Considering all the people who continue to lose their shirts on the stock market these days, was I ever surprised to read the following in the news yesterday:

The Holy See, the administrative body of the Roman Catholic Church, posted a ¬6.1 M (US$7.4 M) gain last year in its stock and bond portfolio.

Not too shabby!

On Tuesday, the Vatican released select details of its 2004 accounts.

"After three years of negative results, the year 2004 closed in the black," said Holy See Head of Financial Affairs Cardinal Sergio Sebastiani.

Here are some of the highlights of the statement:

---The Holy See recorded a total profit of about US$3.8 M in 2004

---Total revenues were approximately US$256 M

---US$89.3 M in donations from dioceses and individuals was recorded

---The Vatican's real estate portfolio saw US$30.4 M in profits last year

When looking at these figures, keep in mind that the 2,864 Catholic dioceses and 412,886 parishes around the world are financially independent from the Vatican. The Holy See represents the church's headquarters only.

Earlier this year, the joke was that Pope Benedict XVI would have to start laying priests off because the past three years have seen deficits for the Vatican budget. Like many investors, the Holy See's bottom line fell short over the past few years because of weak stock market conditions. "The market giveth, and the market taketh away," quipped Joseph Harris, an accountant who analyzes the Vatican's finances every year.

The market's relative strength in 2004 definitely helped the Vatican boost its profits. About 80% of the Holy See's portfolio is in bonds these days, with the remaining 20% in stocks.

After suffering previous stock market losses (after the bubble burst), Monsignor Claudio Celli, the Vatican's asset manager, shifted the Holy See's investment strategy away from higher- risk stocks and towards short-term bonds, and it looks like the strategy has worked.

With the 2005 market still not looking very promising for investor profits, however, I hope the Vatican has something else up its sleeve, because the profits made last year certainly won't continue.

The Vatican's books are traditionally held very closely, with only a bare minimum of information being released to the public. Before 1990, Vatican finances were completely private.

Today, church followers are hoping the shroud of secrecy will be lifted somewhat with Pope Benedict XVI's new reign, although that reality is unlikely considering Benedict's conservative nature. Some Catholics are thinking that a little transparency in the books would help younger members regain trust in the church, not to mention boost donations and financial support.

In the meantime, like any investor in today's market, the Holy See will need to analyze its current portfolio weighting and find new ways to bring in revenue and remain profitable.