Front Runner Scrutiny Pulls Newt Gingrich Back Even with Mitt Romney

As many Americans put off holiday shopping until the last minute, Republican primary voters continue to browse the various candidates looking for the perfect fit, said FBR Capital Markets.

Republican primary voters have successively tried out Michele Bachmann, Rick Perry, and Herman Cain, and now Newt Gingrich in an effort to find the perfect conservative. Yet on closer scrutiny, each new front runner has shown defects and fallen by the wayside.

So, too has Gingrich's popularity fallen back to earth at allowing libertarian Ron Paul to make a formidable surge in Iowa. Through all of this, we see Mitt Romney as the 'satisficing' option that Republicans are ultimately likely to agree on, said Benjamin Salisbury, an analyst at FBR Capital Markets.

Although Romney lacks the conservative wow factor that voters are looking for, Romney is viewed as honest, competent and capable of addressing the country's economic challenges. More importantly, Romney is the candidate most well positioned to challenge President Barack Obama in 2012 Elections.

Salisbury believes that as the primary process plays out, Republican voters will ultimately nominate Governor Romney because, according to a NBC/WSJ poll, he has the one feature that they just can't live without - electability.

The latest Gallup poll shows Gingrich's lead over Romney falling from a peak of 15 points just three weeks ago to 2 points (Gingrich 25 percent, Romney 23 percent). The scrutiny of front runner status has quickly taken its toll on the candid former Speaker.

Electability still weighs heavily on primary voters' minds, and Romney is the only candidate who tests on par with the President, said Salisbury. Romney holds a 10-point advantage as the candidate most likely to beat the President in the general election (down from 22 in November).

However, Romney's moderate policies and temperament mean that he also fails to inspire passion. Just 9 percent of GOP voters view him very positively, but he also has the highest ceiling, as just 16 percent say they would not support him for the nomination, by far the best score, said Salisbury.

Salisbury said key to a successful campaign was the ability to build an infrastructure to translate support into votes, and fundraising is generally a good proxy.

The clear front runner is Mitt Romney, who through Sept. 30, 2011 (the last reported data) has raised more than $32 million and has a cash on hand total of $14.6 million, well ahead of Rick Perry ($17 million/$15 million). Near the bottom is Newt Gingrich with almost $3 million raised, but only $350,000 cash on hand.

Although Gingrich is likely to post a strong fourth quarter, commensurate with his rise in the polls, his paltry early earnings reveal how far behind the Gingrich campaign was in building the infrastructure to compete for the nomination, said Salisbury.

In our analysis of electoral outcomes, we monitor several of the predictive markets. Our analysis shows a sharp drop in implied probability for New Gingrich in recent weeks, coupled with a surge for Mitt Romney, said Salisbury.

One market, intrade.com, now has Mitt Romney with close to a 70 percent chance of winning the Republican nomination and Newt Gingrich with only about a 10 percent chance. This was a reversal of earlier this month when both were showing an about 40 percent chance at the nomination, with Romney's probability rising and Gingrich's probability increasing, said Salisbury.