Gary Thompson: Is the future of movies in movie futures?

THERE ARE probably drunks in bars right now betting that Tom Cruise's next movie will be a piece of crap.

But surely no sober person, no reasonable individual, no bookie, Vegas junkie or Mafia syndicate would try to earn a living from such wagering. And no non-lunatic would want to take revenue from wagers about Tom Cruise movies and turn it into a pillar of the U.S. economy.

That's nuts, right? Except on Wall Street, a place where decades of lax supervision have created a kind of financial Shutter Island, an insane asylum filled with people who don't know they're crazy.

We on the outside know they're delusional because we see them on CNBC talking about collateralized debt obligations as if there really were collateral, or an obligation (to anyone but the U.S. taxpayer).

Exhibit B: The trading outfit Cantor Fitzgerald has asked the feds to approve their scheme to create an exchange where people can wager on the box office prospects of Hollywood movies.

They want to create a new futures market, tying ticket sales to a contract - if you think "Knight and Day" will make $200 million in four weeks, you purchase a $200 contract. If you smell a bomb, you take the other side. Some MIT grad, who could be at the Mayo Clinic curing leukemia, would actually sit down with a slide rule and build out the algorithms for this glorified craps game (a scenario that Hollywood ironically endorsed in the movie "21.").

To Wall Streeters, this seems reasonable, even productive. Studios, they say, could use profits from good movies to cheaply bet against, or "hedge," bad movies. Lots of industries rely on futures trading to smooth out cash flow - the exceptions, apparently, are onions (known for price swings) and movies.

To Hollywood, the whole thing is bonkers, and though I'm loath to jump to the defense of this industry, the studios have a point.

Movies are not onions (although both, it's been noted, can make you cry). Retail movie prices are already stable. And movies are not like, say, cancer drugs or the Apple iPad, developed in secrecy, then suddenly unveiled. Movies (especially blockbusters) are more chaotic, democratic.

They are shaped into a rough form, which almost always looks awful, then shown to test audiences, then reshaped, then shown to more test audiences, etc. Often, gigantic movies aren't even finished until days before they're released.

Geek nerd bloggers infiltrate the process, and post premature reviews on the Net. Sometimes they even intercept scripts and do the same thing.

The potential for corruption (a cabal of geek nerd bloggers making Wall Street wagers, then maliciously posting reviews or even misinformation) is obvious. Just as obviously, a crooked producer could engineer a really awful movie, bet against it, and make fortune - an idea so obvious Mel Brooks thought of it 40 years ago, with "The Producers."

Only now, thanks to the proposed futures market, the producer wouldn't have to sleep with old ladies to finance the scheme, just place a bet with Cantor Fitzgerald. (Which is worse?)

So the whole thing would be prone to manipulation and corruption, factors that would not diminish its popularity among futures traders, who as bookmakers will profit either way.

And once you legalize gambling on something, the derivative possibilities are endless. If people commence wagering on Tom Cruise movies, you can then start betting on how much revenue the wagering will produce, and that money can be used to form a new financial instrument.

Wall Street calls it a "synthetic" CDO, but using entertainment-world lingo, you could think of it as a Seinfeld CDO - an investment about nothing.

Just wagers piled on wagers. And so "Shrek 4" or "Knight and Day" or "MacGruber" form the foundation of an endless pile of gambling revenue, possibly a significant segment of the U.S. economy.

But is this really the best use of actual money? Was betting on crappy real estate bonds really the best use of those billions we blew on synthetic CDOs?

Couldn't that money have been invested, say, in a competent energy services company that knows how to plug leaks in deepwater drilling rigs?

Or in any real company that makes real things and employs real people?

When the bubble economy burst, incidentally, it really hurt movie production. Bloomberg reported this week that the credit debacle gutted investment capital that once funded movies - this confirms what filmmakers have told me directly. They can't find work, especially in the independent world.

And that, incidentally, is where good and even profitable movies come from. The last two Oscar winners, "Slumdog Millionaire" and "The Hurt Locker," were produced outside the studio system.

I'm glad the folks who funded "The Hurt Locker" invested in Kathryn Bigelow instead of walking up to Cantor Fitzgerald's roulette wheel and putting everything on red.

Wall Street, of course, hates the casino metaphor. They hate it when you refer to their trading schemes as gambling. And maybe they have a point.

When "Bank Dick" W.C. Fields tried to lure straight-laced Franklin Pangborn into a poker game, Pangborn protested: "But that would be gambling."

"Not the way I play it," said Fields.

Today's bank dicks couldn't have put it any better.