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Gingrich and Romney hold steady last week as Huntsman and Paul wait for chance

The 2012 GOP field continues to be a study in Newt-mentum. After Michelle Bachmann and Herman Cain did early tours atop the polls as anyone-but-Romney candidates for conservative voters, former House Speaker Newt Gingrich has moved into that slot in the past few weeks. The question for him, as with his predecessors, is whether he can hold on to his lead position.

There's already some initial indication that he cannot. For example, during his first week atop the polls Gingrich fielded an unwelcome series of news reports on his close ties to the mortgage giant Freddie Mac--an awkward revelation for his campaign, since Gingrich had repeatedly called out Freddie Mac and its sister company Fannie Mae for what he contends is the lenders' culpability for the 2008 mortgage meltdown. The press--and rival campaigns have also stepped up scrutiny of Gingrich's checkered personal life, a factor that could jeopardize his appeal among social-conservative voters.

But even as the former Speaker has endured the traditional frontrunner's bumpy ride through the news cycle, the prediction markets haven't really budged in their assessment of Gingrich's shot at the nomination. They continue to handicap those odds at a consistent 15.1 percent.

Prediction markets also have not been greatly impressed with the recent reports that polls among GOP voters in Iowa show a four person race in Iowa. The inside players on prediction markets are treating Iowa essentially as a three-person race, since Herman Cain's campaign remains on the downswing. The relevant leaders in Iowa, from the markets' standpoint, are Gingrich, Mitt Romney, and Ron Paul. Romney has not spent too much time in Iowa, but his front-runner status in national surveys still have him placing strongly in Hawkeye State polling. Gingrich is surging in correlation with the national polls as well--but unlike Romney, he has made a substantial investment in Iowa. Ron Paul has invested heavily in Iowa, and that commitment, too, is now showing in poll numbers there.

The two charts below plot the markets' assessment of the GOP candidates' likely performance in the Iowa caucus--and their shots at eventually claiming the Republican nomination:

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Likelihood of Victory in Iowa and Republican Nomination

You can see Cain's marked downward trend last week on the chart on the right, showing that his already low likelihood of gaining the Republican nomination fell by half.

And should the present wave of Newt-mentum crest and then flag, can anyone else in the field effectively seize the anyone-but-Romney standard? A survey of the prediction markets suggests that's unlikely.

First, there's Paul, who has crept up to a 5.1 percent likelihood of wining the Republican nomination. A surprise Paul victory in Iowa would compel voters to give him a second look. Yet it bears reminding that in open Republican primaries since 1980, Iowa has not been all that reliable starting point for the eventual winner. Yes, eventual nominees Bob Dole and George W. Bush both won there in 1996 and 2000, respectively. But there's also a pronounced trend of Iowa victors fading later in the primaries--witness Iowa winners George H.W. Bush did in 1980, Bob Dole in 1988, and Mike Huckabee in 2008. Paul is also a dedicated libertarian--an affiliation that puts him outside the Republican mainstream which favors a larger government intervention on social issues and is less consistent than Paul on spending issues.

Then there's Jon Huntsman, whom the markets now giv a 4.8 percent likelihood of winning the nomination. Huntsman is now spending all of his time and effort on New Hampshire. But Huntsman has positioned himself as the most moderate Republican in the race--and the GOP seems unlikely to settle on a challenger who seeks to out-moderate Romney.

In short, despite the various shake-ups we've lately seen in the polls, the underlying dynamic of the GOP race remains steady. While Romney's rivals garner greater press attention, the former Massachusetts governor remains well positioned to ride out these early fluctations. The closer this race gets to the voting without a strong anyone-but-Romney candidate, the more likely it is that Romney wins the GOP nomination.

As the 2012 race unfolds, you can follow the likelihoods of the individual primaries and the Republican nomination in real-time.

David Rothschild is an economist at Yahoo! Research. He has a Ph.D. in applied economics from the Wharton School of Business at the University of Pennsylvania. His dissertation is in creating aggregated forecasts from individual-level information. Follow him on Twitter @DavMicRot and email him at thesignal@yahoo-inc.com.

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