Part of my reason for playing the IEM is to test, on a firsthand basis, Surowiecki's theories about the power of markets. But it was also motivated by my preexisting interest in handicapping the race after mulling over each day's events. If, like me, you're interested in politics, you're also probably doing this already. You can't help doing it. Every bit of news seems to carry political meaning, and you're constantly working to measure it. You hear about Ronald Reagan, and the second thing that occurs to you, if not the first, is, will this help or hurt Kerry? You wonder about Michael Moore -- on balance, is he good or bad for Bush? Howard Stern: How much sway, really, does Fartman have? Is Jon Stewart a political force? That friend of yours who's been out of work forever -- he just got a job, a good one: Does the improving job market mean Kerry's toast? And does it mean anything that your friend the Republican is looking forward to "Fahrenheit 9/11"?

I got my first taste of this sort of fun during the Democratic primaries earlier this year when, for a brief while, I became addicted to the presidential market set up by the PBS show "Frontline." But because that market doesn't use real money, it was unbearably volatile -- candidates' share prices would rise and fall by tens of percentage points throughout the trading day, mostly because (I theorized) new people were continuously coming into the market, and armed with unearned cash, they were making silly trades. (A fool and his fake money are parted even sooner.)

The IEM uses real money, quieting the silliness. Setting up an account is not very easy: You've got to fill out a form, print it out, write out a check for your initial investment (plus a $5 fee), then find an envelope and a stamp and mail off the whole bundle to Iowa. A few days later you get an e-mail with your account info, and you can begin trading. I sent a very modest sum to Iowa -- only $30. This is mostly because I'm not betting man and I didn't want to lose my shirt. Other than in a 401K, I don't play the market, and I've never wagered on sports; I figured $30 was a nice, safe initial investment.

The IEM has two markets on the presidential election. (It has others related to Federal Reserve policy and the fortunes of tech firms.) One market is winner-takes-all, in which you're simply picking the guy you think will take the White House in November. In the winner-takes-all market, each contract you hold for the winner of the race will pay you $1 on Election Day; each contract you hold for a loser will pay nothing. If you buy a Bush contract for 50 cents right now, you will get a buck on Election Day if Bush wins the election. If Kerry wins, you lose your 50 cents.

The IEM's other market, the vote-share market, is somewhat more complicated. Here, for each candidate contract you own, you'll get $1 multiplied by that candidate's percentage of the vote on Election Day. If Kerry wins 48 percent of the vote in November, for example, you'll get 48 cents for each Kerry share you own, and 52 cents for each Bush share. (The votes that go to third-party candidates are not counted.)

Because it offers greater precision, the vote-share market is probably the more interesting of the two as a forecasting tool. But that market is also more difficult to play, since you need to make more precise guesses about each candidate's prospects. Perhaps for this reason, the winner-takes-all market is by far the more popular of the two, and it's the one I chose to play.

The IEM's winner-takes-all market immediately presents a trader of moderate and sometimes flighty politics (which is how I think of myself) with a difficult question: Who will win the White House in November? Ordinarily, as a matter of idle chitchat, this is not very difficult to answer; if you follow politics, you're assessing this question routinely. But putting money on your answer, even if it's just pocket change, alters the stakes of the game. When you first log in to IEM you have a bunch of uninvested cash and a difficult first move -- should I buy Kerry or Bush?

I started out buying both in roughly equal amounts, just to get a feel for the system. But when Ronald Reagan died, Kerry took a dive, and I saw an opportunity. I bought 10 Kerry shares for about 44 cents each, near their record low. I figured that Kerry was bound to rebound after Reaganmania passed. Indeed, during the week of Reagan's memorial, the Los Angeles Times released a poll showing Kerry dominating Bush in the race -- and prompted by that poll I bought more Kerrys.

The trouble was, I got a little too confident in Kerry. The L.A. Times poll was big news in political circles, and I confess I felt a sense of elation. People might finally be seeing, I thought, that George Bush has not been great for America; I figured Bush's price would dive, and Kerry would soar. For some reason, though, Kerry peaked on June 11, the day after the poll was released, and then began to sink. Meanwhile, it was Bush's share price that rose.

A better man would have stuck with Kerry as he fell, but I got scared. After June 11, I began to drop most of my Kerry shares, some at a loss. In dollars, the pain was negligible -- I lost less than 50 cents. But the psychic pain was real. Kerry had cost me money, and I'd lost my faith in him.

Looking at the graph of daily prices in the winner-takes-all market over the past month, Kerry's shares seem to move according to this psychology. Once in a while, either prompted by the news or for seemingly no reason at all, investors flock to Kerry, and there's a sudden one- or two-day Kerry rally. Then, just as suddenly, people -- people like me -- lose all confidence in the man, and we begin to sell. If you time it right, you can make money from this volatility (by buying low and selling high). That's what I did last week, when I saw Kerry's share price approach 50 cents. I knew the highs wouldn't last, and I started dumping the Democrat.

Bush's shares, too, rise and fall, but they move more smoothly than Kerry's. This is probably a virtue of incumbency. Few traders are going to suddenly panic over Bush's prospects. The reason for this is simple: The economy, stupid. Presidents who preside over expanding election-year economies are almost always reelected, and it's likely that many of the traders who participate in the IEM are aware of this. Given how disastrous Bush's economic policies have been for many Americans, it almost sounds like a joke to say that it's likely the president will win back his office on the strength of his economic record. But it's one of those jokes that are also true.

Of course, all this could change. The market has still not weighed in on how "Fahrenheit 9/11" will affect the race. Bush's shares did fall between Saturday and Sunday, but Kerry's didn't bounce up very far. Iraq seems a mixed bag at the moment, too, what with the news of the handover of sovereignty to Iraqis coming at the same time as the possibility of much more violence there. For the immediate future, I'm still buying Bush and selling Kerry. But as I play the IEM until November, I'm not ruling out changing my bets.

As of Monday afternoon, I was in the black. I owned 13 Kerry shares, which were trading at around 45 cents each, for a total value of $5.89. I had 32 Bush shares at 54 cents, about $17.28. I had $7.46 in uninvested cash. The grand total? $30.63 -- that's 63 cents in my pocket thanks to George W. Bush. I'm pretty sure that's more than I made from his tax cuts.

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