It wasn’t just Amaranth energy trader Brian Hunter who thought this was going to be a tough hurricane season. Some of our most prestigious weather scientists were making dire predictions, according to a report from Bloomberg news.
In many years, "Dr. Gray's Tropical Storm Forecast," the title of a Colorado State Web site where the free report is updated monthly during the hurricane season, proved uncannily accurate. Early in 2002, 2003 and 2004, the reports correctly predicted the number of named storms in the Atlantic Ocean and Gulf of Mexico for the entire year… Last year, when a record 28 named storms formed in the Atlantic, the Colorado State report sounded an early alarm, warning in May 2005 of "a well-above-average hurricane season" and predicting 15 named storms. That track record is one reason this year's first forecast, published in April, drew so much attention. "We foresee another very active Atlantic basin hurricane season," Klotzbach and Gray wrote. They predicted 17 named storms, five of them intense hurricanes. The paper said there was an 81 percent chance of a major hurricane striking the U.S. coastline. It put the risk of one of them hitting the Gulf Coast, the center of U.S. oil production, at 47 percent.As it turned out, no major hurricanes struck the US coastline, and that calm helped keep down the price of oil futures. So when Hunter made large bets with Amaranth money that spreads in gas futures would widen due to hurricanes, he wasn’t merely repeating the strategy that worked for him in 2005. He was adopting an investment strategy based on the best available opinions of weather experts.
Investing: The hurricane forecast that hit Amaranth hard [Bloomberg in the International Herald Tribune]
Posted by Steve Myers , Oct 09, 2006 12:55PM
My physics prof once made a Rule that goes: "For every complicated problem, there is a simple solution - and it's WRONG." This yearr's prognostic SNAFU falls into the category. A Native American long in years and obervation is said to have noted that "White men talk too much." Put the quotes together in context with the non-event 2006 and there's something worth learning: do not try to fit Gaiea into a video sound byte: the answer is wrong. Likewise, if "experts" MUST talk about the weather, let them do so from humility and awe of Gaiea - and not from a hubris that presupposes we puny carbon based life forms give her orders. As a final quote: "Tain't nice to fool with Mother Nature." Especially when we don't know what we're doing....
Steve Myers in PA.
Posted by beanspants1 , Oct 09, 2006 8:27PM
If the guy really followed the weather "experts" rather than just made a crazy roll of the dice, then he's still an idiot.
it's impossible to really trust weather "experts" because they have to be negative. the obvious reason is the payouts for negative vs positive action are not even close to equal, as they are in the free (ish) market.
katrina cost $200b.
if there had been no katrina, it wouldn't have created $200b over the same time period. so it behooves the experts to err on the side of caution, and business experts to take what they say with the appropriate sized grains of salt.
tbe scary thought is that this guy was allowed to take such a bet with that amt of money. guess i'll be sticking to vanguard.