Prediction market, Intrade, topped the pollster Zogby in predicting the winners of Iowa’s caucus. The forecast taken last night at 9:30 EST shows Obama and Huckabee having clear leads on Intrade. Zogby however while forecasting a Huckabee win couldn’t separate Clinton and Obama (putting both at 28%). Interestingly, neither suggested that Clinton would end up in third place.

Onward to New Hampshire where Obama is favorite on both Intrade (67%) and Betfair (59%) to win the state. John McCain, who appears to be one of the surpising winners of Iowa, has seen his forecast probability of taking New Hampshire has shot up from around 40% to 71% over the past couple of days (Intrade).

Overall, Clinton still remains favorite to gain the Democratic nomination, but only by a sliver (52% on Intrade, 53% on Betfair). For the Republicans, John McCain has now become the front runner for the nomination (32% on Intrade, 29% on Betfair). Despite last night’s win Huckabee trails in third position on a forecast on both exchanges of 16% chance of getting the nomination.

For all you Paulites, both exchanges are forecasting around a 5% chance of Ron getting the nomination.

For me, I’ve got a tenner on Obama to get the Democrat nomination. For him to get such a resounding win in a rural 95% white state I think indicates the strength and breadth of his appeal.

Hat tip to Caveat Bettor.

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The Wall Street Journal has an excellent article today by Professor Justin Wolfers on Using Markets to Handicap Iowa. Obama is the favorite to win the Democrat vote with Romney and Huckabee neck and neck for the Republicans. Justin Wolfers shows that the markets are an excellent guide to election season.

But steady on says Brett Arends, also at the Wall Street Journal. He notes:

Markets are fascinating. I’m as absorbed by political betting as I am by the stock market — right now, maybe, more so. The prices tell stories. They contain wisdom and folly, clues and surprises. Respect them, by all means. But don’t revere them. The “crowd” isn’t always right.

Both authors note some drawbacks with the current markets (low liquidity and potentially absence of smart money). Either way the election kicks off today and it is going to be one exciting race.

Hat tip to Midas Oracle.

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