Plan halted for a futures market on terror

Boston Globe ^ | 7/30/2003. | Robert Schlesinger

[RJCogburn]

A Defense Department program that would have encouraged investors to forecast terrorist attacks, coups, and assassinations - apparently in the belief that market instincts could predict such events - was abruptly canceled yesterday after it came under withering criticism from lawmakers.

[RJCogburn]

Daschle said on the Senate floor, calling the program ''the most irresponsible, outrageous, and poorly thought out of anything I've heard from the administration.''

Even Daschle gets one right......reminding us that no matter which party or person is in control, government by its nature is capable of being incredibly stupid and dangerous.

[Rodney King]

I guess I am the only one at FR, but I think it is a brilliant idea. Markets yield valuble information. Why trust some dopey analyst on his opinion of the liklihood of unrest in a certain country, when they 10,000 most knowledgeable people in the world can meet in a market place to decide the issue?

[snopercod]

The professor from George Mason University who came up with this idea was on Fox last night and made a persuasive arguement for his idea.

He pointed to the fact the the Iowa presidential futures market (or whatever it is called) is a much more accurate predictor of election outcomes than the polls. He also said that the most one could bet was in the tens or maybe one hundred dollars, so it would not be financially-enhancing for someone to do as Rush suggested, and commit an act that would make them "win".

As usual the RATS and the media are completely distorting the facts of the matter and trying to make the pentagon and Bush look stupid. Don't fall for it.

[RJCogburn]

The professor from George Mason University who came up with this idea was on Fox last night and made a persuasive arguement for his idea.

I wish I had heard the fellow. Perhaps I would have been pursuaded, but it seems pretty stupid to me.

using market forces to integrate the knowledge of disparate investors

Right. That'll work...the knowledge of those disparate investors bought into the 'irrational exuberance' that led to the huge market losses over the past three years. I don't think I wanna entrust my family's safety to those guys, thanks.

[RJCogburn]

As usual the RATS and the media...trying to make the pentagon and Bush look stupid

I don't think they needed the help this time. ;^)

[RandDisciple]

I think this is a tremendous idea by the Pentagon. As a professional trader, the truism "the market is always right" would apply in these situations also. In any event where money is wagered (sporting events, Iowa Pres. contest, etc.), the correlation between the final event and the predicted outcomes based on the wagering is amazingly close. I think this idea shows the innovative and creative culture that Rumsfeld has brought into the Pentagon. It is also no surprise that the Democrats are against any anti-terror strategies that are the least bit market based.

[KantianBurke]

Pic of the creator of this program:

[Rodney King]

There is no use in arguing, the reaction to this is 100% emotion and irrationality.

[NutCrackerBoy]

I think it is a brilliant idea.

Also fascinating. But it should have been obvious it would not meet the smell test. A smart way to roll it out would have been for a trading company to launch a generic futures prediction market. After that was established, quietly add terrorism predictions to its portfolio.

[RJCogburn]

the truism "the market is always right" would apply in these situations also.

Hmmm....please persuade me regarding my #4 comment. Seriously.

[Rodney King]

Yes, I agree. They should have known that people would be pissed.

[Rodney King]

Hmmm....please persuade me regarding my #4 comment. Seriously.

Of course it's not always right. But most of the time it is. You are ignoring that the alternative is some kid analyst who probably bought AOL at 75 bucks anyway.

Look, if you don't beleive that markets yield valuable information, that's fine. But understand that we all do, and that is why we think this is a great idea.

[Rodney King]

Plus, nobody is saying that our entire intelligence posture would be dictated by this futures market, simply that it woudl be an incremental piece of information.

[WestPoint90]

My question has been, was this something that was thrown around in a meeting. Then some idiot reporter heard about it and ran with it like it was actually something 'the administration was considering' because it came up in a meeting. Technically that would be true. It came up and was a topic of discussion.

This just smells to me

[Poohbah]

The futures markets during that time frame were all screaming "EQUITY MARKET BUBBLE!"

A variation on this method was used to locate the US nuclear submarine Scorpion after she sank in 1968. They had a starting position--but it was a LONG way to the ocean floor, and there was a lot of room for the thing to scatter.

The guy in charge of finding the Scorpion simply asked his people to guess what each of the key variables was. The catch: the guesser had to back each guess up with a wager of at least one bottle of Cutty Sark.

The project director simply noted which way the bets were trending on each of the variables.

They found the Scorpion within the circle marked out by the confluence of the wagers.

If the IPO touts on CNBC had been required to invest in the IPOs they were touting, we never would have heard of WebVan and pets.com.

[Rodney King]

My question has been, was this something that was thrown around in a meeting. Then some idiot reporter heard about it and ran with it like it was actually something 'the administration was considering' because it came up in a meeting. Technically that would be true. It came up and was a topic of discussion.

My guess is that some really bright guys with no political sense at DARPA came up with this, and that the news came out before anything was really approved from up above.

[mr.pink]

As a professional trader, the truism "the market is always right" would apply in these situations also.

LOL...the market is so right, that millions of Americans who learned first hand just how "right it always is", won't go near it right now with a ten foot pole. The American public seem to be excerising it's "fool me once" options as a means of voting their confidence in Wall Street's infallibility.

Were the fines doled out to the big WS firms actually rewards for it's integrity? Or are you suggesting that the your "truism" is only a "trusim" that exists for the insiders?

[garbanzo]

That's probably what's going to happen. Someone will set up the plan as a private concern and if the government can glean some info from it all the better.

[tsomer]

''I was appalled that we would be in a sense setting up a futures market in death and destruction, and it is not in keeping with our values,'' Senator Hillary Rodham Clinton of New York said during a meeting of the Senate Armed Services Committee.

It's strictly cows for her.

[RJCogburn]

Maybe so. Here is a Fortune piece I came across.

"Is a Futures Market on Terror Outlandish?"
http://www.fortune.com/fortune/investing/articles/0,15114,471785,00.html

I'm still a skeptic to this point, though.