Financial markets
US election
The markets still say Mitt
Jan 23rd 2012, 14:00 by Buttonwood
HAVING posted before on the seemingly inevitable nomination of Mitt Romney, I thought I'd better check up on the betting on Iowa's electronic markets. In the wake of the Gingrich resurgence in South Carolina, there has been a slight fall in confidence about the Romney candidacy but at a price of 73.4, he is still the overwhelming favourite. As you can see, only Gingrich of the other candidates has a real price. There is no sign that a "white knight" candidate, like Jeb Bush, will emerge.
Incidentally, the markets also seem more confident than they were in September that President Obama will be re-elected, perhaps because of the Republican in-fighting. At the moment, it's about a 57%-43% split (that's not a forecast of the vote shares, it;s a winner take all market. a bet on Obama means staking $57 to get $100.)
In this blog, our Buttonwood columnist grapples with the ever-changing financial markets and the motley crew who earn their living by attempting to master them. The blog is named after the 1792 agreement that regulated the informal brokerage conducted under a buttonwood tree on Wall Street.
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I'm not a betting man so I don't really understand the mechanics but it seems to me that the two numbers are slightly contradictory: if Mr Romney is considered to be more likely to be the Republican candidate then surely Mr Obama's chances of being re-elected should fall (because Mr Romney has broad appeal)?
Mr. Romney can be more likely to win the nomination, and simultaneously more likely to have taken significant damage in the process. And the chances of his taking damage are looking increasingly good, both from what his Republican opponents say about him, and from the things that he finds it necessary to say to win the nomination.
Obama has ceded a lot of the high ground to his left (civil liberties) as well as to the right (continuing crony capitalism). His rising stock probably reflects that Mitt Romney is not the guy who can take advantage of either to win independent voters.
"Incidentally, the markets also seem more confident than they were in September that President Obama will be re-elected, perhaps because of the Republican in-fighting."
Or, because of the increased likelihood (albeit still relatively small), that Gingrich will win the Republican nomination, who is a better opponent for Obama than Romney.
Or, because the US economy (and stock market) have improved markedly over the last few months.
A better opponent FOR Obama, indeed...
Markets have difficulty dealing with insanity.