Round Won

Takeaway: Solid win for Romney last night with Big Bird the key loser. Poll sampling questions suggest this race is very tight.

Admittedly, we borrowed the title for this note from the current headline on the Drudge Report.  The title is a pretty succinct summary of last night’s debate.  In effect, Romney won, but it was only the first debate.  Nonetheless, this was a critical debate for Romney and he delivered.


The most immediate assessment of Romney’s debate performance was on Intrade, the electronic predictive market.  The contract in which people can bet on the probability that Romney will win the Presidency increased more than 10 points in the last 24 hours and is currently trading at just over 34%.  Based on our analysis this was the most significant one day move on Intrade this election cycle.  The caveat being that the odds that Obama is re-elected are still 2:1 in Obama’s favor.


Round Won - A


The most noted response on the debate was probably from Chris Mathews (not necessarily a Hedgeye fan boy) who all but blamed Obama’s performance on the fact that the President doesn’t watch enough MSNBC.  We are not sure we would agree with that assessment, but we did want to highlight one exchange that characterized much of the debate, which is the following:


“But don't forget, you put $90 billion, like 50 years' worth of breaks, into — into solar and wind, to Solyndra and Fisker and Tester and Ener1. I mean, I had a friend who said you don't just pick the winners and losers, you pick the losers, all right? So this — this is not — this is not the kind of policy you want to have if you want to get America’s energy secure.


The second topic, which is you said you get a deduction for taking a plant overseas. Look, I've been in business for 25 years. I have no idea what you're talking about. I maybe need to get a new accountant.”


To us this was the point when Romney pushed Obama very hard and Obama had a very feeble come back and looked more annoyed than anything.  The unstated message was that Obama really doesn’t know what he is doing.  The question of course is whether this characterization will stick and provide Romney a sustained bounce.


As of yet, none of the polls will have the impact of last night’s debate, but if we look across a number of electoral factors, Romney remains solidly in the hole.  First, on the national poll aggregate Obama is still up +3.1.  This is narrower than the +5.9 spread that Obama had four years ago over McCain but it is still a meaningful edge.  Second, in terms of the Electoral College math, based on state level polls, the President appears to have 269 Electoral College votes locked up.  Finally, based on our Hedgeye Election Indicator, Obama has a 62.4% probability of getting re-elected.  Net-net, the race is tight, but Obama has the pervasive advantage.


Thus, while the debate last night was a clear victory for Romney, it is not clear that one debate will be enough given Obama’s advantage on many factors.  To the extent that Obama’s strategy is to play good enough defense so as to not lose the lead, he probably accomplished that last night.  The question from here for the Obama team is whether a respectable defense is enough through the duration of the campaign.  Based on the current polls, it just might be, but the key remaining wild card is that polls are inaccurate and that this race is potentially much closer than many suggest.


We’ve touched on just this point a number of times and Karl Rove reemphasized it this morning in an op-ed for the Wall Street Journal.  Rove compared the current election to the race between Reagan and Carter in 1980 when he was the director of the Texas Victory Committee for Reagan-Bush.  Specifically, on Oct. 13th Gallup put the race nationally at Carter 44% and Reagan 40%.  Two weeks later, this gap widened to Carter 47% and Reagan 39%.  Ultimately, Reagan won by more than 10%.  The lesson being that while polls are instructive, they are far from scientific and have at times been very misleading.


In 2012 a key issue with polls appears to be sampling.  Many polls model turnout levels that compare to 2008, a record year for Democrat participation.  In reality, many measures of voter enthusiasm and voter ID suggest that the turnout between the parties could be much more comparable to 2004 than 2008.  As Dick Morris put it:


“People need to understand that the polling this year is the worst it has ever been.”


The most recent example of poll skew came from a series of Quinnipiac polls.  The most prominent was a poll they did for CBS / New York Times on Florida.  The poll showed Obama up by 9% in Florida.  Coincidentally, or not, the poll also had 9% more Democrats than Republicans represented in the poll.


We are not ready to throw out all polls. Realistically, there are a number of polls that do appear to be oversampling Democrats based more on a 2008 turnout profile.  There is a website that attempts to unskew national polls.  For your edification, we’ve included their most recent analysis in a table below.  For what it’s worth, they believe Romney is actually up +2.6.  Ironically, that may not be news the Romney camp wants right now as the Governor has upped his game considerably as the underdog.


Round Won - B



Daryl G. Jones

Director of Research



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