using airport passenger traffic to track the economy

When months like this past January come around with their negative after negative stock market days, it challenges me to review my opinion of the economy and my holdings.

One resource I turn to is passenger traffic at major airports because it doesn’t matter if it’s for business or pleasure, people travel because they not only want to travel but they also have the means to travel.

Phone minutes are dirt cheap and with Skype, Facetime and Go-To Meetings type services it’s even easier to stay connected over great distances, yet passenger traffic has increased steadily each of the past four years. The reasons are three-fold: businesses are increasing their travel budgets for their staff, people have shifted from “staycations” to “vacations”, and grandma and grandpa are feeling flush enough to go visit the grandkids. All of these are signs of a growing economy especially since the increase in traffic is showing up across the nation and not just in certain regions.

Source: airport websites

Bill Gross was wrong but so what

In May 2009 PIMCO’s Bill Gross first used the term the “New Normal” to describe an investment future filled with more regulations, less borrowing, slower growth and below average returns. In his latest letter to shareholders, (January 2013) he now says we may be leaving the “New Normal”.

So how did investors do following his advice…well not too shabby.

This graph shows how $10,000 invested in the PIMCO Total Return grew by about 9% per year from May 2009 (when he first mentioned New Normal) to Dec 2012 (the end of the New Normal).

PTTRX Peer Index (Lipper Intmdt Inv Grd IX) Market Index (Barclays US Agg TRIX)
This graph shows how $10,000 invested in the Vanguard S&P 500 Index grew by about 15% a year during the same time frame.

VFINX Peer Index (Lipper S&P 500 Fund IX) Market Index (S&P 500 Daily Reinv IX)
So by following his advice and owning bonds, your money grew by 9% a year with just a few months of mild price swings.
This sounds to me like what owning a bond should be like.
If you owned the S&P 500 Index during the same time frame you had a higher ending value but that is only if you never sold out during the multiple double digit declines.
Just another example of the differences between the two.
graphs source: Finra.org