I've been following Intrade daily, and I have a feeling Mankiw is too. The current lowered gap between McCain and Obama seems to be a 1-2 day phenom, not a "two good weeks". I think it's a sign even at the presidential level, trading to a degree is headline chasing (like it manifestly was for the republican veep selection market on intrade). I now wish I blogged my prediction that one should buy McCain at the end of the democrat convention and sell at the end of the republican convention.
The headline chasing nature of these intrade markets suggests to me that Obama stock is heavily undervalued, because headline readers probably have a distorted view of a likelihood of a McCain win, given both the realities of the electoral college and the results of a House of Representatives decided election. Before, I was unsure whether intrade's presidential stocks were as vulnerable to headlines as the veep stocks, now I'm more sure they are. I suspect valuation without the distortion of "Mcain/Obama tied at the national polls" headlines would be more like Obama 80/McCain 20. I suspect there's easy money in buying Obama stocks now. I'll let readers know if I predict with my wallet, too.
I'm considering buying up to $5,000 worth of the Obama stock.