CNN/Money  
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Markets & Stocks
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No future for Poindexter?
Irony of ironies -- traders can now speculate on John Poindexter's chances of keeping his job.
July 30, 2003: 1:47 PM EDT
By Justin Lahart, CNN/Money Senior Writer

NEW YORK (CNN/Money) - The uproar over the Defense Department's plan to launch a futures exchange, where traders would speculate on the potential for such tragic events as terrorist attacks or assassination, has reached a fever pitch.

Heads should roll, critics cry, beginning with the head of John Poindexter, the former Reagan administration official who runs the Pentagon office that cooked up the scheme. "The time has obviously come," wrote The New York Times editorial board Wednesday morning, "to send John Poindexter packing and to shut down the wacky espionage operation he runs at the Pentagon."

What are the chances that Poindexter is still around at the end of next month? About 70 percent according to the Poindexter contract that began being traded on Dublin-based futures exchange Tradesports. Yep, Poindexter is about to serve as an example of how accurately a futures market can predict future events -- the very idea that he was espousing.

"There must have been 15 requests for the contract in my inbox this morning," said Tradesports CEO John Delaney. "It seemed like a good idea to list it."

Tradesports biggest business is in futures contracts that allow traders to speculate (some would say bet) on sporting events, but its current events futures contracts have been steadily gaining attention ever since CNN/Money first highlighted its Saddam futures back in January.

Other contracts currently offered allow traders to speculate on what the chances are that weapons of mass destruction will be found in Iraq by the end of September (21 percent, according to the latest trade) and what the homeland security alert level will be at the end of September (75 percent chance it will be orange).

Poindexter's is an all-or-nothing contract, meaning that it pays out its full face value (100 points or $10) if Poindexter hangs on through the end of August, and zero if he doesn't. Because Poindexter's contract has just launched, theory says that it probably isn't accurately forecasting his present chances staying at his post just yet. As more traders become involved, however, the contract should flash a more accurate reading. And as more information becomes available, the contract should move quickly to reflect it.

Unlike the many critics of the Pentagon's now-defunct futures program, Delaney reckons it was a valid idea -- over the past two years Tradesports' markets have been good predictive tools, he said. In fact, Tradesports has had a good relationship with the researchers who were setting up the Pentagon's exchange, even giving them full access to its trading data.

But there are differences between the two exchanges. The point of the Pentagon's was to provide information on the likelihood of different events, with the aim to try and minimize the potential for those events to happen. Tradesports' business is for traders to act on their understanding of how likely an event's occurrence is. The information that the market spins off as a result is merely a byproduct.

The other difference is that, unlike some of the futures the Pentagon was going to list, Tradesports draws the line at offering contracts that speculate on death. And so the Saddam contracts that were trading heading into the Iraq war were not bets on whether the Iraqi leader would be alive, but whether he would still be in charge. It's just good business not to deal explicitly with the macabre when you're trying to sell stuff like this to the public.

Poindexter might have more of a future if he'd realized that.  Top of page




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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.