The Smart Money

By JOHN TIERNEY

New York Times

April 12, 2005

Do not be fooled by the talking heads in Rome. The journalists handicapping the papal election may sound as confident as ever, authoritatively quoting anonymous cardinals and exclusive sources deep in Opus Dei. But our profession is in trouble. A specter is haunting the punditocracy - the specter of Intrade.

That's an online futures market, based in Dublin and used by more than 50,000 speculators worldwide who put their money where our mouths are. They're expected to spend at least $1 million on futures contracts tied to the election of the pope. And if recent history is any guide, their collective wisdom could be a lot more valuable than ours.

If you listened to journalists during last year's presidential campaign, you heard about a tight race with oscillating polls and shifting momentum. The weekend before the election, we painstakingly analyzed the battleground states and bravely proclaimed them too close to call.

But if you watched the Intrade market throughout the campaign, you saw the traders serenely betting on a Bush victory. Most remarkably, the weekend before the election, the traders correctly called the winner in every one of the 50 states.

Of course, it's much easier to call Ohio than a conclave of cardinals who have never been polled and would be excommunicated for joining an MSNBC focus group. But given the news media's track record, any system more scientific than scrutinizing the entrails of a sacrificial chicken could be an improvement.

For now, the Intrade speculators are expecting the white smoke to signal an Italian pope. The futures contract that pays off in the event any Italian wins was trading at one point yesterday at 41.9, which means the traders gave Italy a 41.9 percent chance, followed by Nigeria at 13. The individual favorite was Dionigi Tettamanzi of Milan, at 23, followed by Francis Arinze of Nigeria, at 14.

Many of the traders probably know little about Vatican politics and are basically recreational gamblers, perhaps sentimentally betting on their local contender. But these amateurs serve a purpose in the ruthless ecosystem of the market.

They are the sheep who attract the wolves. The amateurs' money entices serious investors to spend time scouring cardinals' past statements and other sources. The sheep's money also offers a temptation for those with inside knowledge to cash in, even though that's against the rules of Intrade - not to mention a 1591 papal bull forbidding Catholics from betting on a conclave.

The bull was prompted by rampant betting during previous conclaves. In 1549, the Venetian ambassador tracked the odds with Roman bookies and reported that "the cardinals' attendants in Conclave" were going partners with local merchants "in wagers which thus causes many tens of thousands of scudi to change hands."

The church's ethical standards have improved a bit since the Renaissance, when one pope had eight illegitimate children and another got the post by giving electors written promises of promotions. I don't expect today's cardinals to be smuggling BlackBerries into the Sistine Chapel and placing trades between votes.

But suppose a venal Vatican bureaucrat, or a secular friend of some official, hears a piece of useful gossip before or even during the conclave. Is he going to give it free of charge to a journalist, knowing this risks compromising himself as well as his source?

Or is he is going to sit down, in the secure privacy of his home, and make a few profitable clicks on his computer? Maybe that's improbable. But is it any less fantastic than his calling up one of the reporters who have been babbling for weeks into a microphone at St. Peter's Square?

The journalist in me hopes he leaks it to us, or at least stays away from Intrade, thereby keeping everyone in the dark and allowing us to pontificate unencumbered by actual information. We can theorize that the Italian delegation is following Karl Rove's strategy of "solidifying the base." We can ruminate on a third world cardinal following the Bob Shrum strategy of building a coalition of "the people against the powerful." Columnists have built careers on less.

So I'm praying, for purely selfish reasons, that Intrade gets this election wrong. When I consider those thousands of traders working around the clock, without salaries or health benefits, I hate to think I'm starting a column just as the job is being outsourced.

E-mail: tierney@nytimes.com