Apr

19

 Yesterday was the anniversary of the tragic 1906 San Francisco Earthquake (Mag: 7.8 EQ)

Dr. Lucy Jones, a USGS Seismologist (@DrLucyJones) tweeted an interesting fact surrounding the aftermath: "The greatest growth [earthquakes] in Los Angeles was the ten year period after the 1906, while San Francisco shrank"

This has my mind racing on trading ideas for testing. If you figure Earthquakes as single financial instrument and SF & LA as two separate markets with similar securities and something like security volatility as earthquake magnitude (my first guess approximation, there are probably better indicators, perhaps security liquidity.) Which of these would you think are worth testing for similar outcomes:

Various Central Banks maneuvers- Perhaps we're seeing it now as the US Fed unwinds and ECB picks up QE.

WTI vs. Brent

S&P vs Dax or UK or Asia

Currencies- take your pick.

Not a commodity expert so hard to decide there. I would consider gold but it seems universal.

Would love to hear of your thoughts and please feel free to call me out for Ballyhoo.

Enjoy your weekends.

Best,

Paul

anonymous writes: 

 On or about the 8th March this year I posted a piece on the site that may help clarify your initial thinking on what to test.  ( if you want it sent direct to you please advise ).

Amongst much else, there are two types of waves involved.  So called P -  and S - waves.  ( Wikipedia has a reasonable description of both ).

They P waves travel in the direction of the energy propagation whereas the S waves ( or shear waves) travel in a perpendicular fashion.

One starting point is to consider P wave as movements within and between the same type of markets ( SPU, DAX, NIKKEI) and S Waves as subsequent/coincident moves into unrelated markets. 

The key is that P waves show up first on the seismograph. There is no Mount St. Helens eruption without a P wave but there are plenty of P waves without Mount St. Helens eruptions.

One reads much about the precursors to major things/ events/ phenomena.  They almost invariably focus on only one side of the distribution (ie the crash scenario in markets). I believe the trifling ( yet cumulative /additive) information available in research papers should be used for predictions of melt- ups AND melt downs, not merely the downside.

Paul Marino replies: 

Thanks for the quick response, will certainly track down your post. I totally agree with you at the one-sidedness of looking for the crash as opposed to the melt up and its ramifications elsewhere in the system.

I'm looking at it from the SF side where things stabilized and grew and the calling signs for fut growth there were reinforced by the "event" moving along to the other markets. As Vic says a forrest fire clears the underbrush for future growth and a firmer ground.

I see it as a value with growth opportunity in the initially affected area, SF, and not so much looking for future crashes although you could hedge/pair against the trade by going against whomever is along the fault line thereafter as an idea. 

anonymous writes: 

What grew in the 10 years after the San Francisco earthquake (God's work) and fire (largely the work of the stupid U.S. Army) was construction, development and population in Los Angeles, not "earthquakes". Los Angeles largely owes its pre-eminence in California to the effects of that boom and San Francisco's literal downfall. 

Pitt T. Maner III writes: 

Related to the San Francisco discussion, I wonder how the recent dramatic changes in depth to groundwater in some areas of California might change the odds over time.

1.

"Researchers proved that the Hayward Fault, which stretches through largely populated areas in the East Bay as far south as Fremont and as far north as San Pablo Bay at Richmond, actually touches the Calaveras Fault, which runs east of San Jose. There is an estimated 14.3 percent likelihood of a 6.7 magnitude or greater earthquake along the Hayward Fault in the next 30 years and a 7.4 percent chance on the Calaveras Fault, according to the U.S. Geological Survey. "The smooth connection between the two faults means that an earthquake could quite easily break both faults at the same time, making for a substantially bigger and more destructive event," said Roland Burgmann, campus professor of earth and planetary science and co-author of the study. "Deeper in the Earth, we find small earthquakes that clearly define where the connecting fault is.""

2. Average time between ruptures


3.
A interesting list of earthquakes in California


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1 Comment so far

  1. Edward Lam on April 20, 2015 4:21 am

    Doesn’t answer your questions, but this is a good book on the financial aftermath of the 1906 quake:
    http://www.gutenberg.org/files/6716/6716-h/6716-h.htm

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