Why such a huge shift, and why was it so sudden? It was not the result of Gingrich's performance at the December 15th primary debate; most reviews of Gingrich's performance were positive. The majority of the crash actually took place a day or two before the debate. Nor was it the result of a steep drop in the polls: Gingrich is still leading in every recent national poll, every South Carolina poll, every Florida poll, and virtually every Iowa poll.
However, the extent of Gingrich's average lead in the polls has declined. Intrade investors are skittish, having seen Rick Perry and Herman Cain rapidly rise and fall in the polls. Perhaps the investors understand that Gingrich's poll numbers are built on a flawed candidate, and they were looking for signs that the Gingrich bubble was past its peak.
Was there ample evidence that Gingrich is past his prime? Intrade investors apparently placed a lot of faith in just two Iowa polls. An Iowa poll from Public Policy Polling (D) this week had Gingrich only one point ahead of Ron Paul. The next day, a Rasmussen poll of Iowa had Romney in the lead over Gingrich, 23-20. Drudge Report prominently displayed the results of both polls, and the Intrade market had a big reaction. If subsequent polling doesn't reinforce those two (which are currently outliers; the rest of the recent Iowa polls have Gingrich ahead by 10-15 points), the market may shift back to a lesser degree.
Among the minor candidates, only Paul and Jon Huntsman post numbers above 5%: They are at 7.8% and 7.1%, respectively. It seems that Paul and Huntsman's numbers are unaffected by the sudden increase in Romney's chance to win; the markets apparently serve as places for fans of Paul and Huntsman to lose some money.
The Iowa intrade market shifted accordingly. Romney leads at 33%, with Paul at 31.2% and Gingrich at 20.1%. The near tie for Romney and Paul reflects investors' lack of certainty over whether the PPP or Rasmussen poll was more accurate. Either way, they clearly discount the rest of the Iowa polls.
In New Hampshire, Romney is still at 75%. In South Carolina, where Gingrich was a big favorite just days ago, Romney leads 38% to 30%. This is interesting because polling has Gingrich an average of twenty(!) points ahead of Romney, though the polls are not as recent. Presumably Intrade investors think Romney has a good chance of sewing up the nomination with wins in Iowa and New Hampshire.
In the Florida market, Romney leads Gingrich 50% to 30%. As with South Carolina, polls have Gingrich ahead an average of about 18 points, but the polls are about two weeks old. Overall, it's plain to see that the effect of establishment attacks and TV ads against Gingrich have had a big impact on the way people view the race, most polls notwithstanding.
