Farmer’s almanacs were indispensable business tools back in the 18th century, as the success of our agricultural economy depended greatly on reliable sunrise tables, planting charts and weather forecasts.

The Old Farmer’s Almanac, launched in 1792, is North America’s oldest continuously published periodical. To calculate the Almanac’s weather predictions, founder Robert B. Thomas studied solar activity, astronomy cycles and weather patterns, and developed a secret formula that’s still kept in a black tin box at the Almanac headquarters in Dublin, New Hampshire (this is suspiciously reminiscent of the proverbial “black box” algorithms used by some of today’s hedge fund managers).

In 1818, a competing publication, known simply as The Farmer’s Almanac, hit the market. This publication’s forecasting formula is also top secret, and known only to a reclusive seer named Caleb Weatherbee. The almanac says Caleb is a real person living somewhere in the United States, but his true identity has never been revealed.

Meteorologist for hire
Our economy no longer depends on family farms, and farmer’s almanacs have been reduced to little more than curiosities. But weather still pays a major economic role. Indeed, the U.S. National Weather Service was moved out of the Agriculture Department earlier this decade and made part of the Commerce Department.

Energy companies are said to be hiring meteorologists at more than twice the rate of government agencies. Retailers are teaming with climate consultants to predict everything from the demand for winter coats to the best time to stock lawn fertilizer. Pharmaceuticals ramp up allergy pill marketing based on expected pollen counts. And natural disasters have cost insurers tens of billions in the last few years alone.

Joe Bastardi could be considered the Caleb Weatherbee of Wall Street. As Chief Forecaster at AccuWeather, a firm that calls itself, “The world’s weather authority,” he sells weather predictions to commodity traders and hedge fund managers. According to a Dow Jones report, Bastardi’s forecasts can make a measurable swing in the New York Mercantile Exchange.

Investment firms are also building in-house expertise. For example, Lehman Brothers hired Dan Guertin as its chief meteorologist in 2007. He’d arrive at work at 5:30am to scan global forecasts and produce reports tailored to different commodities. Guertin was right on the money when he predicted that Hurricane Dean would narrowly miss touching down in the U.S. However, given the recent fortunes of Lehman, it’s hard to say if he really knew which way the wind was blowing.

Our view
Over the long-run, we’d be confident predicting that the weather in Arizona will be warm and equity markets will return somewhere in the neighbourhood of eight percent annually. But in the short-run, both the markets and the skies are influenced by such a complex aggregation of factors, we doubt they’ll ever be truly predictable. //