When investors talk about the weather, should anyone listen? That is the question on many people's minds today after Gustav tracked further west than most hurricane forecasters thought it would, weakened materially before landfall, and generally didn't live up to the "monster storm" billing.

As a result, after rising to almost $120, crude oil has tumbled below $110, making for a wonderful short-selling opportunity if you had decided to fade the forecasters. So, when investors start talking about the weather, should anyone listen?

Debate topic: My buddy Marc Andreessen is finally right, Google's new Chrome browser -- which has been coming for roughly as long as .... oh, let's say Guns 'n' Roses Chinese Democracy -- is finally reducing Windows to a poorly debugged set of device drivers.

I have a host of speaking events coming up -- including following T. Boone Pickens at one event, which can only go badly -- but one that I have been meaning to mention is a panel for the CFA Society of San Francisco. It’s me, Michelle “Footnoted” Leder, and Eric “Barron’s” Savitz. I know I have a bunch of readers in the San Francisco financial community, so look forward to seeing folks there.

More here.

So, was Gustav a near miss -- an almost-Katrina -- or was it just another example of why weather forecasting remains up there with Kirlian auras as a scientific pursuit? Some good analysis follows of the nearness of the Gustav miss, at least as compared to the much more economically damaging Katrina of three years ago:

Comparing Gustav to Katrina
We got very lucky with Gustav--it could have been another Katrina. Both Gustav and Katrina had similar diameters (not radii) of tropical storm force winds at landfall--440 miles. However, Katrina affected the coast with a region of hurricane force winds 170 miles across--45% larger than the 115 miles of coast affected by Gustav (Figure 4). Both storms passed over some very high heat content waters in the Gulf of Mexico--Katrina, over a Loop Current eddy, and Gustav, over the Loop Current itself.

Why didn't Gustav explode into a Cat 5 monster storm when it crossed the Loop Current yesterday? Well, when a hurricane has a well-formed circular eyewall that is aligned vertically from the surface to the upper atmosphere, it acts as a very efficient heat engine that can take heat out of the ocean and convert it to the kinetic energy of its winds. When Katrina hit its Loop Current eddy, the hurricane was under low wind shear and had an ideal structure like this for taking advantage of the heat energy offered to it. Gustav, on the other hand, had just crossed Cuba when it hit the Loop Current. Gustav was under about 15 knots of wind shear, which it had been able to hold off, thanks to its tight, well-formed eyewall. However, passage over Cuba disrupted the eyewall structure just enough to allow the upper-level winds shearing it to penetrate into the heart of the hurricane. These winds ripped up the eyewall and tilted it, so that the surface eye was no longer underneath the upper-atmosphere eye. A tilted eyewall structure is not able to act as an efficient heat engine until it can get itself lined up more vertically, so Gustav was unable to take advantage of the warm Loop Current waters it was traversing. It's like when your car engine is not firing on all cylinders and you hit the gas pedal--nothing happens. Once Gustav finally did align its eyewall vertically and armored itself against the effects of the wind shear, it had passed beyond the Loop Current and was over cooler waters of much lower heat content. Thus, Gustav was not able to intensify much before landfall. The computer models that predicted a Category 4 hurricane at landfall could easily have been correct, had the shear been a few knots less when Gustav crossed Cuba.

Weather jargon aside, in short, hurricanes, like all complex systems, are incredibly sensitive to small changes in their environment, and a minor change -- the disruption of the eye-wall by Cuba and the slightly higher wind shear -- turned Gustav from a new Katrina into just a really crummy weather day in the Gulf.

More here.

Some quick links to things others may find interesting:

• Michael Wolff gets to promote his new Rupert Murdoch book (Vanity Fair)
• Great new issue of Chance (on probability) is out (Chance)
• Carlos Kleiber, the world’s best conductor (circa 1990), only conducted when he was hungry (Guardian via Portfolio)
• You call that a bubble? How we underperformed in puffing up the real estate bubble (Nick Gogerty)
• Valuing reverse breakup fees is an entertaining exercise in put valuation (TheDeal)
• Total value of offloaded LBO loans is nearly $30-billion (TheDeal)

Quote of the day goes to this piece in Bloomberg on how Iraq bonds are outperforming those of Ohio banks. It is, in some surreal sense, the ultimate uncorrelated investment -- which means it belongs in your portfolio, of course:

Iraq provides some insulation from the market. The risks are so idiosyncratic that it trades on its own drivers.

Load up.

[via Bloomberg]