Great Ponzi.com

2009-07-21

3-Year Winners and Losers


Let's “zoom out”

Since everything is pretty strong right now, it's worth looking back at how current values compare to a few years ago, before the crisis began.

The purpose of this exercise is to zoom out over a few years, step away from the current short term movements and get some perspective. In other words, how would your investments have done if you simply left them alone from 3 years ago?

The time period I'm using is the last 3 years, July 2006 - July 2009. This period is nice and fair because it starts before the first signs of credit market trouble and ends at a high point, which is more than fair to recently-depressed assets.

Some ETFs are used below; these are good proxies for typical mutual funds. Percent changes shown are totals, not annualized, and have been adjusted for all dividends.


Investment asset

3 year change

Currency (reference)

Gold bullion in US$

52%

USD

Gold bullion in Canadian$

46%

CAD

Silver bullion

25%

USD

Emerging markets index, EEM

23%

USD

Japanese Yen

23%

USD

US broad bond index, AGG

20%

USD

Continuous Commodity Index (CCI)

8%

USD

Canada broad bond index, XBB

8%

CAD

Nasdaq 100 index, QQQQ

7%

USD

S&P/TSX 60 Index (Canada)

5%

CAD

Canadian Dollar

3%

USD

Canadian financial index, XFN

-4%

CAD

US Dollar Index

-8%

Currency basket

Crude oil WTIC

-12%

USD

London FTSE (UK)

-14%

GBP

MSCI EAFE (EU/JP)

-16%

USD

S&P 500 (USA)

-18%

USD

Russell 2000 (USA)

-18%

USD

Tokyo Nikkei (Japan)

-34%

JPY

DJ REIT index, IYR

-45%

USD

US financial index, XLF

-59%

USD

Some observations

Even with the dramatic recent market strength, the major large cap stocks (USA, Europe, Japan) are severely lagging in performance. I'd say that any way you cut these numbers, these bottom performers are not a good place to invest. They have largely underperformed for around a decade!

Another surprise is that commodities are not doing badly. Averaged among gold, the CCI, and oil you're looking at over 10% gains. It's worth noting that the most popular commodities strategy in recent years was over-weighting oil, which depressed returns even though commodities as a whole are quite positive. The CCI (original CRB), which I believe is the best broad index to measure commodities, is up 8% from 3 years ago.

Notice that the broad US bond portfolio (AGG with 7 year maturities) exhibits very high performance, nearly as high as the highly-speculative emerging markets index. This is largely attributable to the amazing strength of US Treasuries.

Finally, do not simply use this table as a shopping list for investments and chasing performance. There are big differences in the characteristics and relative risks of these investments! I have no ground-breaking advice to offer, other than to avoid the bottom performing cluster unless you have reason to believe they can outperform cash in the toughest economic conditions since the Great Depression.

- Perpetual Bull