Hurricane Betting Not Likely: Oil Spill Trades Are
With the 2010 Hurricane season set to begin today (June 1), don't expect online bookmakers to start offering betting odds on Hurricanes hitting the US.
In 2006, following the record setting hurricane season the year prior, online gambling's oldest betting site catering to the North American bettor, Bookmaker.com, came under increasing scrutiny for taking bets on the 2006 storm season.
Bookmaker.com had offered odds on how many tropical storms would hit the US mainland and the number of Category 3 and above storms to hit. With two extremely active seasons, 6-1 odds of zero Category 3 storms hitting the US were posted and Gambling911.com jumped on that opportunity. Past history suggested this was a great bet and it turned out to be just that as no Category 3 storms affected the mainland US.
Gambling911.com promoted Bookmaker.com's hurricane betting heavily coming into the 2006 season. The Miami Herald, Fort Lauderdale's Sun Sentinel, CBS 4 Miami and even the Weather Channel picked up on Gambling911.com's extensive hurricane betting coverage.
Much of the outrage leveled against Bookmaker.com, not surprisingly, came from those regions most threatened by tropical storms.
Natural disasters are out while manmade disasters appear to be in.
Bookmaker.com recently began offering odds on when the BP oil spill would finally be contained and the odds of a massive dome working to stop the flow. The bookies know best it seems. Last month, Bookmaker.com listed odds of "It (the giant dome) will reduce the flow by less than 80 percent at -500, and they were right on the money.
Bookmaker.com CEO Mickey Richardson explained these odds: "In betting terms, since it's the favorite, it's a more expensive bet to make to win more. Each $5 will return $1 if this wins."
Hurricane Oil Spill Betting Combo
Of course there is always the possibility that one or more online gambling sites might begin to offer odds on a hurricane hitting the Gulf of Mexico prior to the BP oil spill containment.
Howard Bryan Bonham of Suite101.com:
"There remain many uncertainties about how to shut down the flow, in order to begin the disaster recovery. With the announcement by the National Oceanic and "Atmospheric Administration (NOAA) that this year's hurricane season could be extremely active, a new complication threatens. More and more, this disaster is taking on aspects of a perfect storm.
"BP's stock market cap has declined $53.2 billion or 28.3 percent, since the Deepwater Horizon rig exploded April 20. (Judging from the public's adverse reaction to the disaster and the President suspending of new offshore drilling, maybe the rig should have been christened the "Deepwater Sunset.")
"Since the average stock market cap of the company's major oil peer group has declined approximately half that amount, or 12.5 percent, the "prediction market" - the wisdom of the betting crowd - indicates BP's oil spill loss exposure is one half its market loss."
Investing Based on News a Bad Idea
The betting market associated with the BP oil spill is alive and well....and probably growing as the oil slick expands in the Gulf of Mexico.
Charles A. Jaffe of the Newark Star-Ledger writes:
"Stocks like Alternate Energy Holdings (AEHI) or Renewal Fuels (RNWF) - where there's no real direct connection or promise to be made - have gotten some play from promoters, under the basic idea that the oil spill will generate a surge of interest in every type of alternative.
"Just about any microcap stock mentioned as an oil-spill play has horrible numbers - provided you can actually get a look at them; they are in the back of the class, with a financial health grade of "F" from Morningstar.
These stocks are all traded on the OTC Bulletin Board or on the Pink Sheets where individuals "invest in a stock without thinking that their odds of winning with it are only slightly better than in picking the daily lottery number," according to Jaffe.
Betting on Catastrophes Fueled by Customer Demand
Mickey Richardson explained his rationale for offering several hurricane-related propositions to open the 2006 hurricane season. He said the idea of betting on calamities seemed depraved at first. But customers demanded the wagers.
"We had to wrestle with it, some people view it as a morbid thing to offer," he said of his site's storm-season bets. "But we can't stop hurricanes. There's been a true interest in it from the public."
Richardson also said at the time that they refused to take bets on the amount of destruction or casualties even with the demand there to do so.
The motive behind hurricane betting is not so much based on winning huge sums of money in the event of a catastrophe. Much of the interest comes from the vast amount of historic data supplied from past hurricane seasons, allowing for more accurate handicapping results than with your typical sports matchup outcome. Historic stats combined with forecasts, weather pattern and ocean temperature observations make hurricane wagering a scientific endeavor of sorts with the chance to make a small profit.
Alejandro Botticelli, Gambling911.com
