shome42

http://story.news.yahoo.com/news?tmp...rror_market_10

Does anyone understand the logic behind this? How do futures markets predict terror attacks? Is it because people 'in the know' bet on the events???

If that's the case, why in the hell would someone bet in the Pentagon-created futures market instead of just buying standard S&P, Nasdaq or Dow futures or options? You'd think they'd be giving themselves away....yes, I know, the Pentagon says they will not know the identities of those invovled...but who believes that????!!!!

As well, there's already something similar going on at www.tradesports.com, where they have a futures market in many current events, including terrorism, I believe.

Why wouldn't the government just look at their figures? Is it because that market isn't liquid enough? Or is it because they're foreign-owned, meaning the U.S. can't obtain the identities of the traders???

Berry berry interesting...

Sakpo

Talking about a bunch of crackpots. Sickening. Capitalism as The Occult, etc etc. It makes me sad and afraid when articles like that have genuine links at the bottom to .mil sites, meaning I can't dismiss them as hoaxes.

John K. Fitzpatrick

a Death Pool for the ruling class, so they know where to run...

If I had inside knowledge of that nature, and I were a selfish market bastard, I'm sure I could also find better ways to speculate on it than a futures market run by people trying to influence the outcome. Something perhaps more, um, direct?

But maybe that's the point - Pentagon would just warn the appropriate people to get out, and let the event occur anyway.
With that level of distrust in that market's organizer, I wouldn't speculate without an inside line, otherwise even if I had the knowledge, I wouldn't know whether to 'sell short' or not.

- John

shome42

Small note...

If such a market were created, it would not only be played by speculators hoping to make money. I'm sure a significant number of people would also use it to hedge their bets, just as people do with other futures contracts. Industries particularly sensitive to terrorism could use those terrorism futures to protect themselves.

S2Focus

(disclaimer: I smell a hoax here -- but given the track record of Bush and Co., this could be for real.)

If such a market were created, who would be in the best position to profit? Al-Qaeda operatives, with their access to "insider information", of course!

shome42

Al-Qaeda operatives can already profit from insider info. by purchasing standard futures contracts that already exist.

If creating a specific terrorism market allows us to predict events, nab terrorists and allows businesses to protect themselves against terrorist events, then I suppose I'm all for it.

Although...I don't understand why the government would create that market. Why doesn't a private organization create it. All of the other markets, NYSE, Nasdaq are privately owned, right?

Oh, and if this is a hoax, it's one hell of a hoax. How would they got a .mil URL? Unless they hacked it...in which case the Pentagon should be making a statement soon.

Loren Pechtel

If this is real it actually makes sense.

Futures markets are actually a very good way of predicting what's going to happen.

Furthermore, if funny money shows up and makes very accurate predictions there's likely a link to the terrorists. Follow it!

S2Focus

Actually, on further reflection, I'll have to admit that something like this really does make sense in a perverse sort of way. WIth such a market, there'd be lots of private-sector "bean-counter" types looking out for suspicous transactions. So information like this would be much more difficult for the Cheney/Perle/Wolfowitz crowd to hijack than the type of intelligence that typically works its way through gov't (CIA and FBI) channels.

Happy Wonderer

Paging Mr. Lopez...

I have a feeling that when we come out of our mass-delusional dreams of empire that this will be seen as one of the low points. Not only is it distasteful, it is just plain crazy and reminiscent of some third-world dictator's 'great economic idea.' This seems like a plan concocted by somebody who thinks that business models are the solution to everything.

The one thing markets can't stand is unquantifiable risk. The markets operate because there is at least the illusion that you can predict the future values of a commodity. What happens when there is an unpredictable catostrophic shock? People stop trading either up or down, because they have lost their sense that they can predict future values.

Nobody but the most deluded would think that these futures were predictable. Look at them:

How do you predict whether Arafat will survive another attempt on his life? We already know that there are people on both sides of the conflict who would like to see him dead, what we don't know is how technically competent they are, or when they plan to make their move. Terrorists act based upon opportunity more than anything else; Arafat is probably more likely to die the more people who love him -- if he feels secure enough to let his guard down, even one person who hates him can kill him.

Futures contracts have expiration dates (I don't want to wait until Arafat dies of natural causes to collect my money) so you are essentially not betting on whether Arafat is killed, but when he is killed. This is especially unpredictable; how would anybody other than OBL know that 9/10 was buy, while 9/11 was a sell?

Finally, how does one set the price on Mr Arafat's extinction by a certain date? There is no worth at all to that event, so it is hard to see how buyer and seller could have any kind of common ground.

Anyway, others will have better analysis than this top-of-my head reply.

hw

shome42

Agreed.

Agreed, assuming they have no way of hedging that risk.

However, I disagree with your theory that the reason markets exist is because people think they can predict future value. That's true in certain cases, such as the stock market, but I don't think that's the case with derivatives.

People use derivates to hedge precisely because they cannot predict the direction of a security, so they use derivatives to hedge that unpredictable risk.

For example, McDonalds has to deal with unpredictable risk of beef prices all of a sudden rising. McDonalds can't have the price of a Big Mac constantly fluctuating between $.99 and $5, so they buy and sell cattle futures to hedge that risk, allowing them have steady Big Mac prices.

Similarly, insurance companies, for example, have to deal with unpredictable risk. If all of a sudden a massive terrorist attack occurs, they may go broke. But if they buy terrorism futures, they have mitigated that risk because any losses incurred because of terrorism will be made up for with winnings from the futures.

In this way, derivates markets allow people to accept a greater degree of certainty because they act as insurance.

Pure speculation in futures is possible, but that's really not their purpose.


About the specifics of a how a futures market in terrorism would work, look at www.tradesports.com. They have a functioning futures market that deals in terror already.