2012 . . . Can Obama Be Beat?

Conclusion: It’s a long ways out, but President Obama looks more and more formidable heading into 2012.  The key issue is that there does not appear to be a Republican contender. Or at least anyone that is willing to be considered such.


As of yet, no Republican candidate has declared that he or she is running for President in 2012.  While the election is more than a year and a half away, the lack of decisiveness and early declaration may turn out to be an error by those candidates striving for the office.  In contrast, President Obama seems to be gaining momentum in terms of his positive standing among the electorate.


We are big fans of the Intrade markets for politics.  As we’ve witnessed in the past, they are often dead on in their ability to predict electoral outcomes and we saw this in spades with the recent midterm elections, as Intrade came very close to predicting the margin of victory in Congressional elections by the Republicans. 


The futures contract on Intrade for President Obama to win the 2012 Presidential election is currently trading at 62.  This means that if you were to buy the contract, and President Obama wins, your payout would be $38 on every $62 invested.  As outlined in the chart below, this market has trended up since its inception in December of 2010, when the futures contract was trading at 50.


2012 . . . Can Obama Be Beat? - 1


While the Presidential election is still more than a year and half away, this type of data must be disconcerting for Republican strategists, especially combined with some recent polls.  In particular, a recent NBC News / Wall Street Journal poll, with the polling period of 2/24 – 2/28 indicated Obama a +5 versus the generic Republican candidates.


More broadly, while President Obama’s approval ratings are still mired in mediocrity, he has seen some improvement from his worst approval ratings of his Presidency.  Currently, according to the Real Clear Politics Presidential Approval poll aggregate, 47.4% of respondents approve of President Obama and 48.0% disapprove.  While this rating has gone the wrong way over the last few weeks in conjunction with accelerating gasoline costs and a U.S. equity market selloff, it is still well improved from the 51% disapproval rating on September 27, 2010, which was the worst reading of the Obama Presidency.


President Obama’s ratings are far from stellar, but so far they are holding stable despite a major setback for his party in the midterms and only modest economic improvement, especially as measured by employment, in the last year.  A key benefit for Obama appears to be that there is no real frontrunner, or even a declared candidate for the Republicans yet.  In the chart below, we show the poll aggregate for the potential Republican candidates, which validates the lack of a front runner.


2012 . . . Can Obama Be Beat? - 2


In the 2008 Presidential campaign, shortly after the midterms, Presidential candidates began declaring in size.  In fact, between November 2006 and February 2007, Joe Biden, Hilary Clinton, Chris Dodd, John Edwards, Dennis Kucinich, Barack Obama, Bill Richardson, and Tom Vilsack all declared their candidacy.   In the same time period, almost as many Republicans officially declared their candidacy, including Tommy Thompson, Jim Gilmore, Sam Brownback, Mitt Romney, Ron Paul, John McCain, and Rudy Giuliani.


Currently, no Republican has officially declared his or her candidacy.  This is somewhat surprising given the large amount of cash needed to fund a campaign, and the lead time needed to raise that cash.  In addition, there is bully pulpit afforded to an official nominee.  Surprisingly, so far no potential candidate has decided to take advantage of that potential media exposure and establish his or her credentials (and, of course, attack the President).


The other challenge for the Republican Party is that they do not appear to have a strong candidate at the moment.  Currently Obama polls worse against a generic Republican than he does versus any of the perceived front runners.  According to the Real Clear Politics poll aggregates, President Obama leads a generic Republican by 2 points, but leads Huckabee by 5.5 points, Romney by 5.2 points, Ron Paul by 9 points, Gingrich by 14 points, and Palin by 15.2 points.


Clearly, the longer the Republicans wait, the more of an incumbency advantage President Obama will have in the fall of 2012.  As well, even if Republicans were to begin declaring for the Republican candidacy shortly, the other major concern from the polls is that no Republican currently seems viable.


Christie  / Walker 2012… anyone?


Daryl G. Jones

Managing Director

Another French Revolution?

"Don't be complacent," writes Hedgeye Managing Director Neil Howe. "Tectonic shifts are underway in France. Is there the prospect of the new Sixth Republic? C'est vraiment possible."

read more

Cartoon of the Day: The Trend is Your Friend

"All of the key trending macro data suggests the U.S. economy is accelerating," Hedgeye CEO Keith McCullough says.

read more

A Sneak Peek At Hedgeye's 2017 GDP Estimates

Here's an inside look at our GDP estimates versus Wall Street consensus.

read more

Cartoon of the Day: Green Thumb

So far, 64 of 498 companies in the S&P 500 have reported aggregate sales and earnings growth of 6.1% and 16.8% respectively.

read more

Europe's Battles Against Apple, Google, Innovation & Jobs

"“I am very concerned the E.U. maintains a battle against the American giants while doing everything possible to sustain so-called national champions," writes economist Daniel Lacalle. "Attacking innovation doesn’t create jobs.”

read more

An Open Letter to Pandora Management...

"Please stop leaking information to the press," writes Hedgeye Internet & Media analyst Hesham Shaaban. "You are getting in your own way, and blowing up your shareholders in the process."

read more

A 'Toxic Cocktail' Brewing for A Best Idea Short

The first quarter earnings pre-announcement today is not the end of the story for Mednax (MD). Rising labor costs and slowing volume is a toxic cocktail...

read more

Energy Stocks: Time to Buy? Here's What You Need to Know

If you're heavily-invested in Energy stocks it's been a heck of a year. Energy is the worst-performing sector in the S&P 500 year-to-date and value investors are now hunting for bargains in the oil patch. Before you buy, here's what you need to know.

read more

McCullough: ‘My 1-Minute Summary of My Institutional Meetings in NYC Yesterday’

What are even some of the smartest investors in the world missing right now?

read more

Cartoon of the Day: Political Portfolio Positioning

Leave your politics out of your portfolio.

read more

Jim Rickards Answers the Hedgeye 21

Bestselling author Jim Rickards says if he could be any animal he’d be a T-Rex. He also loves bonds and hates equities. Check out all of his answers to the Hedgeye 21.

read more

Amazon's New 'Big Idea': Ignore It At Your Own Peril

"We all see another ‘big idea’ out of Amazon (or the press making one up) just about every day," writes Retail Sector Head Brian McGough. "But whatever you do, DON’T ignore this one!"

read more