• It's Here!

    Etf Pro

    Get the big financial market moves right, bullish or bearish with Hedgeye’s ETF Pro.

  • It's Here


    Identify global risks and opportunities with essential macro intel using Hedgeye’s Market Edges.

Conclusion: Texas Governor Rick Perry seems to have the hot hand in the race for the Republican nomination, but his emergence verifies our continued belief that this is a weak and poorly organized field of candidates.  This bodes positively for President Obama’s re-election efforts.


This weekend, two-term Texas Governor Rick Perry spoke at the Republican Leadership Conference in New Orleans and according to reports, he brought the house down.  Governor Perry drew a sharp and partisan line between the political left and right that played well with his audience.  The three key themes of his twenty-five minute speech were the need to cut government spending, cut government interference, and to, generally, get the United States back on track.  It should be no surprise that Perry received favorable reviews after this speech, as he himself said, “I’m preaching to the choir here. I understand.”

This speech capped off a strong month for Governor Perry in terms of perception of being a legitimate presidential candidate.  While he isn’t yet making a serious dent in national polls and hasn’t yet participated in candidate debates, he has seen a startling move on the InTrade Republican nomination futures market.  We’ve posted the chart of the futures contract for whether he will gain the Republican nomination below.  In the span of one month, this contract has gone from being priced below $3, to a current price of $18.80, so an effective increased of likelihood of his getting the nomination from 3% to almost 19%.  This has occurred despite the fact that he has not officially entered the race.  Interestingly, according to InTrade Perry has almost double the chance of receiving the nomination versus Governor Pawlenty of Minnesota.

Run Rick Run - 1

The rapid ascent of Governor Perry, at least on this measure, verifies the obvious challenge to Republicans in this electoral cycle, which is that they do not have a candidate, or candidates, that will clearly drive the Republican base.  While former Massachusetts Governor Mitt Romney is currently the front runner in many polls, and according to InTrade has a 32.5% change of obtaining the nomination, his position remains precarious as front runner. 

In the broader polling data related to the Republican Presidential Nomination at Real Clear Politics, the RCP averages for the Republican nomination show a similar story.  That is, a race that is poorly defined with no real front runner.  While much of the data is about a week old, Romney still leads with 24.4% of those polled saying they are going to vote for him in the primary.  Interestingly, his two closest competitors, Sarah Palin and Rudy Giuliani, at 16.0% and 11.0% respectively, haven’t even declared they are running for the nomination.  We’ve posted a summary table of these polls below.

Run Rick Run - 2

Currently, if the advisors of any Republican candidate are concerned, it would have to be those of Romney.  In effect, Romney has been running for President for well over  six years, has substantial name recognition advantage over the competition, and, clearly, has a much more developed fundraising network.  Despite these advantages, Romney still has only a narrow lead over the field.  As well, the recent visibility of Governor Perry provides support to the idea that Romney remains very vulnerable.

Some political strategists that we are in contact with have suggested that Governor Perry is just what they Republican Party needs to defeat Obama.  Perry is a motivational and fiery speaker, has strong views related to the minimal role of government, has a largely successful track record as Governor in Texas, and has the social conservative credentials that will aid him immensely in the Republican primaries. 

President Obama is going to have a very difficult time defending the economic performance of his administration.  More than anything else, perhaps the best proxy of this is the misery index. The misery index is basically a combination of unemployment and consumper price inflation and hit a 28-year high last month.  We have an index that measures a similar dynamic called the Hedgeye Inflation Index, which is posted below.  Specifically, this index measures the delta between what people pay versus what they make.  Collectively, both of these indices show that that average American isw getting squeezed.  It is likely that by September 2012, there will be limited improvement of these measures.  So, to the extent that President Obama can shift focus away from the economy, he stands a much better chance of gaining re-election.  In theory, a candidate such as Rick Perry would open that door for President Obama.

Perry has two characteristics that may not aid in his ability to win a general election for the Presidency.  First, he is extremely socially conservative.  He opposes all legal recognition of same sex marriage.  In addition, he is pro-life and has opposed government funding for elective abortions.  Much of this is underscored by his evangelical faith, which has led him to, among other controversial decisions, encourage the teaching of intelligent design in schools.  Second, Perry has been a strong advocate of State rights, so much so that he has mused publicaly about Texas seceeding from the Untied States.  As he said on April 9, 2009:

“I believe that our federal government has become oppressive in its size, its intrusion into the lives of our citizens, and its interference with the affairs of our State. That is why I am here today to express my unwavering support for efforts all across our country to reaffirm the States' rights affirmed by the Tenth Amendment to the U.S. Constitution. I believe that returning to the letter and spirit of the U.S. Constitution and its essential 10th Amendment will free our State from undue regulations, and ultimately strengthen our Union.”

Collectively, these views are increasingly out the mainstream believes of Americans. 

This, of course, is a short and nuance summary of some of Governor Perry’s more controversial stances, but they are important to consider especially given the positive response Perry has received.  In a short period of time, he has become a legitimate Presidential candiate.  The question remains: which party wants him to run more?  Just perhaps, there are a few Democratic strategists out there who are saying, “Run Rick Run”, as well.  If nothing else, it will certainly elongate an already muddy Republican primary.

Daryl G. Jones

Managing Director

Run Rick Run - 3