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Earthquakes and the stock market |
Earthquakes and stock markets.
Here's a fun one. I saw a TV documentary once about the impact that a
major earthquake in Tokyo would have. Aside from the immediate damage,
there was the knock-on effect worldwide due to the losses incurred by
a) insurance companies, and b) anyone owning property or shares in
companies investing in Tokyo, or based there.
The world's stock markets would probably plunge, and all sorts of
things would follow on - most of them pretty predictable. And as the
earthquake is considered likely to happen eventually, you would assume
that some of the smarter people in the financial world have some kind
of contingency plan, for this and other events.
In the modern world most stock trade is carried out by computers, so
the contingency plan is probably a program, updated regularly, which
sits there waiting for someone to activate it. When the earthquake
strikes, somebody somewhere has the responsibility to do the modern
equivalent of shouting "scramble, scramble".
But what happens if that person happens to be in the bathroom at the
moment the wire services report the news? Or even if he/she is ready to
rock and roll, who's to say that someone else isn't busy launching a
program of trades designed to capitalise on everyone else's emergency
plans?
Clearly, the trick is for the whole process to be automated - and for
it to launch ahead of the news breaking so that you get the chance to
capitalise on eveyone else's reaction.
Apparently the likely location for the future earthquake is as clearly
identified as the San Andreas Fault. It's some distance from Tokyo,
under the sea. In theory then, you could have a network of sensors on
the seabed which would report the size and location of a quake as it
happens, and trigger an appropriate response from your share-dealing
computers.
You could then dump all your stock in Sony, and in all major insurance
companies, before everyone else does. And put the cash into
construction companies, again before anyone else doe. After a few days
you could probably sell the construction stock at a massive profit, and
buy back your Sony stock at a huge discount. Even after donating some
of the remainder to disaster relief funds, you would probably still be
left with a big pile of cash that you could then share with me!
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