Paul Krishnamurty is a professional gambler and political analyst. He writes about US and UK politics at the blog The Political Gambler and on Twitteer at @paulmotty.

Paul Krishnamurty is a British professional political gambler currently touring America to watch the primaries firsthand—and to bet on the election. He’s reporting regularly for Politico Magazine on how the gambling markets see the race—who’s up, who’s down, and where the smart money is moving.

1. Trump’s odds plunged when he lost Iowa


When Trump came in second to Ted Cruz in Iowa, he took a big hit in the betting markets: His chance of winning the nomination was at 50 percent before Iowa, then almost immediately fell to 25 percent after the caucus results. As for New Hampshire, before Iowa, the market gave Trump a 75 percent chance in the state. Now he’s hovering around 65 percent, with the odds going up and down every five minutes. So yes, the market still favors Trump to win the state, but the key detail is that Trump is falling fast—faster than anyone else.

I wouldn’t be surprised if his percentage falls further before New Hampshire. The market has learned from Iowa that Trump can’t be relied on for turnout. Second, he’s lost momentum, and third, Trump’s brand is no longer the same: I’m number one, look at me, I’m on top, you’re down there.

But I’m still not ready to short-sell Trump in New Hampshire like I did in Iowa. (I made a last minute, weekend decision to bet that Trump would lose Iowa, which returned a $1,500 profit when Trump lost.) I’m watching a few factors this week. First, I want to see if Trump takes a bigger hit in the polls. I’m also looking to see if an obvious establishment rival to Trump emerges in the state; for months, the establishment candidates have more or less viewed New Hampshire as their saving grace, resulting in a four-way brawl between Kasich, Christie, Bush and Rubio. Will the Bush or Christie people transfer? Is Rubio hoovering up those votes, or is Kasich?

Third, I want to see how Kasich is doing. His odds are at 299:1 to win the presidency, which gives him plenty of room to move up. Kasich, who has staked everything on New Hampshire, has also polled consistently well in the state. Fourth, and finally, how does Cruz come out? Ben Carson bet everything on Iowa, and he could disintegrate to one percent. Where are those votes going?

The one thing I won’t do is put any money on Trump any time soon.

2. Rubio won Iowa

Even though he came in third, the market is hugely impressed with Rubio’s performance in Iowa, and so am I. After the Iowa results, Rubio’s chances to win the presidency and the nomination doubled and his odds to win New Hampshire likewise doubled.

The market is reflecting the Rubio potential I saw last week, when I went to a Rubio rally in Ames, Iowa. The whole thing was very low key and felt disorganized—you immediately got the sense that Rubio didn’t have much of a ground game. But almost everyone there was undecided, and also overwhelmingly moderate. Many of them told me they didn’t like the extremism of the other candidates and other such things.

Rubio starts off with a polite, enthusiastic welcome, but by the end, they absolutely loved him—everything he had to say. And it just struck me immediately: This guy is going to finish third, and he’s probably going to pick up more undecideds than anyone else. That’s when I decided to go long on Rubio, and I placed a $1,250 bet on Rubio to win the presidency, at a 12 percent chance, that evening. After caucus night, that percentage had doubled to 24 percent. I cashed out part of my bet, worth $5,250. If Rubio wins, I can still keep the remainder—$5250—without carrying any risk. This is what we call a risk-free bet, or in gambler’s parlance, a “free bet.”

My position on the Democrat side is less straightforward. On one hand, I've taken a $300 loss on my earlier Clinton position, as her rating to win the presidency has fallen from 56 to 51 percent since I backed her. However her slip helps my existing Sanders position. I could cash out up to $750 on the small stake I have in Sanders, but given the overwhelming likelihood that he'll win New Hampshire, it makes better sense to wait another week in the hope his odds improve further



3. Ted Cruz may lose New Hampshire, but he’s a steal for a gambling portfolio

Ted Cruz is ridiculously underpriced—now valued at 14 percent to win the nomination from 11 percent before Iowa, and unbelievably underrated considering he just won. It’s just plain wrong. Not only has he won, but Cruz showed tremendous resilience—he took it on the chin from virtually everybody, with very few endorsements and allies in Iowa. And though I’ve staked my major long-term bets on Cruz, I’m so confident that I might go back in for more bets soon.

Cruz goes to New Hampshire with very few expectations. If he comes in second, that will be a great result, but third or fourth is fine. From my point of view, in New Hampshire I’m sitting pretty: I don’t think that Cruz is under any pressure at all, I have my nice new position on Rubio, and I want to watch rest of them carve each other up.

But in the abstract, the best news for Cruz is this: The outsiders are winning. In Iowa, Trump, Cruz and Carson got over 60 percent of the vote, not to mention Huckabee and Santorum.

4. Democrats should sleep through New Hampshire—it’s Nevada that’s the next big contest

For the Democrats, New Hampshire isn’t even a contest—Bernie’s hugely ahead in the polls and rated at 93 percent in the markets. What I’m really interested to do is observe in person the enthusiasm gap between Sanders and Clinton here in the state. The question is how much momentum Bernie can translate into national poll numbers, where he is currently around 20 percent likely to win the nomination.

That momentum will eventually play out in Nevada, the next big contest for Democrats. There’s a small market open, but I haven’t made any bets yet; the market for Nevada will balloon in the next few weeks.

I’m giving New Hampshire to Bernie, and South Carolina to Clinton—in fact, the odds are so one-sided in those states that there’s little money to be made, and so I haven’t placed any bets. But Nevada is a true mix of voters, the first interesting test. Originally, Nevada was talked about as a Clinton firewall, but maybe not anymore. Nevada is also much more representative of the Democratic base than all-white Iowa and all-white New Hampshire. If Bernie has momentum to make a challenge there, or even win it, then we could have a race on our hands. Alternatively, the race could just be done.

5. Meanwhile, Bloomberg lurks

The ascendancy of Cruz and the strong performance of Bernie both make Bloomberg more likely to jump in the presidential race. (A Cruz-Sanders race is the scenario in which a moderate voice is most lacking.) Amazingly, when it comes to Bloomberg, the markets have not reacted to Iowa yet: Odds on Bloomberg are still tremendously low, at 59:1, or around 1.67 percent, to win the general election, slightly down actually from 2 percent before Iowa, which is virtually no change at all. No one is sure he’ll run—would he run if it were Rubio versus Clinton? Probably not. If you’re going to bet on Bloomberg, you’re making a big gamble that he even enters the race.

To bet on Bloomberg, I’d need to see his odds shift a lot. I’m kicking myself that I didn’t back him when he was 400:1 at the start of the year. I took a gamble on Paul Ryan at those odds, but not Bloomberg. Now Bloomberg is in seventh place overall for the presidency, behind Jeb Bush but ahead of Christie and Kasich.

Edited down from an interview by Ben Wofford. See Krishnamurty's dispatch from last week.