Yow! Dow Drops — But Yonder 40 Drops More in Hard Week for Markets
It wasn't a good week for any stock index. The Dow dropped over 500 points in the last two days, as investors were worried about credit risks. (That's what the financial press tells us. Oil prices were up, too. And maybe the market was just reacting to sunspots or the ring around the moon. Who really knows?)
For the record, the Yonder 40 fell 6.7 percent this week, dropping the 40 stock index of the rural economy below its beginning level of July 1. The Dow was down 4.2 percent in the week. The NASDAQ was down 4.7 percent and the Standard and Poor's 500 index was off 4.9 percent. All the indexes are below their levels of July 1. (See full results below.)
And all of the Yonder stocks were down for the week — except for two. Gunmaker Sturm Luger was up strongly again this week. Chaw-maker UST was up slightly. It was a good five days for guns and smokeless tobacco.
We can hope for something better next week. In the meantime, an interesting discussion has broken out about the meaning of the Yonder 40. Last week, the Rural Populist asked what the 40 really meant.
"When Wal-Mart is doing well, businesses up and down main street in rural communities are being driven out of business," RP wrote. "And when Wal-Mart is doing well money is being sucked out of rural communities, destined for the pockets of rich urbanites. When Smithfield is doing well, farmers aren't receiving a fair price for their livestock. And when Smithfield is doing well, family livestock producers are being put our of business. And so it goes for a number of the stocks in the Yonder 40. So, what does the Yonder 40 really tell us?"
One of the founders of the Yonder 40, former S&P managing director Jim Branscome, responded to the Populist:
"None of us may like it and would love a stock index that reflects the hard work of the small farmer and throws in the sweet smell of alfalfa drying in the windrow, but the reality of what really drives the rural American economy is Wal-Mart and the 39 other companies in the Yonder 40.
"We did take the Waltons down a few notches when we equal-weighted their $115 billion colossus in the Yonder 40 with the $4 billion Dean Foods that peddles butter and half and half, all made from real American milk. Or, at least, none of it from cows in China.
"We sorted through about 3000 stocks before we selected the sainted 40. It would have been nice had we come across investable public companies that represent farmer cooperatives, rural electric co-ops, or worker-owned coal mines and sawmills. There ain't none. No fan of the Daily Yonder may be comfortable with it, but the reality is that Thomas Jefferson's vision of America as a nation of farmers and toilers in the soil is as dead as our third president. Or at least that's what you find when you try to construct an index using SEC registered and stock exchange listed companies for rural America.
"Had we tried somehow to value the private companies that deal with rural America, impossible as that probably is, we would also have had to list Cargill and Koch Industries and the Chicago Board of Trade as well as the little bitty businesses that dot our small towns.
"Those of us who think about indices and derivatives and also love rural America would love to find some way so we could all go short the Farm Bill and all the presidential candidates who haven't even bothered for more than a few minutes to construct a rural policy platform. More work to be done!
"We're always open to suggestions of public companies that we may have overlooked. Given how fast mergers and acquisitions are taking place these days, we are going to need some good replacement candidates!"
Anyone else want to pipe up?
THE YONDER 40 JULY 22-27
| Companies | Ticker | Price July 27 | Price Change | Percent Change |
| Alico Inc. | ALCO | 47.2 | -7.85 | -14.26% |
| Andersons Inc. | ANDE | 42.4 | -4.15 | -8.92% |
| Burlington Northern Santa Fe Corp. | BNI | 82.74 | -7.62 | -8.43% |
| Berkshire Hathaway Inc. Cl B | BRKB | 3,615.00 | -27.5 | -0.75% |
| Bassett Furniture Industries Inc. | BSET | 13.38 | -0.66 | -4.70% |
| Peabody Energy Corp. | BTU | 41.08 | -5.13 | -11.10% |
| Cabela's Inc. | CAB | 20.37 | -1.16 | -5.39% |
| ConAgra Foods Inc. | CAG | 25.74 | -0.83 | -3.12% |
| Cato Corp. Cl A | CTR | 21.19 | -2.67 | -11.19% |
| Citizens Communications Co. Series B | CZN | 14.36 | -0.8 | -5.28% |
| Deere & Co. | DE | 118.94 | -10.13 | -7.85% |
| Dean Foods Co. | DF | 29.51 | -2.15 | -6.79% |
| DIRECTV Group Inc. | DTV | 22.23 | -1.87 | -7.76% |
| Family Dollar Stores Inc. | FDO | 30.24 | -4.28 | -12.40% |
| Fleetwood Enterprises Inc. | FLE | 9.38 | -1.32 | -12.34% |
| FairPoint Communications Inc. | FRP | 15.82 | -1.25 | -7.32% |
| Gaylord Entertainment Co. | GET | 49.56 | -5.1 | -9.33% |
| Hormel Foods Corp. | HRL | 35 | -1.4 | -3.85% |
| International Speedway Corp. Cl A | ISCA | 48.16 | -1.97 | -3.93% |
| Lee Enterprises Inc. | LEE | 18.22 | -0.32 | -1.73% |
| Mohawk Industries Inc. | MHK | 92.57 | -4.85 | -4.98% |
| Monsanto Co. | MON | 63.45 | -5.59 | -8.10% |
| Mine Safety Appliances Co. | MSA | 41.14 | -3.81 | -8.48% |
| Southwest Bancorp Inc. | OKSB | 20.22 | -1.04 | -4.89% |
| Plum Creek Timber Co. Inc. REIT | PCL | 38.55 | -3.87 | -9.12% |
| Penn Virginia Corp. | PVA | 38 | -3.29 | -7.97% |
| Ralcorp Holdings Inc. | RAH | 51.54 | -2.17 | -4.04% |
| Regions Financial Corp. | RF | 30.28 | -2.34 | -7.17% |
| Sturm Ruger & Co. | RGR | 19.34 | 2.68 | 16.09% |
| Smithfield Foods Inc. | SFD | 31.34 | -3.28 | -9.47% |
| Skywest Inc. | SKYW | 22.08 | -1.39 | -5.92% |
| Southern Co. | SO | 33.79 | -0.47 | -1.37% |
| Stage Stores Inc. | SSI | 18.05 | -2.66 | -12.84% |
| Tractor Supply Co. | TSCO | 46.23 | -3.29 | -6.64% |
| Tyson Foods Inc. Cl A | TSN | 21.41 | -2.26 | -9.55% |
| UST Inc. | UST | 54.01 | 0.18 | 0.33% |
| Waddell & Reed Financial Inc. | WDR | 25.25 | -2.34 | -8.48% |
| Walter Industries Inc. | WLT | 25.6 | -4.73 | -15.60% |
| Wal-Mart Stores Inc. | WMT | 45.94 | -2.12 | -4.41% |
| Cimarex Energy Co. | XEC | 38.05 | -3.15 | -7.65% |
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Comments
As Wal-Mart Stock Rises, Rural America Falls
Thanks Jim for taking the time to respond to my initial comment about the Yonder 40. I've commented a second time, but at such length I made it a full blog post over at The Rural Populist. Here is an excerpt:
In outlining my objection, I will stick with Wal-Mart as an example. However, my objection is not about Wal-Mart per se, and the argument can be easily extended to Smithfield, Monsanto, or a number of the other companies that comprise the Yonder 40.
If you walk down Main Street in Lyons, Nebraska (population 960) where I live it doesn’t take long to start to understand the result of the Walmartization of rural America. A solid 50% of the buildings on Main Street are simply closed, boarded up or vacant. With a lack of economic activity on the street, even some remaining businesses are open sporadically at best. A few can still be counted on to be open every day, but of those, one often wonders how they manage to stay open and how many more years they will hang on for.
It hasn’t always been this way. But ever since Wal-Mart began their concerted campaign to infiltrate rural America, and stake their business model on gobbling up an ever-increasing share of rural retail activity, small businesses up and down Main Street in Lyons and small town streets like it across the country, have been shuttering their doors (pdf). Every time one does it means a loss of local jobs and local economic activity. These are losses that often have ripple effects throughout a community. Wal-Mart is most often located in a nearby mid-sized town, and even if one does drive to Wal-Mart to work, the jobs don’t pay what the local jobs did. To add insult to injury, Wal-Mart’s profits are wired to Arkansas at the close of business every day. With them goes the multiplier effect of money spent locally.
In short, this is to say, when Wal-Mart does well rural America does poorly. But let’s look at some numbers too.
From 1990 to 2000 Wal-Mart stock rose from an adjusted daily close of $6.45 per share to $53.31 per share. That is an 8-fold increase. Following the logic of the Yonder 40, this should be an indication of rising prospects for rural American during the same time period. But rural America did not fair quite so well during the 1990s.
Swept Away, a study done by Jon Bailey at the Center for Rural Affairs, reports that while per capita earnings for metropolitan counties in the states studied rose steadily between 1990 and 2000, rural farm and rural non-farm per capita earnings were essentially stagnant in real dollars. At the beginning of the decade, the average person in rural farm counties earned 58 cents for every dollar earned by the average person in a metropolitan county. But by 2000, the average rural farm county resident earned only 48 cents for every dollar earned by a metropolitan county resident. During the same time period, metropolitan counties also saw a job growth rate of 25%. Rural farm counties experienced job growth at a rate just 1/5 of metropolitan counties.
In the 10 year period in question Wal-Mart stock doubled, and then doubled, and then doubled again. However, for every year of that period, rural America slipped further and further behind the earnings and job growth of their fellow metropolitan residents. During this time period rural America also continued to loose population, watch the number of farmers decline, and watch the younger generation depart for the city.
So, there does not in fact seem to be a positive correlation between Wal-Mart’s stock price and the overall economic health of rural America.Read the full response here.
Just a Few Simple Observations