Review: The Callan Periodic Table of Investment Returns 2009

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Callan Associates has published The Callan Periodic Table of Investment Returns for 2009.

Chart
Click to Enlarge

Callan-Chart-2010

Some of the key observations from this chart include:

  • Global stocks rallied about 32% in 2009 while US S&P 500 climbed 26.5%
  • Small caps outperformed large caps for the ninth year out of the past 11 years
  • Fixed Income generated a 5.9% return

You can download the complete pdf version of “The Callan Periodic Table of Investment Returns (Key Indices: 1990-2009)” by clicking here

Related: The Callan Periodic Table of Investment Returns 2016: A Review

The Best and Worst Banks in the U.S.

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Sixteen banks have failed so far this year. 1st American State Bank of Minnesota of Hancock, Minnesota was the latest bank to be shut down yesterday. In the past few years investing in bank stocks have gotten tricky as many of them have been battered by the credit crisis. However there are some high quality banks which continue to remain strong and pay dividends.

The Forbes magazine published a list of America’s best and worst 100 banks last month.

These banks were ranked on the following factors:

  • Return on average equity
  • Net interest margin
  • NPLs as a percentage of loans
  • NPAs as percentage of assets
  • Reserves as a percentage of NPLs
  • Two capital ratios (Tier 1 and risk-based)
  • Leverage ratio

The size of the banks selected ranged with assets of $5.2B to $2.3T. Investors can use the Forbes list as a starting point to identify potential candidates for investment opportunities.

The Five Best Banks are:

Bank of Hawaii(BOH)
Current Dividend Yield: 4.13%

UMB Financial (UMBF)
Current Dividend Yield: 1.97%

Commerce Bancshares (CBSH)
Current Dividend Yield: 2.45%

Prosperity Bancshares(PRSP)
Current Dividend Yield: 1.59%

SVB Financial(SIVB)
Current Dividend Yield:  N/A

The Five Worst Banks are:

Capitol Bancorp (CBC)
Sterling Financial (STSA)
R & G Financial
W Holding (WHI)
Flagstar Bancorp (FBC)

The highest ranked bank in this list was Bank of Hawaii(BOH). This conservative bank had a non-performing loan ratio of just 1.2% of total loans in the last quarter. Bank of Hawaii also declined TARP funds from the Federal government. Many of the banks that declined TARP funding actually increased lending.  Another bank that is noted in the article is Capital Bancorp (CBC) of Michigan.”The bank has a presence in 17 states, but has been badly hurt by the severe economic problems of its home state. Its capital ratios of 8.4% (Tier 1) and 11.2% (risk-based) are both sixth worst among the 100 largest banks. The bank is divesting businesses in six states, including problem areas like California and Ohio to boost its capital ratios and improve its balance sheet.”

The Top 50 U.S. Banks and Thrifts

Top 25 U.S. Bank Stocks To Consider

U.S. Public Healthcare Spending To Exceed Private Spending

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The U.S. spends the highest amount for healthcare on a per-capita basis than other OECD member countries. Soaring health care costs continue to be a major concern for ordinary Americans.

In Public Health Tab to Hit Milestone, The Wall Street Journal notes that “For the first time, government programs next year will account for more than half of all U.S. health-care spending, federal actuaries predict, as the weak economy sends more people into Medicaid and slows growth of private insurance.”

Public spending accounted for 47% of the total health-care spending in 2008. Federal actuaries had predicted earlier that the government spending would cross the 50% mark by 2016. However they now predict that by 2012 public spending would exceed 50%.

Chart:

US-National-Health-Spending-2010

The main reasons for the rise in public health spending are:

  • The economic recession
  • Rising unemployment
  • Changing demographics
  • Baby-boomers retiring

The U.S. total heath care expenditures was estimated to reach $2.5T in 2009 accounting for 17.3% of GDP. Despite the decline in GDP health-care spending rose by 5.7% last year. Health-care spending is projected to increase to $4.5T in a decade.  As the number of unemployed people increases, they lose their private health-care benefits and some try to enroll into the Medicare and Medicaid. This is causing a rise in enrollments in those public programs.The Medicare program for poor people is projected to see a 5.6% rise in enrollments this year. Last year medicare expenses are estimated to have reached a whopping$507B.

Enrollments in private health-care plans is estimated to decline again this year due to the continued high unemployment levels and expiration of subsidies for the COBRA plan.

Sluggish growth in the job market, stagnant/declining wages in the private sector and rising health-care costs do not bode well for the future of U.S. economy.

Health Care Spending Comparison Across OECD Countries

The Complete List of Railroad Stocks Traded on the NYSE

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In November 2009, Warren Buffet’s Berkshire Hathaway agreed to buy the Burlington Northern Santa Fe (BNSF)  railroad for $34B. The railroad is the largest second largest railroad in the country and is also the biggest mover of food products like corn and coal. As one of the largest railroads, BNSF also transports the large amount of consumer goods from west coast ports to destinations across the country. At that time Buffet said that it was a huge  bet on the future on the U.S. economy. Buffet added “They do it in a cost-effective way and extraordinarily environmentally friendly way,” he told CNBC. “I basically believe this country will prosper and you’ll have more people moving more goods 10 and 20 and 30 years from now, and the rails should benefit.”

Despite the growth of the trucking industry due to the interstate road network, railroads are the largest carrier of  all types of goods and commodities since they transport them cheaply and efficiently. For example, most of the electricity generated in this country comes from coal and railroads deliver coal to the utility companies efficiently.

Generally the transportation sector is a good indicator of the U.S. economy. Railroads especially track the ups and downs of the economy.  The monthly report from AAR mentioned that in December 2009 carloads were down 4.1% from 2008 and 17.6% from 2008.There was slight improvement in traffic according to the weekly report released on January 28th.

From the report:

“The Association of American Railroads today reported that freight traffic is showing slight improvement in the year over year comparison but remains down sharply when compared to 2008.  For the week ending Jan. 23, 2010, U.S. railroads originated 277,420 carloads, up 3.9 percent compared with the same week in 2009 and down 11.1 percent from the same week in 2008. ”

Regardless of how railroads perform in the short-term, railroad stocks are great for long-term investment. They transport some of the necessary goods such as coal, food grains, etc. that are in demand whether the economy is in recessionary or in expansion mode. Similarly when the economy improves they benefit from transporting large quantities of consumer goods that are exported from China to the U.S.

The Complete List of Railroad Stocks Traded on the New York Stock Exchange as of Sept, 2015:

S. No.CompanyTickerCountry
1Canadian National Railway (USA)CNICanada
2Canadian Pacific Railway Limited (USA)CPCanada
3CSX Corporation**CSXUSA
4Guangshen Railway Co. Ltd (ADR)GSHChina
5Genesee & Wyoming Inc.GWRUSA
6Kansas City Southern KSUUSA
7Norfolk Southern Corp.NSCUSA
8Union Pacific CorporationUNPUSA

Three of the stocks listed above foreign railroads. Canadian National Railway (CNI) and Canadian Pacific Railway Limited (CP) are the largest railroads in Canada. They move the majority of natural resources, cars, food grains, etc. from Canada to the U.S.  Canadian Pacific primarily operates on the western parts of Canada and the U.S. while Canadian National dominates the eastern parts of the country. Guangshen Railway Co. Ltd (GSH) is a Chinese railway company that is engaged in both passenger and freight transportation.