If you had any doubt that you could use your instincts to predict virtually any future event and make money, that doubt should quickly be fading. HedgeStreet, an online futures market which is government regulated has launched “hurricane contracts” to speculate on the damage they will cause.
There are two types of hurricane speculation in which you can participate. One is on whether insurance claims for the 2006 Atlantic hurricane season (through November 30) will exceed a certain amount. For example, investors can speculate whether the hurricane season damages will exceed $100 million, $1 billion or $25 billion.
The second way that investors can speculate is on specific named storms and whether insurance claims will exceed a specific amount for the single storm. The first of these contracts will be launched this morning for tropical storm Debby.
For the vast majority, this type of investment contract is nothing more than pure gambling. Unless you have superior knowledge on how storms work and due to this knowledge feel that the market is misrepresenting the monetary risks from the hurricanes’ potential damage, it’s best to steer clear of these.