"Everybody talks about the weather, but nobody does anything about it," Charles Dudley Warner groused in an 1897 editorial in the Hartford Courant.

Well, somebody finally has. Drawing on the relentless improvement of information technology, a group of utilities, insurance companies, and financial institutions has come up with a way for people and companies to hedge their weather-related risk.

The hedges are structured as traditional put and call options (giving those who buy them the right, but not the obligation, to sell or buy something at a certain price by a certain date). It's just that, this time, the value of the hedge doesn't depend on the price of a stock or a bond—the value depends on the temperature in a certain region over a specified period.

Duke Energy, for instance, bought five options based on National Weather Service readings in various cities in the area it serves. Duke wanted to protect itself in case the 1997-98 winter was mild, depressing gas demand and crushing profit. Duke, like many utilities, is counting on the options to help it smooth out its earnings and make itself more popular among Wall Street's generally risk-averse investors. (Duke declined to say what it received on the options, whose maximum payment ranged as high as $10 million. It also declined to say what it paid through a broker.)

Before the advent of weather derivatives, Duke might have bought an option giving it the right to sell natural gas at a certain price before the end of winter. But that would have been a bet on gas demand nationwide, or even worldwide. With the weather options, Duke protected itself against unfavorable temperatures in its precise markets.

As with so many things over the past year, El Niño played a big role in the appearance of weather-based options. El Niño was raised as an issue so far in advance that many companies decided they needed to protect themselves against the possibility of severe, highly localized weather. Since the first weather-related option was set up in July 1997, about 500 have been written, according to Colin Myer, senior vice president of Koch Supply & Trading, a subsidiary of Koch Industries.

But weather-related options wouldn't even have been possible without the strides made by information technology. Until recently, long-range forecasts were too iffy and risky. But supercomputers have made great strides, allowing for reasonably accurate forecasts several months out.

The Internet has helped, too, by making National Weather Service information so widely available that people can easily monitor the conditions that determine the value of an option.

With the Internet, "it takes me five to 10 minutes max to pull down data from 300 cities in the U.S.," says Prem Ramamirtham, director of risk management at Duke Energy Trading & Marketing, a division of Duke Energy.

So far, the option writers and buyers have typically been limited to big utilities, such as Duke Energy, Enron, Koch Industries, and Aquila Energy, and reinsurance companies like Willis Faber North America. Brokers active in the field include Natural Resources Group, Prebon Energy, and Euro-Brokers.

With so few players, there isn't yet much of a secondary market for trading options after they've been set up. That market needs to develop before weather-related options can really take off. Otherwise, the options become all-or-nothing bets because it's so hard to sell an option before it expires.

But Lynda Clemmons, director of Enron Capital & Trade Resources, says she has talked with the New York Mercantile Exchange, the Chicago Board of Trade, and the International Petroleum Exchange in London about having standardized weather risk contracts traded on those exchanges. All say they are examining the concept.

Players in what's being called weather risk management predict that the market will mature quickly, leading to multiyear contracts and payments that could range into the tens of millions of dollars. Eventually, industry executives say, there will be contracts built on a whole range of weather indexes—such as precipitation, snow pack, wind speed, and level of rivers. The business also has the potential to go global, because weather data are plentiful in many parts of the world and will likely be accessible on the Internet.

It's easy to see how the idea might appeal to everyone from ski resorts and theme parks, to farmers and airlines, to manufacturers of snowmobiles and long underwear. The Department of Commerce says a whopping $1 trillion of the U.S. economy has some weather exposure.


DIGITAL DISPATCHES

Compiled by Joanne Kelley & Pegeen Hopkins





TOYS THAT PICK UP AFTER THEMSELVES

Lego—the maker of all those little plastic bricks that young kids love sticking together and that parents get stuck picking up—has a new line of products aimed at kids 11 and up. First, the bad news: The toy sets come with more than 700 Lego pieces. Now, the good: They can be fashioned into robots that might even be capable of cleaning up the house.

In addition to the regular Lego pieces, the sets, called Lego Mindstorms, include a microcomputer and sensors that detect obstacles. They also come with small motors for moving arms and legs. Putting everything together, kids can design and program robots that adapt and react to their environment.

Users first build a robot. Then, on a personal computer, they create a program for their invention using a simple programming language. They download their program to the Mindstorms microcomputer using a special infrared transmitter.

The sets contain a Constructopedia building guide, which provides guidance on how to build working robots in less than an hour, as well as tips and inspiration for undertaking more complicated inventions. For those who need more help in assembling robots or want answers to questions like, "What's that gray thingy?" Lego features advice from its Master Builders on the Mindstorms Web site. The experts may not tell you everything you need to know to build a robot. But because kids can also join the Lego Mindstorms Internet community to share ideas with each other, there's bound to be someone out there who will.

Estimated retail cost for Mindstorms: $200. Oh, it helps to have a personal computer, too. For more information: www.legomindstorms.com.


I'LL TRADE YA...

As children, we swapped baseball cards, toys, and much of our lunches. We learned that, if we were lucky, a fruit tart might pry someone loose from his Twinkie but that no number of apples would work.

For those longing for a return to those simpler days of childhood, there is now a Web site: www.ubarter.com.

Launched in July, the on-line bazaar fancies itself as a "game" that lets "players" barter products and services. Visitors to the site post items, list what they think the items are worth, then wait for offers of other items. Those who make matches pay ubarter.com a fee of 1% to 3%, depending on the price that was initially posted. (Charities and nonprofit groups can trade items at half the normal fee.) Ubarter users are responsible for making their own arrangements for exchanging the goods and making sure both parties live up to their descriptions. On a recent visit, we found someone willing to part with a battery-operated unit for panning for gold—the "Magic Spiral Gold Recovery" system—that he valued at $495. At press time, it had already drawn a whopping 48 offers. Don't look for it now, though. Items are purged from the site every 14 days to keep things rolling along.

Some people specify what they want in return for their posting—one wanted to trade vacant lots adjacent to a golf course in return for antique cars. Others clearly just want to see what they can get. The owner of a Seattle Times edition commemorating the Washington Huskies national football championship in 1992 rather bravely valued it at $50. If he gets anything close to that, we recommend you start cleaning out your closets. For more information: www.ubarter.com.


FLOUR ARRANGEMENTS

Flowers and sweets have long gone together in the language of love—but not as closely as they do on a new Web site. Via the Internet, a self-described "cookie florist" is selling "flour" arrangements of "long-stemmed cookies."

To build a basket or arrangement, a buyer goes to Blooming Cookies' Web site and clicks on choices for cookies with names like Double Chocolate Violet and White Chocolate Macadamia Nut Mums. The bouquets of cookies—wrapped in cellophane and stuck on the ends of sticks—can be customized in all sorts of ways. Blooming Cookies will even download corporate logos and transpose them onto flower pots, or just about anything else.

While Blooming Cookies has been around since 1984, it had trouble finding a solid customer base. It first invested in prime location, location, location for two storefronts in Atlanta. Then it tried mail order. But it wasn't until the company launched a Web site in 1998 that the company's charming, but quirky products found a broad audience. Now, Blooming Cookies can brag of selling cookies to the stars, such as Barbra Streisand, Katie Couric, and Neil Simon.

A dozen long-stemmed cookies run about $40.

For more information: www.bloomingcookies.com.


X-RAY VISION

Teen-age boys have, for decades, been teased with magazine ads offering X-ray glasses that see through clothes. Forget the glasses. Now, researchers are finding ways to see through walls and doors.

The uses of the new technology are less tantalizing than the glasses', but they're more practical. The new devices even work.

The devices, shaped like a flashlight, shoot electromagnetic waves, like the type that heat things in microwave ovens. Microcomputers in the devices analyze the radio signals as they bounce back, to determine whether there is any movement beyond the walls and doors that is being caused by human breathing. If so, a red light comes on.

The devices, being developed at Georgia Tech Research Institute, could help law enforcement officials tell, for instance, whether someone is hiding in a closet and could help nervous homeowners tell whether an intruder is in the house. (If your problem, in the wee hours of the morning, appears to be a ghost, then you're on your own.)

The radar technology is also being tested for use in vehicles. Amerigon, a company that adapts military technology for commercial use, is building "backup radar" for trucks and vans. Radar-based sensors are imbedded in bumpers or taillights and trigger loud beeps when drivers are close to backing into an object or a wall.

For more information: www.gtri.gatech.edu or www.amerigon.com.


PHONE FUN

The other day, a friend was searching for something in his pockets. He pulled out his cellular phone and plunked it on the table. Then came his two-way pager. Then his Palm Pilot. He said he felt like a walking electronics store.

Now, there's a new product that could take at least one item out of your pockets. Qualcomm's "pdQ smartphone" marries a mobile phone with the popular Palm Pilot, the device that keeps track of addresses, phone numbers, and appointments. The smartphone weighs half a pound and fits easily in a coat pocket or a purse. It has a Palm Pilot screen. And, yes, it's possible to call someone just by tapping the stylus on the person's name in your address book. The cost of the device, which will be available early this year, hadn't been set at press time.

Fonefinder, another twist on the basic wireless phone, has a receiver built into it that pinpoints the caller by using the Global Positioning System and that lets a "911" operator locate a caller in distress. Some 30 million people a year dial 911 from cellular phones, but many of those callers are on the move and don't know precisely where they are.

With Fonefinder, you don't even have to be able to say or do anything in an emergency, other than hit 911. The phone will automatically tell the operator orally where you are. The phone costs $400.

For more information: www.qualcomm.com or www.fonefinder.com.


LAN HO!

Dennis Conner, the legendary America's Cup skipper, says sailing at that level of competition is like standing under a cold shower while tearing up thousand-dollar bills. For those who find that concept less than thrilling, a Web site has produced a simulation of the Around Alone race that gives people a bit of the experience of covering 27,000 miles of open ocean while letting them avoid the little real-life nuisances like icebergs, rogue waves, and hurricanes.

The race, run every four years, has individual sailors going around the world over nine months. This time, Quokka Sports, in cooperation with the race organizers, is offering armchair sailors a chance to compete along with the boats on a Web site. The virtual participants pick the kind of boat they want to race, then monitor daily weather conditions and currents. They pick their course. They specify when to change tack. They even allot specific times for sleep, sailing, relaxation, and boat maintenance, and they decide how many calories to eat each day—woe to the "sailor" who eats his supplies too fast or takes longer than expected to reach port.

For those who think LAN lines and simulations are poor substitutes for rigging lines and the real race, the Quokka site lets race followers read e-mail from the skippers as they traverse the globe through May 1999. Visitors to the site also can watch video clips of the journeys, listen to audio interviews, and generally keep up-to-date on the latest news.

For more information: www.aroundalone.com.