Thursday, September 23, 1999

Want a hot tip? Try a thermometer

New investment a bet on weather

The Cincinnati Enquirer

        So now you need a broker to know which way the wind blows?

        Speculators weary of buying the latest dot-com stock have a new way to invest.

        Doppler Radar met pork bellies Wednesday as the Chicago Mercantile Exchange began offering monthly futures contracts based on heating degree days expected in Cincinnati, Atlanta, Chicago and New York. A “heating degree day” is a measure used to describe how much the temperature differs from the standard average for one day.

        Utilities, insurance companies and other businesses with a lot riding on the weather can use the futures to hedge their risk.

        “Why, I say!” declared 62-year-old retiree Steve Varnum, a West Chester investor. “I always thought about the futures market ... that you could make a lot of money, but it sounded a little bit like the lottery.”

        Contracts are based on an index that measures how much the actual daily average temperatures in those cities is below 65.

        If Mr. Varnum ever bought one of the futures, he said, he would certainly bet on Cincinnati: “Maybe if enough people put money on rain, we'd get some.”

        Why would someone without proper weather information buy such an investment, wondered Tim Hedrick, chief meteorologist for WKRC-TV (Channel 12).

        “I guess from now on, you'll see 120-day forecasts as opposed to five-day forecasts.”

        But would he ever buy any weather futures?

        “Oh sure, I'm headed down to the exchange tomorrow.”


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