Double Blind

Here is a link to the most maniacally paranoid article about the Bird Flu invasion coming into the USA that I have ever read. Mainstream media continues to get less reliable with credible analysis, and they score massive points for sensationalizing the next apocalypse with this article.

Tradesports has been listing contracts on whether the Asian H5N1 strain of Bird Flu (not to be confused with H5N3, or the much more milder H5N1 North American equivalent) would be confirmed in the USA (any one of 50 states) by a certain date.

Here are the present odds of the Asian H5N1 Bird Flu strain confirmed in the USA:

By March 31, 2006: 8.4% ($100 wagered returns $109.17 if won)

By June 30, 2006: 35.2% ($100 wagered returns $154.32 if won)

By September 30, 2006: 57.7% ($100 wagered returns $236.41 if won)

By December 31, 2006: 72.4% ($100 wagered returns $362.32 if won)

The September and December markets are very thin right now, which means any material amount of wagering (>$100) will be enough to shift the odds.

I have done some extensive research on the matter since Tradesports offered contracts on this as early as June of last year. I have been actively trading the contracts on the short side – I do not anticipate the asian strain of H5N1 Bird Flu hitting the states until at least 2007, if ever. I have already cleared about $500 on the September and December 2005 contracts, which expired at zero.

The simple reason for the spread of Bird Flu to Europe is that Asia and Europe are completely linked by land. In addition, the bulk of landmass in Asia where the Bird Flu originated is warm all year, which means that the birds that exhibit migratory patterns are not necessarily going to be flying north-south (opposed to east-west) and certainly not across the ocean. It’s not surprising at all that the Bird Flu has spread as much as it has, especially to Europe (where it’s bound to gather much more media attention).

The real question of North America is which species of birds will be making the transit across the ocean to infect the continent. My belief is that it will go through the Iceland-Greenland-Labrador route, which will mean that it will take at least one more summer beyond this one for the flu to get confirmed, if at all.

There is also the Africa-South America route, which we would receive plenty of notice as there is a significant portion of North-South migration. So far H5N1 has not been confirmed in South America.

Finally, there is the Russia-Alaska corridor, which consists of a few bird species which should be taken into account.

One should ask themselves why Australia hasn’t had a confirmed case of H5N1 up to date.

My intuition is that all of the contracts above will expire at zero. In particular, the summer months have the highest risk, as there will be the highest percentage of bird density coming in from the potential bird flu ‘hot zone’.

I don’t think the reports of a bird flu pandemic will come to fruition. But the calls to be prepared for such incidents should always be heeded, mainly because it’s the events that you don’t plan for that usually end up causing the most amount of trouble… let’s say an earthquake in the Vancouver region, or a one in a hundred year flood of the Fraser River that’s just about due?

This entry was posted on Monday, March 13th, 2006 and is filed under Commentary. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.