Last month, the Intrade investors perceived a two-man race between Mitt Romney and Rick Perry, with Romney still holding onto a small lead. Prior to the Perry boom, Romney had held a comfortable lead for quite a long time. Now Intrade puts Perry in the lead, with a 36.0% chance of victory. Romney is not far behind with 31.0%.
And what of Michele Bachmann, fresh off her win at the Ames straw poll? Apparently the Intrade investors don't think too highly of the straw poll. Rather than seeing Bachmann in closer competition with Perry and Romney, Intrade actually has lower numbers for Bachmann than before: 5.8%. Intrade appears more certain than ever that the primary is a two-man race. Bachmann's 5.8% is tied with Jon Huntsman for the third-highest percentage. With Tim Pawlenty out of the race, Intrade says it's Perry, Romney...and everyone else, way behind.
How did the investors arrive at this conclusion? Although Perry is doing well in some national polls, he has not yet polled well in any early state primaries; few such primary polls have been taken since Perry entered the race. We can take a deeper look into the mind of Intrade investors by examining their markets for the early primaries.
In the Intrade market for the Iowa Caucus, Bachmann is virtually tied with Perry at about 38%. Everyone else is far behind. Meanwhile, on the New Hampshire Intrade market, Romney sits comfortably at 44%, with Perry down in the 20s.
But if Perry and Bachmann have an equal chance of winning the Iowa Caucus, how can Perry have such a higher percentage chance of winning the nomination? In the South Carolina Intrade market, Perry has a 60% chance, with Bachmann down at 13%. Thus, we can conclude that the Intrade investors believe even if Bachmann wins Iowa, it will be a fluke corrected by the voters of South Carolina.
