Hurricanes, Correlations and Wall Street

This post is based on an interview I had with Institutional Investor that you can read here.

News flash: New York is a coastal town and the entire Wall Street area is only a few feet above sea level!  For anyone not familiar with NYC geography, Manhattan is an island sandwiched between two rivers (Hudson and Harlem), an estuary (known as the “East River”) and NY Harbor, which is open to the Atlantic Ocean.  Click on the map to see in detail what New Amsterdam looked like in 1660 when it was still controlled by the Dutch.

Lower Manhattan in 1660

Note the wall on the right side of the map (North), where Wall Street now stands. Follow Prince Straet south from the wall until first bridge over the canal.  Investor Analytics is located on the corner of what was Begijn Gracht (Beaver Street) and that main canal, now Broad Street.  The NYSE occupies the corner of Prince (also now Broad Street) and Het Cingel (the Wall), just North of us.  All of this land is in the flood zone, as it was when the Dutch ran the place, and they know a thing or two about dealing with water.  For the past 400 years, this island has been an important part of world commerce, and during that time it has been hit by quite a few hurricanes.  According to NYC’s Office of Emergency Management, Lower Manhattan was completely flooded as far North as Canal Street during a hurricane in 1821, and a category 3 hurricane hit the city in 1938.  I count eight different significant storms hitting or affecting NYC from the OEM’s website: 1821, 1893, 1938, Carol, Donna, Agnes, Floyd, and Sandy.  That’s an average of 4 per century – quite a bit more than the “one in a  hundred” we hear about.  Given the reality that Earth is getting warmer, regardless of the cause, and the Northern Atlantic can support larger storms, we should expect even more storms of such strength or worse to hit NYC and other Northeastern coastal cities.  What’s a business located in such a city to do about it?  We at Investor Analytics have a few ideas, based on the very same tools we offer our clients to avoid financial risk.

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