Bush and Kerry are in a virtual dead heat according to the Iowa Electronic Market -- a winner-take-all futures market with a great track record of picking the victors in November. At midweek, Bush was trading at 50.5 cents and Kerry at 49.9 cents.
Kerry had taken a small lead going into the Democratic National Convention, his first lead of the year in the Iowa market. But Bush pulled ahead by the convention's halfway point. Looks like the Boston con game -- "We're not really left liberals who believe in soaking the rich, high taxes, massive government spending and wartime U.N. appeasement" -- is not working all that well.
Between Michael Moore and Teresa Heinz Kerry -- and not to mention the Woody Allen sperm-suit picture of Kerry leaked by NASA -- the Democrats have a bit of a PR problem. Bill Clinton couldn't bail them out. Nor could any of the other big Dem guns, like Carter, Gore and Dean. True, it's not what you would call a really deep bench. But you'd think the Democrats would get a noticeable lift out of a week in the limelight.
The Iowa futures contracts, however, are not all rosy for the Republicans: The GOP could lose the Senate. At midweek in the market for the Senate, the RSlose contract was trading at 45.5 cents, the RSgain was at 43.1 cents, and the RShold was at a mere 11.4 cents.
For those who believe in lower taxes, this is not good. The fact that the Republican Senate can't get a corporate tax cut passed, can't make the Bush tax cuts on dividends and capital gains permanent and can't get a budget passed (all while continuing to press for a budget-busting pork-barrel highway bill) is undoubtedly playing a role in the bad news from the Iowa markets.
The House, however, is in a much more bullish position. At last look, the RHhold contract was trading at 45.5 cents, the RHgain issue at 39.5 cents and the RHlose at a low 14.9 cents.
When you step back and look at all these results, there's a hint that the November election could produce a Bush White House working with a Democratic Senate and a Republican House. In other words, preserving the president's pro-investor tax-cut package is possible -- but it won't be easy.
Undoubtedly, results from the Iowa Electronic Market have been a drag on the stock market for many months. In fact, economists Arthur Laffer and Tom Gallagher have published tight-fitting graphs that show a clear correlation between John Kerry's rise in the Iowa and Tradesport.com markets, and the slump in cyclical growth stocks and the overall stock market.