Monday, July 16, 2007

Cash On Hand

Today was the day that the quarterly fundraising numbers for Presidential candidates was reported. The most important number is "cash on hand". Compare "cash on hand" with "amount spent so far" and it is a decent measure of "potential energy" in a campaign. For example, it is widely recognized that John McCain's campaign is in trouble. He has raised piles of money- $11 million this quarter, but he has also spent piles. If it has helped him at the polls it has only helped by slowing his drop. If the $11 million has not raised his support then the three million he has left (due in part to a 1.7 million dollar loan) won't help much either. His three million represents low potential energy because he has already spent several times that amount. The cash on hand cannot push him up. Compare that to Ron Paul. He has about the same amount of cash on hand as McCain, but none of it is in the form of a loan and Paul has only spent $655,000 to date. So even though their "cash on hand" is about the same, the Paul campaign has significantly more "potential energy". Keep that principle in mind as we go through the numbers with other candidates...

The situation on the Democrat side is pretty simple- and scary for Republicans. Hillary has $45 million dollars on hand. Barak Obama has $36 million. Sen. John Edwards has a very respectable 13 million on hand. Bill Richardson and Chris Dodd have 7 and six million dollars respectively. Six million dollars cash on hand would make on a legitimate contender on the Republican side without a doubt, but on the Democratic side it makes them virtually uncompetitive. Joe Biden is the only other Democrat with over a million ($2.7) and he is uncompetitive. Richardson and Dodd are $30 million dollars behind the two leaders. Republicans can only hope they spend most of that cash fighting one another in the primary.

The Republican situation is a lot less clear. Rudy Giuliani has a big lead in cash on hand with $18 million. His next closest rival is Mitt Romney with $12 million on hand. Romney's trouble is that about $9 million of that pile is a loan to himself. He is down to about $3 million in "raised" money. He has spent cash at twice the rate of Rudy. He has spent it at a pace he cannot sustain unless he self-finances. He is leading in the early states, but trailing elsewhere. He may have peaked in those early states TOO early. In other words, Romney's pile also has lower "potential energy" than a narrow look at "cash on hand" would lead one to believe.

There are many states Giuliani is going to have a hard time winning regardless of how much money he spends. Not so Hillary and Obama on the Democratic side. That is why his huge lead in the money is not as overpowering as one might think. We don't know how much non-candidate Fred Thompson has, but some rumours are saying that it is in the area of $7 million dollars. We will see. John McCain ($3.3 million and most of it borrowed) and Ron Paul ($2.4 million) are the only other two Republicans that have more than $1 million in the bank. In fact, none of the others is even close to one million.

Based on this view, we would expect the McCain and Romney campaigns to stall. Ron Paul is the second tier candidate with the best hopes of rising. On the Democratic side, the two leaders have such an overpowering advantage that it will almost impossible for a 2nd tier candidate to gain energy.

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