I believe Kerry is now at 95% probability to win. The best position he's been in to date. Here's why...
(Cross-posted at mydd.)
First, you have to remember the 50% Incumbency Rule. Forget the difference between Bush's number and Kerry's number in the polls: just look at Bush's number. He's losing if he's below 50% (or below 49% in a state where Nader is running.) Details here (plus much discussion on the front page of MyDD over the last few weeks).
With this in mind, Bush is screwed.
Here's Bush's number in the last 8 polls in Ohio (most recent left-most):
43 44 47 47 47 46 47 46
averaging a miserable 45.9. The incumbency toss-up point in Ohio is 50% rather than 49%, since Nader is happily not on the ballot. So Bush is 4%
short of a toss-up. This puts Ohio in Kerry's column (outside the margin-of-error, since we averaged the last 8 polls).
Here's Bush's number in the most recent Florida polls:
46 47 45 49 48 44 44
averaging a pathetic 46.1%. Almost as disastrous as his standing in Ohio, and 3% short of a toss-up. (The incumbency toss-up point in Florida is 49% since Nader is on the ballot, rather than 50%as in Ohio where Nader is not.)
Finally, suppose Bush loses Ohio, but manages to hold onto Florida by the skin of his teeth. He's also screwed in New Hampshire (41 47 47 41 48 45 47 42 43, ave 45.6). This means, to win, he has to win EVERY single one of the following five states (Bush's recent polling numbers in brackets, most recent left-most):
Iowa (48 51 45 49 47 47 47 46)
Wisconsin (47 51 45 48 47 43 43 44) [The 51 is Gallup - surprise!]
Nevada (49 45 52 52 50 48 47 48)
Colorado (52 50 48 49 49 47)
W Virginia (49 47 51 50 46 45 44 44) [The 51 is Gallup - surprise!]
Kerry needs to win just ONE of the above states; Bush has to win ALL FIVE. That's why the smart money's on Kerry. And don't forget this is predicated on Bush managing to hang on to Florida --- which is already in much doubt.
PS There's a slight complication if New Mexico (46 49 47 45 43 47 44 44 42, incl. two right-wing Mason-Dixon (49 47) and one right-wing Gallup poll (47)) becomes pretty close. But the story basically remains the same. (With hindsight, I should probably have included NM in the story... oh well.)
PPS In the end, it probably boils down to how much voter fraud you think the GOP can get away with...
PPPS Speaking of smart money I recommend shorting (selling) the PRESIDENT.GWBUSH2004 contract at tradesports.com, which at the time of writing still shows an implied 58.5% probability of a Bush win. :)
PPPPS I slightly cherry-picked those Bush numbers, in the sense of choosing how far back in time to go. But I think that merely (or not even) compensates for the Likely Voter bias towards the GOP, so I hope you'll forgive me.
PPPPPS Finally, remember Dems are surging in Iowa early voting (7% of total returns are in), and there's solid evidence of a Kerry turnout surge in the swing states.