However, Romney has emphasised a victory in Iowa so much that if he fails to deliver his campaign will be irreparably damaged and his lead. At the same time he faces strong challenges from both John McCain and Rudy Giuliani. Given that the former has to win this state, or face political oblivion, he can expect a vigorous campaign that won’t hesitate to tackle him head on with the issues. At the same time failure to win Iowa will mean that a resurgent Huckabee and even Fred Thompson will be snapping at Romney’s heels, siphoning off conservative votes from him.

Therefore, I predict that if Romney fails to win Iowa his chances of winning New Hampshire as well are pretty marginal. Even if Romney wins he will face an uphill struggle. This suggests both that betting against Romney in New Hampshire makes sense, but that if you are conservative you could think of betting on him winning Iowa as an arbitrage, although personally I prefer the bolder option of simply betting against him in both states.

Filtered Polling Data: Hung Parliament

Adding the latest ICM poll to the YouGov poll, and assuming that the Lib Dem vote share is 21 rather than 23, produces a weighted average of Conservatives 39.46 Labour 31.61 and the Lib Dems 16.69. Putting this average into the collection of polls since the end of August produces a hung parliament when the data is put through Samplmiser. The predicted vote shares are Conservatives 39.51 Labour 31.7 Lib Dems 16.63. This produces a projection of 270 seats for Labour, 314 for the Conservatives and 35 for the Lib Dems. If the Conservatives can’t get a majority in the wake on the dire news about the Inland Revenue and the Lib Dems can only muster 35 seats, then this appears to confirm that the hype about a ‘Black November’ is unjustified.

Filtered Polling Data: Conservative Majority of 30

Adding the latest YouGov poll to the previous polls produces a clear Conservative parliamentary majority. The predicted shares are Conservatives 41 Labour 32.13 Lib Dems 13.98. This produces a prediction of 256 seats for Labour (-40), 336 for the Conservatives (+25) and 24 for the Lib Dems (+10). The only good news for Labour is that the combined Conservative and Lib Democrat share of the vote only increased slightly to 54.98, suggesting that the voters who have moved away from Labour have not moved to the Lib Dems or the Tories. It should also be empahsised that the Channel Four polls suggest that voters still believe that 51% of the public believe Labour to be competant in handling economic matters (against 42% who believe them incompetant). In contrast only 46% of the public believe the Conservative economic team to be competant in economic matters (against 47% who believe that they are incompetant). This might not be as bad for Labour as people believe, especially if it pushes Northern Rock of the headlines.

The gap narrows further

Good news for Huckabee and Thompson but bad news for Romney and McCain.

 

Putting the latest Iowa polling data through Samplemiser produces the following figures: Romney 27.77 Huckabee 23.5 Thompson 14.45 Giuliani 13.01 McCain 6.15 Paul 5.86. This is good news for the former Arkansas governor, who sees the gap with Romney dwindling from 19.34 points as late as October 22nd to 4.27. The data also show Thompson overtaking Giuliani and pulling away from McCain. McCain’s campaign has now publicly abandoned Iowa, pledging to make only a ‘nominal’ effort. The problem with McCain’s strategy, apart from making a third place finish by Giuliani a possibility, is that he could very well be overtaken by Ron Paul, which would be a damaging blow to his credibility. It goes without saying that McCain needs to ‘throw the pigskin’ and start attacking Bush, and the Republican field, on economic issues, even if that loses him some of his conservative support. The only good news for the Arizona senator is that it looks like Michigan will be running a primary rather than a convention (though even this is a balanced by the fact that the gap between Iowa and New Hampshire will only be five days).

Is it time to go long on Obama in Iowa?

Is the market momentum behind the Illinois Senator justified?

Ever since Hillary Clinton turned in a poor performance in a debate in late October people have been looking for an excuse to believe that the contest for the Democratic nomination is still wide open. Although I believe that Hillary has her weaknesses, she is easily the most credible (and electable) of the current crop of Democrat candidates. The fact that a CBS poll has her behind Obama for the first time (though still within the margin of error) has meant that the price on Barack Obama winning the Iowa primary has risen, going above its fifty day moving average to its current price, with the last trade at 35.0. Does this mean that now is a good time to buy into the Senator from Illinois, either as a momentum play or a value bet?

There are several reasons why this is not the case. Barack Obama has not answered the central charge of his opponents – why should an someone with no foreign policy experience, only four years in national politics and demonstrable immaturity be put in the White House in a time of unprecedented international turmoil? Obama answer, that he has lived in Muslim countries, is risible and risks sounding a lot like the answer that Michael Foot gave about the foreign policy implications of a victory in 1983. After all, the ‘Cook County Project’ in 2004 was one of the key factors, that produced a Bush victory in that state. There is also the unanswerable criticisms that while Obama may alienate voters less than Senator Clinton, her campaigning and organisation skills make a victory, even if it a close one, more likely.

Finally, it is important to remember that the Iowa contests is a caucus rather than a primary. As such it depends upon the ability to get people to devote an hour of their time on a cold January evening. As Howard Dean found out, candidates who have a disproportionate amount of their support from the very young, such as Senator Obama, will fare less well. According to the 2004 exit polls, only 17% of voters were aged 17-29 while 41% were between the ages of 44-65. Indeed, according to the last Rasmussen poll, Obama is in third place among those aged 50-64 and over 65. Contrary to belief, Hillary’s support is more committed to her than Obama’s is, with an eleven point gap between Clinton and Obama when only people certain to vote for her are counted. There is also the possibility that anti-Clinton votes might go to Edwards instead. All of this makes the Obama Iowa contract overpriced.

Betting Journal: SOLD 5 contracts on the GOP retaking the House

I have decided to partially liquidate my position on the GOP retaking the House of Representatives by selling 5 of my contracts at $2.00 each, raising $10.00 before trading fees. A longer analysis of my decision will follow shortly.

Is there still value in betting against Romney in Iowa?

Why you should still short Mitt.

One of the most interesting development in the race has been the extent to which Romney’s supremacy in Iowa has been challenged by Mike Huckabee. Although Huckabee is still, by my estimation, over nine points behind Romney, the fact that the governor of Arkansas has managed to get so close to Romney without spending any money on advertising, indicates that Romney’s support in the Hawkeye state is very thin. This has been reflected in the betting markets with the contract on Romeny winning Iowa falling from a peak of 69.3 in early October to the current level of 55.9. However, I think that the Romney contracts still have a way to fall as the fact that Huckabee is attracting enough money to begin airing some adverts in the Hawkeye state will boost his name recognition and make him seem a more credible candidate. I believe that once Huckabee has been perceived as the more credible candidate, a lot of the Evangelicals who were unsure about Romney and Thompson, or were opposed to Romney but were not decided about who was best able to stop him, will move to Huckabee. I firmly believe that Romney’s contracts are overvalued until they enter the low 40s.

What do you think? Add your thoughts below.

Is the Ron Paul bubble starting to pop?

Why now might be the last time to take advantage of the ‘irrational exuberance’ surrounding the Texas congressman.

Nothing has done more to disprove the notion that betting markets are an accurate judge of election prospects than the dramatic shortening of the odds on Ron Paul to become the Republican nominee. As I said before, although nothing is ever a complete impossibility, the chances of someone who want to legalise hard drugs and believes that 9/11 was a conspiracy getting on the GOP ticket, let alone heading it, are so close to zero that they are not worth considering. Although Paul, like Denis Kucinich and Lyndon LaRouche, has managed to raise some money from his legions of fellow cranks he failed to break 10% in the Ames straw poll and is around 5% in most Iowa opinion polls. However, up until now his fans, aided by people looking to offload their contracts to ‘greater fools’ has meant that the price on his contract on intrade has been gaining steadily since April.

At one point in early November his contract reached 9.5, suggesting that the odds of him winning the nomination were nearly 10%. However, his contract has declined since then with the last traded price at 6.9. As the above chart shows the closing price has fallen below the 50 day moving average (a key technical indicator). I believe that it is going to collapse further and fall down to below 5 by the end of the month. This is for several reasons:

Greater awareness of the contract – Not only is the bubble being discussed on internet forums but it is being discussed in the maintstream media. The Republican magazine Human Events ran an article about the mispricing last week, which will alert gamblers (although strictly speaking, internet gambling is illegal in the US).

Increased participation by foreign gamblers (such as myself) – As the election draws nearer interest from gamblers outside the US will increase. Because of the US ban on internet gambling these bettors, who are unlikely to be biased towards Ron Paul, will be much less inclined to bet on the congressman.

Profit taking by lucky gamblers – Aside from his supporters trying to move the price, one of the key features that led to Ron Paul’s price soaring has been momentum buyers looking to sell the contract to ‘greater fool’s at a higher price. Now that his price is moving downwards these gamblers will start taking their profits (or losses if they bought into the hysteria late), depressing the price.

Even if the price doesn’t fall this is a good value bet.