Friday, September 25, 2009

Yonder 40 outpaces Dow and S&P in 2009

The Yonder 40, an index of 40 companies that reflect the U.S. rural economy, is up 32% year to date 9/18 as compared to the Dow being up 12% and the S&P up 18%. The Nasdaq narrowly leads the Y40 with a gain of 33%. This is not as a result of the Y40 playing catch up. For the first two years of its existence, 7/1/07 to 7/1/09, the Y40 endured this rough stretch with a loss of 27%, while losses were 29% on Nasdaq, 37% on the Dow, and 39% for the S&P. A bittersweet victory for the Y40 perhaps, but outperformance nonetheless.

In this bounce back from the dead rally, measured from the beginning of March to 9/18, the pattern continues. The Y40 is up 53%, the Nasdaq 55%, S&P 45%, and Dow 39%(using March 9 as a starting point would have led to higher numbers across all four indexes but the pattern would be consistent).

So what does this mean? Rural America is not generally depicted as an economic segment that would be vying with the technology laden Nasdaq as the market leader. Are agriculture, mining, sporting goods(aka guns), and small town Main Street in a race with IPhones, flat panels, server farms, and biotech to lead the American economy. The Y40 is the product of "The Daily Yonder", a web based journal of news, commentary, and research on rural America and its 55 million residents. As both a news source for and an advocate of this part of our country, they look for perspectives that aren't necessarily covered by the dominant urban based media outlets. This is an example.

As to the meaning of the Y40's performance, time will tell. The numbers are fact and the index is well researched in its composition. The equity markets look forward, discounting future cash flows into a current price. While that fundamental premise of corporate finance was temporarily abandoned during the recent debacle, it's operative now and is suggesting a relatively more sustainable rebound in a part of our economy and our heritage that is more often viewed as quaint rather than dynamic.

It's all interesting. Who knows what the future may bring, but don't overlook the Yonder 40. It goes down easy with pulled pork or chicken fried steak.

For weekly analysis of Yonder 40 performance go to


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