CAPITAL VIEWS:'Dr. Strangelove Meets The Invisible Hand'

By John Connor

30 July 2003
15:18 GMT
Dow Jones Capital Markets Report

A Dow Jones Newswires Column

WASHINGTON -(Dow Jones)- The idea that emerged from the depths of the 
Pentagon for a terrorism futures market came and went in a heartbeat. This 
was a deservedly fast demise for a monumentally knuckleheaded initiative.

Call it "Dr. Strangelove Meets the Invisible Hand."

The universal condemnation of the terrorism futures market brainstorm marked 
a rare episode of bipartisanship in contemporary Washington. And not since 
the implosion of Long-Term Capital Management has market wizardry been so 
ridiculed.

"Well, in the first place it was absurd," said Senate Intelligence Committee 
Chairman Pat Roberts, R-Kan., during an appearance on CNBC's "Capital Report."

"In the second place, we're trying to get to the bottom of it," Roberts 
said. "In the third place, we stopped the authorization." The senator added 
that "it's bizarre" and "it's over."

Senate Democratic Leader Tom Daschle, D-S.D., said that "the more we look at 
it, the more troubled we are."

Saying "this trade on terror is outrageous and irresponsible," Daschle said, 
"I think there ought to be a full-fledged accounting within the 
Administration (to determine) who is responsible for this, and I think that 
some apology ought to be made to our military men and women and the victims 
of 9/11 for the kinds of things that are being suggested here."

The idea - actually the program started to allow traders to sign up last 
Friday - seems to have germinated from the notion, beloved by many, that the 
market inevitably is right, that it is the ultimate instrument for 
distilling all information into correct conclusions.

Alas, as Alan Greenspan has reminded us, "the future at times can be too 
opaque to penetrate."

As for actually getting a terrorism futures market on line and taking bets, 
well, talk about inside trading possibilities.

Deputy Defense Secretary Paul Wolfowitz learned of the terror futures market 
while reading the newspaper before testifying on Capitol Hill, where, 
coincidentally, he received a bashing for being overly opaque with respect 
to the estimated cost of operations in Iraq in the period ahead.

"I share your shock at this kind of program," Wolfowitz told the senators. 
"We'll find out about it, but it is being terminated."

The idea of using the market to divine the likelihood of things like coups 
and assassinations and attacks and whatnot reportedly was hatched in the 
shop at the Pentagon run by John Poindexter, the retired Navy rear admiral 
perhaps best known, at least until now, for his role in the Iran-contra 
scandal during the Reagan years.

(John Connor, a veteran observer of the financial markets and the Washington 
scene, is Washington bureau chief for Dow Jones Newswires. He can be reached 
by E-Mail at John.Connor@DowJones.Com)