Bad Weather: Can It "Predict" Business Success?

Friday, 8 Dec 2006 | 1:02 PM ET

Colorado State University is just out with its 2007 Atlantic Hurricane forecast. The report sees above-average activity next year--with some 14 named storms ahead. That includes 3 major hurricanes. Of course--they could be wrong. They were in 2006 when CSU said the 2006 hurricane season would top 2005. It didn't--as the East Coast was hurricane free.

Given all that--is it a good idea to make investment decisions based on weather forecasts? Apparently so. Scott Burnhart--of Planalytics--says clients are paying them big bucks to predict the weather future. But NYMEX Energy Trader Ray Carbone--says hold on. Both appeared on "Power Lunch."

Banking on Weather
Above-average hurricane activity is being predicted for 2007. CNBC's Bill Griffeth takes a look at whether its wise to make investment decisions based on weather forecasts, with Ray Carbone, Paramount Options Trader, and Scott Burnhart, Planalytics SVP.

Burnhart says that his company looks at weather in the long term--meaning that they don't do "daily" weather forecasts so much as long term trends. He says this helps many retailers so they can plan ahead for what consumers may want. Burnhart says Planalytics has had a 75% degree of accuracy.

Carbone says it's nearly impossible to predict the weather (a common sentiment for us all) and that he personally doesn't look beyond two weeks when it comes to something like this. He says everyone should be prepared for rough weather--but that using weather predictions for business--is risky.

FYI--some companies that do will in "bad" weather include Federated, Target and Lands' End. Items like electronics do not.

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Kenny Polcari