Republican

Despite the always-long odds against a Christie run, an actual Christie candidacy would likely create a big impact on the battle for the GOP nomination; even without entering the race, the markets forecast that he had a 10 percent likelihood of winning the nomination. Where did that 10 percent go when confirmed he was not running?

The short answer, shown in the chart above, is that Mitt Romney got most of it, and he got it fast. As Christie quickly headed toward a 1 percent likelihood of attaining the nomination, Romney jumped approximately 10 percentage points--from 45.3 percent to 55.3 percent likelihood, where he is right now. Many people saw Christie as the last major new Romney adversary, and his non-entry may be close the door on any other late challenge to the current field.

A look at the race for the Republican nomination just before and after Christie dropped out:

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If Christie runs, he will immediately be a top contender. Right now the prediction markets give him a 24.5 percent chance to run for President and an 8.0 percent chance to win the Republican nomination. However, should he proceed with a run, my projections suggest that the prediction markets would instantly grant him a 25 to 35 percent likelihood of gaining the nomination.

If Christie does not run, he may lose his moment. The markets are reflecting growing unease in the Republican party over the current crop of candidates. The reason that Romney did not gain all of Perry's strength is that the Republicans are looking for someone to take him on for the nomination. If Christie does not grab this chance, someone else will--former Alaska Gov. Sarah Palin, for instance, or some other dark horse contender. If Perry continues to falter--and if Christie passes on a 2012 presidential run--the predictions markets suggest that GOP field is still fairly wide open.

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It just gets worse and worse for Govenor Perry of Texas. As the dust settles from Thursday's debate Perry has slid from 38.5 percent likely to be the Republican nominee to 26.4 percent (as of this reposting on Sunday morning):

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Every day that Governor Christie of New Jersey flirts with federal office his likelihood of winning reelection is diminished. In recent months he has become agnostic on teaching evolution, he vetoed state funding for family planning and he has pulled state money out of projects designed to remediate the impact of global warming, even though has previously admitted that climate change is a real problem associated with human activity. All of these are going to hurt him when he runs for reelection, but if he stops flirting with the national Republican Party now, he still has a chance at reelection.

Every day that Christie focuses on New Jersey his likelihood of winning a federal office is diminished. He is a Republican in a Democratic state. He cannot make the policy that wins affection in New Jersey and stay friends with the national Republican Party.

He has a choice to make and my advice is to make that choice soon. The longer he tries to be Governor of New Jersey and viable federal office Republican the less likely he is to succeed at either of them!

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Perry is no Trump; he has risen to the top in the prediction markets, as well as the polls. This is an important indication that Perry is getting a serious hearing not just from GOP voters, but from political insiders as well. Still, the prediction markets are not quite so bullish on Perry thus far as GOP voters appear to be. Perry is way ahead in the polls (up by six, eight, and twelve points over Romney in the three most recent national polls), but only tied or slightly behind in the prediction markets. This suggests that even though political insiders are giving Perry his due as a legitimate candidate, they are still predicting that his relative strength will wane and Romney will close the race up before the end of the primary season ...

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I posted a blog piece on Yahoo on the electability of the Republican candidates for President. Click Here for Full Text. As you can see, Rick Perry took a hit in both his likelihood of winning the Republican primary and his electability in the general during his first debate on Wednesday. The chart is here:

The real-time updating table is here:

This morning Nate Silver, writing in his blog in the New York Times, notes the disconnect between a few recent polls and Intrade's prediction market in regard to the likelihood of Mr. Huntsman ultimately gaining the Republican nomination for President. He is concerned that Republicans are giving Mr. Huntsman the highest "unacceptability" ratings of any major Republican vying for the 2012 Presidential nomination; 51% of Republicans state that he is unacceptable in recent polls. Yet, despite these unacceptability ratings, Mr. Huntsman is being given 13.3% likelihood of the Republican nomination by the prediction markets, placing him in a strong third place (the fourth place contender, Ms. Palin, is at just 6.7%).

As Mr. Silver notes, Mr. Huntsman is unknown to most Republicans and, if they know anything, they are likely to only know that he was an ambassador for President Obama. I will quote the comment on the New York Times article written by "David from NJ" (who, despite the description, is not me!): "The press on Huntsman has characterized him as a moderate and his role as ambassador to China puts him in the Obama camp. The net is he falls in the same group as Romney and Pawlenty, with possibly less well known knowledge about his positions than either."

The first reason that prediction markets (Intrade and Betfair are very close on these numbers) differ from the polls is that prediction markets take into consideration what the Republican voters will learn between now and their primary elections, while polls do not. Knowledgeable prediction market users are expecting voters to eventually learn what "David from NJ"already knows: that Mr. Huntsman is not in the Obama camp, but a standard Republican. The prediction markets are predicting that those unacceptability numbers will disappear in the next few months.

The second reason that prediction markets differ from the polls is that the prediction market users assume that Mr. Huntsman, in expectation, matches up the best against Mr. Obama in a general election. Mr. Obama has a 62.7% likelihood of winning the general election, but that number is related strongly to the likelihood of meeting his different potential Republican challengers. He is more likely to beat some challengers than others.

Mr. Romney has a 30.0% likelihood of winning the nomination and an 11.7% likelihood of winning the general election. When thinking about "electability" what I think about is the likelihood of winning the general election assuming the candidate wins the nomination. For Mr. Romney, that likelihood is 39.0% or 11.7/30.0; Mr. Romney‘s electability is similar to Mr. Pawlenty (33.5%) and Ms. Palin (37.9%). All three of these fall in the middle range, making them about as likely to win a general election as the average Republican challenger against Mr. Obama. Ms. Bachman, who is a very extreme candidate, has an electability of just 27.6%. If she won the nomination, Mr. Obama's likelihood of wining the general election would shoot up to nearly 75%.

Mr. Huntsman has a 48.5% likelihood of winning the Presidential election,contingent on winning the Republican nomination. Thus, the second reason that the prediction markets think Mr. Huntsman is so likely to win the Republican nomination, despite his initial weak polling numbers, is that he is the most viable candidate for the Republicans in the general election. He is the only candidate that the markets think could turn the general election into a dogfight.

 

Huckabee and Trump Depart the Race

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Within the past week, both Mike Huckabee and Donald Trump announced that they would not seek the Presidency in 2012. The prediction markets had plenty to say about these candidates both before and after they dropped out of the running. Both men's likelihood of winning the Republican nomination peaked at nearly 9%, but the markets show that the end of their campaigns came about under very different circumstances. Below is a chart of Mike Huckabee's likelihood of winning the Republican nomination, where the red line marks the moment when he made the announcement he was not running during his weekly Fox News TV show. One day before his on-air announcement, when rumors of an impending announcement on his campaign began to spread, this market tanked rather quickly. The market was reasonably quick to recognize that he was going to drop out of the race. However, it appears as though the market began to second-guess itself over the following 24 hours - perhaps due to conflicting rumors - and by the time of his announcement, the Huckabee contract regained about 1/3 of the value lost during the previous day.

Donald Trump's likelihood of winning the Republican nomination peaked just before President Obama released his long-form birth certificate on April 27, and began its precipitous decline just as Obama announced the death of Osama Bin Laden on May 1. The final drop on May 17 coincided with his announcement that he will renew his job as a television personality, rather than run for President. While Huckabee was an extremely viable candidate prior to his announcement, Trump had already been trending towards irrelevancy, even before his announcement.

I regret that we had not been tracking Jon Huntsman's chances until very recently, but the other two candidates who clearly benefited the most probability of victory with the Huckabee announcement were Mitt Romney and Tim Pawlenty. As I note in the first chart there are really two separate noteworthy events in Huckabee's withdrawal from the race. The first occured when rumors of an impending announcement were circulating and the second occurred a day later when his decision was announced. The first reaction of the market was to assume that Romney was going to really benefit from Huckabee's departure. After the rumors began, going into the formal announcement (where the red line is located), Romney had absorbed almost all of the Huckabee's total loss. Yet Romney gained little from the formal announcement while Pawlenty, who had already fallen back down to his pre-rumor level, got a nice boost from the actual announcement. One thing is clear from this analysis: the market is undecided on who benefited from the Huckabee announcement.

Prediction Markets Working Well on Republican Nomination

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Three recent polls have come out in regard to the Republican Presidential Nomination. These polls by CNN, Fox, and NBC have Donald Trump in first, third, and second respectively. Further, they have Mitt Romney in fourth, second, and first respectively.

Imagine that there is three types of information about the current field of Republican candidates: first is known to the average Republican voter, second is known to political informed people, and third is unknown. An example of the first type of information for Trump is that he is a popular TV personality and for Romney that he is a former governor of Massachusetts. An example of the second type of information for Trump is that his business affairs and personal life are very rocky and for Romney that he was an extremely successful businessman. The third type of information is all of those things that will happen between now and Election Day, for which is unknown.

In short, differences between poll-based and prediction market-based forecast of who will ultimately win the Republican nomination hinge heavily on the second type of information: information that political informed people in the prediction market know and the average Republican voter does not know now, but will know on Election Day. In this situation, that type of information is generally neutral or positive for Romney, Tim Pawlenty, and Mitch Daniels, but negative for Trump. That is why although Trump is trending second in the polls of today, the self-selected politically informed people who gamble in the prediction markets have Trump as the fourth most likely person to get the Republican nomination. They are betting that the public will learn what they know about Trump and then become less likely to vote for him, relative to the other candidates.

Mrs. Palin's Political Trouble from Saturday's Massacre

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Immediately in the aftermath of Saturday's assassination attempt on Congresswoman Gifford, that resulted in the death of six people including a federal judge and a nine year old girl, the media began speculating on the political fallout to Sarah Palin's 2012 Presidential aspirations. In March she had put out an advertisement with a target on Congresswoman Gifford and then told asked that her followers "Don't Retreat, Instead - RELOAD!" Thus, after the massacre people began to discuss her contribution to both the specific target and the general heated atmosphere in politics; regardless of her complicity, and thus far there is no direct evidence the assassin followed Mrs. Palin, talk of it has political consequences. As several blogs have already noted, the market for her 2012 Republican nomination responded immediately ... on Intrade. She lost over 1/3 of her probability in the immediate aftermath of the massacre. Yet, the movement a different market, Betfair, was much smaller, as it was already trading lower for Mrs. Palin; Betfair has consistently had less confidence in Mrs. Palin's viability as the Republican nominee. The chart is below: