Creepy and Depressing...

I can't help it; that's how the election “tea leaves” are looking to me.

First: the creepy.  Check out the “Obama version” of the U.S. flag at right.  That flag is for sale on the official Obama web site.  There are only 250 of them (it's a limited edition print), so the listing may disappear at any time – so I've preserved a screen shot of the entire store screen, just in case someone doesn't believe it.

What's creepy about it?  Look how the Obama “O” logo is replacing the standard field of stars for each state.  It's sending a message to me, a creepy message: ”Replace the states with Obama!”  And those red stripes – five of them – look like streaks of blood from the fingers of someone's hand.  Shivers...

And here's another creepy thing: official Obama spokeswoman Jessica Alba asks people to pledge allegiance not to the United States of America – but rather to Barack Obama.  She even asks people to take pictures of themselves with their hands over their hearts (as when you pledge allegiance), like the one at left.  It's way too much like the personality cults of Mao, Stalin, or the various NoKo leaders...

Well, all of that certainly wasn't calculated to make me feel good.  I couldn't help thinking that Romney was running against a new version of Mao, but with competent PR people (and, thankfully, minus the violence).  And I'm not the only one noticing this...

As I drank my morning tea, pondering the above, it suddenly occurred to me that a fixture of previous election reporting – the Iowa Electronic Markets – was conspicuously missing from what I've been reading for the 2012 elections.  If you're not familiar with the Iowa Electronic Markets, it's a futures market (all accessed via the web) where you can purchase “contracts” for all sorts of things.  Essentially it's a legal way to place a bet on some particular outcome.  It's run by the University of Iowa's School of Business, and it's the best of the efforts attempting to “crowdsource” judgment about future events.

Of relevance here, you can purchase a contract that pays based on the outcome of the 2012 presidential election.  The way these contracts work is quite simple.  In the 2012 presidential election “Winner Takes All” contracts (the most popular by far), you can buy one of two contracts: either a contract that says the Democratic nominee (Obama) will win the popular vote, or a contract that says the Republican nominee (Romney) will win the popular vote.  Each contract pays $1 after the election if the candidate whose contract you bought wins the popular vote, or nothing if he didn't.  Where it gets interesting is how much you have to pay to buy one of those contracts today.  Someone is selling you that contract, and they will set the price based on how likely think it is that they will have to pay out that $1 in the end.  The graph at right shows you the price of those contracts over time; blue for the Democrat winning, red for the Republican winning.

If you're not used to interpreting these graphs, this may not be conveying much to you.  Here's the short interpretation: if you're an Obama supporter, this graph tells you that the wisdom of the marketplace is that Obama is very likely to win the popular vote (I wrote that carefully, for reasons I enlarge upon below).  That graph tells me that right now it would cost me about $0.75 to buy a contract for Obama, and about $0.25 for a Romney contract.  The price for a Romney contract is low for a very simple reason: the person selling that contract doesn't think it's very likely that he'll have to pay off.  The thing that's powerful about a system like the Iowa Electronic Markets is that you're seeing the cumulative judgment of many thousands of people.  It's precisely the same dynamic that's at work on the options markets, or the commodities futures market.  It's as close as you can get to an actual measurement of the probability of a future event like the outcome of a presidential election.  The Iowa Electronic Markets have a good track record – not perfect, but good – in their predictions of political outcomes.  What they're saying right now is that Obama is a 3:1 favorite in the election.  Obummer...

The reason I made a point of being careful to qualify the WTA market as being based on the popular vote outcome is this: it is possible for a candidate to win the electoral college (and therefore the election) while losing the popular vote.  This actually happened in 2000 with Bush vs. Gore – Bush won the electoral college vote (and therefore the election), but Al Gore actually won the popular vote.  That's an artifact of our Constitutionally prescribed presidential voting process, and not evidence of George W. Bush cheating somehow.  This artifact drives a lot about how presidential campaigning works.  All of this is discussed in some detail in this nicely done article.  Only three times in U.S. history has a candidate won the popular vote but lost the election.  It could happen again this time, but it's not very likely.  So the WTA results, even though based on popular vote and not electoral college, are still a reasonably good proxy for the election's outcome.

The Iowa Electronic Markets presidential WTA results should be (and probably are) ringing all sorts of alarm bells at Team Romney, and be a reason for the Team Obama folks to be sleeping peacefully at night.  They are not a good omen, most especially the way they're trending (and with a steep slope, too!).  They are not cause for despair – not yet, anyway.  It's still six weeks until the elections, and much can happen in that interval.  But if Team Romney wants to win, they'd better start upping their game, 'cause the tea leaves are not saying cheerful things from their perspective...