- The Washington Times - Saturday, June 26, 2004

President Bush’s job-approval rating is close to low ebb, if you buy what the major polling organizations say.

With even the most optimistic numbers barely reaching 50 percent, and falling as low as 42, the chances of Mr. Bush serving a second term seem to shrink with every passing day. But polls aren’t infallible.

As we have learned, many polls — most notably from the Los Angeles Times — have heavily overweighted Democrats and underweighted Republicans. The Washington Post poll of 1,201 adults included only 1,050 registered voters, and the other 20 percent who are ineligible to vote undoubtedly weighted the entire sample with a pro-Democrat bias.

But Mr. Bush does much better in one group’s opinion: the investor class. Look at the Bush re-election futures markets:

The Iowa Electronic Market’s presidential market (www.biz.uiowa.edu/iem/index.html) opened June 1, and the outlook is good for Mr. Bush. The contract on George Bush’s re-election opened at a healthy 55 cents, and reached a high of 63. Even at its low for the day, the Bush contract was still worth more than John Kerry’s, which never finished a day’s trading above 50 cents. To bet you have to pay to play — but it only costs $5. After three weeks of trading, the Bush contract is still at 55 cents, while Mr. Kerry’s is stuck at 45.

The Iowa Market isn’t the only market on which Bush election futures are bought and sold. There has been heavy trading on the popular online gambling Web site TradeSports (www.tradesports.com), a site featured in the pages of the Wall Street Journal and the New York Times as a leading market for political futures. TradeSports has offered the Bush contract since January 2003 — a year and a half before the Iowa Market opened. The outlook there is almost as cheery as the Iowa market’s — the value of the contract has been hovering in the high 50s since the end of May, climbing to 58 this last week.

After Saddam’s capture last Dec. 13, the price skyrocketed to $75. But in recent months, despite the best economic news in years, the contracts have steadily lost value, as the news from Iraq worsened. With the abuses committed at Abu Ghraib and Mr. Bush’s ever-declining job-approval numbers, the contracts sank to a low of around $52.

After Mr. Bush’s speech at the Army War College on May 27, the contract began moving back up, hovering around $56. On June 2, the price reached $57. As of today, it has risen $1.

If you’re not interested in futures, there is always gambling, pure and simple. And online betting site William Hill (www.willhill.com) offers a chance to bet on the outcome of the next presidential election. Even they, until recently, favored Mr. Bush — he got odds of 1.72, while Mr. Kerry got 2, favoring Mr. Bush by roughly 30 percent — although the odds have since equalized at 1.83 for both candidates.

That the Iowa Market opened so strongly for Mr. Bush even after the hits he took in recent weeks shows how strong he is relative to his market. The Iowa Market has it slightly higher than TradeSports or InTrade, but the investors in all three see the probability of a Bush re-election in the mid 50-percent range, even with the months of bad war news.

If Mr. Bush survives the past months, and it now seems he will, it’s hard to imagine anything that could derail his chance of victory with such relative strength, with the exception of total failure in Iraq or a wholesale economic collapse. Neither is likely.

Although the contracts bought and sold on the Iowa market don’t represent big money, don’t let that fool you — as New Yorker staff writer James Surowiecki put it in his new book, “The Wisdom of Crowds,” this group of “a few hundred amateur traders in the middle of Iowa” has done “a better job of predicting election results than the Gallup poll has.”

How well has it done? From 1988 to 2000, the IEM was off just 1.37 percent in its election-eve prices for presidential elections. If this doesn’t prove that crowds and market wisdom are usually more accurate than expert pollsters or any media elite, I don’t know what does.

Mr. Kerry’s promise to roll back tax cuts makes him unattractive to the investor class, or the gambling class, or whoever else plays these contracts, but if you care enough to place a bet, you probably will vote. Apparently, a majority of these folks, whoever they are, think Mr. Bush is still a good bet. In terms of cents and sensibilities, let us hope they are right.

Lawrence Kudlow is a nationally syndicated columnist and chief executive officer of Kudlow & Co., LLC, and CNBC’s economics commentator.

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