'Disaster Market' Brings Up Unresolved Question

The notion of the Pentagon setting up a futures trading market for predicting disasters, attacks and political turmoil is deeply disturbing, if not downright scary.

No, it is not disturbing or scary because people will abuse it and commit terror to make profit, although that would probably happen.

It's scary because I thought the Pentagon, particularly allegedly crafty people like John Poindexter, knew that we had options markets for this kind of stuff already. In fact, it is totally unsettling to me that the Defense Advanced Research Projects Agency, supposedly filled with a lot of brains, isn't monitoring the incredibly sophisticated terror predictor that the options market already is. You don't need to spend taxpayers dollars to create an overt terror index when we have a covert one that's working spectacularly.

Of course, I am talking about the open secret that anyone who trades options for a living knows: the incredible put volume on the airlines ahead of the attack on Sept. 11. In fact, one of the most nagging parts of the government's attempt to get at the Sept. 11 financial backers was that some of us who trade for a living thought that Osama bin Laden's money managers and his buddies in Saudi Arabia were placing big bets already.

It's long been known that financiers in the Saudi kingdom play our markets heavily. Why should bin Laden have been any different? In fact, one of the great things about the Patriot Act is that finally hedge fund managers at least have to find out if they are handling terrorist money. Before, nobody even cared about this stuff.

So, when I read about Poindexter's shenanigans I blanch, not because of what an incredibly stupid move it was to embarrass the administration like this just when it worries about its credibility, but I had figured by now someone in the financial portion of some black ops outfit finally would have gotten down to asking how come there was such heavy airline put-buying ahead of what should have been a fantastic autumn season for travel in 2001.

But then again, I always was a conspiracy thinker when I was a trader. Because, of course, it made me more money than believing that there weren't conspiracies.

Hmmm.

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James J. Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. To see his personal portfolio and find out what trades Cramer will make before he makes them, sign up for Action Alerts PLUS by clicking here. While he cannot provide personalized investment advice or recommendations, he invites you to send comments on his column to [e-mail]. Listen to Cramer's RealMoney Radio show on your computer; just click here. Click here to buy Cramer's latest book, "You Got Screwed!" Click here to order Cramer's autobiography, "Confessions of a Street Addict."