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Weekly Commentary
October 24, 2011
The Markets
"Good news is good and bad news is bad, but a lack of bad news can be good, at least for investors," so wrote Vito Racanelli in the current issue of Barron's.
Since the recent October 3 low, the S&P 500 index has risen 12.6 percent on the back of "a lack of bad news," according to data from Yahoo! Finance.
Here's what we could classify as a lack of bad news in the past few weeks:
- Corporate earnings are coming in okay so far this quarter as 75 percent of the 118 companies that reported earnings have beaten estimates, according to financial data provider FactSet.
- Economic news has generally supported the idea that the economy, while soft, is not collapsing.
- European leaders, after months of tough talk, but little action, may finally be on the verge of taking "comprehensive" action to quell (at least temporarily) the sovereign debt crisis, according to Phil Orlando, chief equity market strategist at Federated Investors.
Whether this "lack of bad news" turns into good news or bad news going forward, remains to be seen. Either way, we'll work hard to profit from it.
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Data as of 10/21/11
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1-Week
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Y-T-D
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1-Year
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3-Year
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5-Year
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10-Year
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Standard & Poor's 500 (Domestic Stocks)
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1.1%
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-1.5%
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4.7%
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9.0%
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-2.1%
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1.3%
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DJ Global ex US (Foreign Stocks)
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-0.3
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-14.0
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-11.1
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8.1
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-3.1
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5.3
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10-year Treasury Note (Yield Only)
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2.2
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N/A
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2.5
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3.7
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4.8
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4.6
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Gold (per ounce)
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-2.1
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16.5
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22.3
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28.6
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23.0
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19.5
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DJ-UBS Commodity Index
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-2.2
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-10.7
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0.3
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2.0
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-2.7
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4.8
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DJ Equity All REIT TR Index
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3.6
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1.4
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2.3
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14.6
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-1.8
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10.4
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Notes: S&P 500, DJ Global ex US, Gold, DJ-UBS Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT TR Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance, Barron's, djindexes.com, London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.
THE WORLD'S POPULATION IS EXPECTED TO HIT 7 BILLION on October 31, according to the United Nations' population division. That's up from 2.5 billion in 1950. To put 7 billion people in perspective, see if you can correctly answer the following question.
If 7 billion people stood shoulder to shoulder, which of the following geographic areas is the smallest that could accommodate them?
A) Zanzibar (about 650 square miles)
B) Maui (about 727 square miles)
C) Rhode Island (about 1,033 square miles)
D) Sicily (about 9,925 square miles)
E) Cuba (about 42,845 square miles)
F) New Zealand (about 103,733 square miles)
The answer... in a moment.
Here are some interesting facts regarding the rate of growth of the world's population.
It took...
- 250,000 years for the world to reach a population of 1 billion (hit in 1804)
- 123 years for the next billion (2 billion in 1927)
- 33 years to reach the next billion (3 billion in 1960)
- 14 years to reach the next billion (4 billion in 1974)
- 13 years to reach the next billion (5 billion in 1987)
- 12 years to reach the next billion (6 billion in 1999)
Sources: The Economist; United Nations World Population Prospects: The 2000 Revision, Volume III: Analytical Report
And, the growth continues... we're projected to hit 9.3 billion by 2050.
For decades, experts have argued over whether or not our planet can handle this growth. What is not up for debate, though, is the fact that a growing population will affect the demand for goods and services. Food, of course, is high on the list.
The World Bank says, "Between 2005 and 2055 agricultural productivity will have to increase by two-thirds to keep pace with rising population and changing diets." Okay, this is interesting, but why should we pay attention to this type of information?
As financial advisors, we want to monitor trends that could impact the demand for goods and services, which, in turn, may suggest areas ripe (no pun intended!) for investment. By keeping a finger on the pulse of long-term trends -- like the rising world population -- we might get an early read on investment opportunities.
Getting back to the population/geography question, The Economist says the answer is A) Zanzibar. Does that surprise you?
Weekly Focus - Think About It
"The investor of today does not profit from yesterday's growth." --Warren Buffett
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