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Conclusion: Romney has caught Perry in the race for the Republican nomination making it a true two horse race with the support of other front runners eventually being critical.  In the recent special races, the bad news builds for Democrats suggesting Republicans could gain the Presidency and Senate.


Two nights ago, the Republican candidates for President held their second debate.  The message from this debate was clear: the Republican posse is not going to let the cowboy from Texas remain at the front of the pack without a fight. Indeed, Texas Governor Perry suffered shots from all of his fellow nominees and while he handled himself reasonably well, former Massachusetts Governor Mitt Romney was the clear beneficiary after the debate.

In fact, according to the most recent contracts on InTrade, Romney’s probability of becoming the Republican nominee for President now surpasses Perry’s probability.  Based on the futures contracts on InTrade, Perry now has 35.4% probability of becoming President, while Romney is at 39.7%.  Perry’s probability is not off dramatically from its highs, but Romeny’s, on the other hand and as shown in the chart below, has skyrocketed. 

The Posse Catches Cowboy Perry - 9 15 2011 10 23 34 AM

The other key take away from these InTrade contracts, and most national polls, is that this race is most definitely a two candidate race.  On a combined basis, the probability of either Romney or Perry becoming the nominee is north of 75%.  Interestingly, the key for either getting nomination could very likely be the endorsement of one of the other front runners, namely Gingrich, Bachmann, or Paul. 

In that vein, Tim Pawlenty, who admittedly knows both candidates well, opted to publically come out and support Romney (and Romney supporters purportedly have agreed to help retire Pawlenty’s campaign debt).  Since Pawlenty was a marginal national candidate at best, he likely only had a marginal impact on Romney’s standing.  The next endorsements will be much more critical and will likely come much closer to Presidential primary season.  

The tentative primary dates to be focused on are as follows:

  • Iowa, December 5th, 2011;
  • New Hampshire, December 13th, 2011;
  • Nevada, December 13th, 2011; and
  • South Carolina, December 17th, 2011

These dates are subject to change, but it is in this general time frame that the Republican nominee should be crowned and if the race between Perry and Romney stays tight, it will likely be determined by endorsements from the other front runners.  Then, after the Republican nominee is named, the real political race begins.  Or does it?

There can be no doubt that President Obama will face a tough race given the state of the economy and his own approval rating.  Interestingly, many polls suggest that the race will be close and the President Obama is still the odds on favorite.  In fact, a poll released by Public Policy Polling yesterday shows Obama beating Romney by 4 points, Perry by 11 points, and Bachmann by 14. 

Polls, of course, are notoriously inaccurate when analyzed on a standalone basis.  The recent results from Congressman Anthony Weiner’s former district, the 9thCongressional District, and other special races, are perhaps more telling than recent polls.  Specifically, New York-9 has not elected a Republican in over a hundred years and has 3:1 registered Democrats versus Republicans.  Not only did presumptive Congressman Bob Turner (R-NY) win the seat, he crushed the presumptive Weiner heir by a margin of almost 9 percent. 

The other two recent special elections, though not as newsworthy, have had similar results.   In Nevada-2 on September 13th, the Republican candidate won by 22 points and in California-36 on July 12th, the Republican only lost by 10 points.  In both of these races, the Republican candidates dramatically outperformed their Partisan Voting Index (PVI), a measure of how the district voted based on the past two presidential elections, by a margin of +12 and +14 respectively.  Collectively, in California-36, Nevada-2, and New York-9, the Republicans outperformed versus the PVI-expected outcome by a staggering 15 points on average.

Clearly, these are only a few races, but certainly telling.  As one Queens voter told the New York Times:

“I am a registered Democrat, I have always been a registered Democrat, I come from a family of Democrats — and I hate to say this, I voted Republican. I need to send a message to the president that he’s not doing a very good job. Our economy is horrible. People are scared.”


To that end, we will be releasing our Hedgeye Election Index in coming months that takes real time economic data and provides insight into future election results.  In part, the Hedgeye Election Index will be based on Yale Professor Ray Fair’s work.  Professor Fair looked at more than one hundred years of national elections and found that the most consistent and relevant factors that predict elections are recent economic performance, specifically growth.  Currently, based on our financial estimates, Fair’s model shows that Obama will only get 49.7%, so lose in a squeaker, but the Republicans will also gain control of the Senate.

Daryl G. Jones

Director of Research