GOP Civil War; Brokered convention possible?; third party likely

The GOP is turning its guns inward as the party delivers what the public ordered with its social mood: infighting galore. The long knives are out and the topic picking up the most steam is whether someone else will jump into the race, since it is possible that Ron Paul wins Iowa, Mitt Romney New Hampshire and Newt Gingrich South Carolina. Ron Paul voters think there's no difference between Romney, Gingrich and Obama on spending and foreign policy, while some Romney and Gingrich voters would consider voting for Obama over Ron Paul. With greater proportional representation this time around (though not a major shift), there's also a greater possibility that a candidate goes deep into the race with a significant number of delegates.

During the primaries delegates are apportioned and once they get to the convention, they can vote for any candidate. A contentious primary season that leaves candidates unable to compromise could open the door to a candidate not in the running, a true dark horse, as candidates wheel and deal their delegates. It also opens the door to third parties, as voters decide to leave the party.

A brokered convention is very unlikely, but it's looking like the election will be knock down drag out. Democrats who are salivating at the prospect of Republican infighting will be disappointed to hear that not only will the rhetoric intensify in the general election, but a close race could also expose Democrat divisions. Even worse, A Down Stock Market Guarantees Obama Will Lose in 2012: Robert Prechter. Which is why I expect another round of QE......

The prediction market Intrade is a bit more sanguine. Romney as GOP Nominee contracts are currently trading at 73.6%, with Gingrich down at 6.8%, 0.1% behind Ron Paul. If Romney sails into the nomination, my bet is that we also see a first quarter stock market rally......

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