You can place money bets on future temperatures.
Can such a predictor help climate-proof your investments?

Temperature graph for betting against GoreThe odds at a race track, determined by hundreds or thousands of bets, are a pretty accurate prediction of performance. What would we learn if punters could bet on global warming?

They can.

In 2007 Professor Scott Armstrong of The Wharton School claimed that there was no scientific basis to global warming predictions. He offered to bet Al Gore $10,000 that his no-change prediction for average temperature over the next decade would be more accurate than the global warming forecast that Gore was popularizing.

Gore declined to participate, but Intrade, an on-line trading exchange for predictions, opened book on the wager anyway. 1,800 bets (at varying dollar prices) have been placed over the past 18 months. For the first 9 months, Armstrong (no temperature change over 10 years) was favored 60/40. But in February 2010, Armstrong’s predictions began to lose support, dropping to 25% by May, and down to 5% today.

These odds may not predict the future. They do little more than track the latest temperatures on which Armstrong bases the bet. As monthly temperatures rise, Gore’s predictions are favored.

We’ve got a lot invested in the climate status quo. We’ve chosen where to live, how to spend money, and other options. So if stock prices reflect what investors think about a company’s future earnings, maybe we can learn something from these prices. Have a look at the odds and let me know what you think they do and don’t tell us.