The Hyperion Effect

Markets are again in a lather over the continued issues in Greece, this time centred around the fact that they can’t form a Government and the threat that when they do they will reject the E.U. austerity requirements and will end up in a disorderly default. Great fodder for the press as the headlines spew rhetoric about panic’s, crashes and stock markets.

But we have seen this before and in times like these I always remember the byline of the movie Deep Impact which said ‘ Oceans May Rise and Cities may fall but humanity will prevail’. Sure its a little dramtaic for a bit of turmoil in the markets but this is just another crisis in a long line from which we have and will recover. To underscore that take a look at the chart below which looks at financial crisis’ going all the way back to 1810.

If you click on the chart it will take you through to a site where you can zoom in and look events over the past 200 years, which i’m sure at the time were just as serious as the issues today, but from which we nevertheless recovered.

In case your missed it JP Morgan, often held out to be one of the star performers during the GFC, announced that a trading unit in London had lost the bank around $2 billion in the last quarter. This is a staggering number to begin with, but exactly how can you lose this amount of money and be unaware that it was happening?. In an even more ironic twist the loss was generated out of a strategy that was designed to protect the bank from risk.

If you can’t get your head around that one (I certainly can’t) then today’s chart might help explain it.

It puts new meaning to the words keep it simple stupid!

John Maynard Keynes once said that in the long run we are all dead. Whilst this is true the stock market will continue to roll on and this leads into today’s chart. Going back to 1926 you can see the rolling 10 year returns and there are two key takeouts from this:

• The recent 10 year lows in 2009 were very close to the 10 year period after the great depression; and
• After the low in 1939 the market rallied for 20 years to the 1959 high

If you want to look at the inflation adjusted returns check out the original post here.

Following on from the news that the U.S. Fed has recently revised their forecast for unemployment down to 7.8%, today’s chart looks at the overall unemployment levels across Europe. I wrote a few posts ago about the problems of youth unemployment, particularly in Spain and Greece which were extrmemly high which is almost in stark contrast to somewhere like the Netherlands with a rate under 5%.

Interestingly we can see the trend of U.S. unemployment beginning to fall, along with Germany, whilst other European countries don’t seem to be making a dint. So it seems that Dutch Luck has had the oppisite effect this time.

Some more statistics on the perils of market timing presented in a great infographic including the facts that:

• Over 20 years, ending in 2008, the annual return of the S&P 500 in the U.S. was 8.4% compared to the Average Investor who received 1.9%;
• This cost market timers around $127,000 over that period; and
• 85% of sell decisions are wrong and are manly based on emotion.

I have previously posted on this topic including an article some 12 months ago with similar numbers.

Check out the chart below or click this link for a larger version.

I went to school with a bloke who when asked what he thought about euthanasia replied ‘I have got no idea about the youth in Asia I’ve never been there’. Today’s chart is not about either of these but rather the youth in Europe and more importantly the unemployment rate which currently tops 50% in Spain and 40% in Greece.

 The focus on unemployment in recent times has been on the high level of over 8% in the U.S. and more recently here in Victoria layoffs at our local Toyota plant, they do pale in comparison to the skyrocketing rates in Europe

I saw this great chart a little while back listing out the break up of the financial assets around the world. Hat Tip to Wall Street Ranter who put the chart together and what caught my interest was the fact that although the U.S. makes up 42% of the global equity market the only hold 29% of the worlds financial assets.

I assume that Australia falls into either ‘Other Asia’ or ‘Other Developed’………either way we are the proverbial small fish in a big pond!

We have previously presented pieces on the European debt crisis however this one take a different spin by looking at how it may affect the U.S. economy. Why should we care what happens in the U.S.? well unfortunately as the U.S. goes so goes Australia both directly and indirectly. The U.S. is a huge consumer of Chinese manufactured goods and if they stop spending, China stops producing and in turn no longer needs to buy large quantities of our resources.

In addition, with almost 50% of world stock markt capitalisation held in the U.S., a secondary collapse would impact the already unsteady Australian market.

Watch the piece below

Today’s chart is an interesting one looking at the long term birth and death rates and considering some underlying reasons. What’s really interesting is the bulge in stages 2 and 3 where, although the birth rate was dropping the death rate did so at a greater pace resulting in the rise in the population. The reasoning is also interesting with more people required for farming and no family planning being key factors in the rapid expansion which presumably covers the periods pre/post the industrial revolution.