Wednesday, May 22, 2013

Events that Changed the History of the World

From the Desk of Joe Rollins

I can never pass up an opportunity to remind you how good the financial markets have been lately. For 2013 through May 20, 2013, the S&P 500 is up 17.8%. Whenever the market is up this much, I find myself worrying about clients who have money sitting in checking accounts. At the current time, most fixed-interest rate instruments are yielding a negative real rate of return. Investors who are keeping vast amounts of money in cash are actually losing purchasing power.

I also think about investors who do not make their IRA contributions early in the year. With the S&P 500 up 17.8% so far in 2013, people who wait until the last minute to make their annual IRA contributions are missing out on a fabulous opportunity to generate higher returns.

It’s still not too late to invest. Even though the market is up and setting records almost every day, investing in the stock market continues to be relatively cheap by historic standards. Simply put, equity investments are the best game in town.

Most of my posts focus on mind-numbing economic facts and financial information, but I watched a documentary last night regarding World War II that I thought some of you might find interesting. I’ve always been a history buff and I enjoy learning new things, and this particular documentary presented information that I had not previously heard.

I was watching the Braves game on TV last night, but I quickly lost interest in the game after they ran up the score fairly early. I switched over to the Military Channel and happened upon their two-part series on events that changed the history of the world. This particular episode focused on the dropping of the first atomic bomb during World War II.

History and science are very interesting when looked at together, and the invention and evolution of the atomic bomb is no exception. One interesting fact that I did not know is that the atomic bomb that was dropped on Hiroshima on August 6, 1945 (“Little Boy”) had never even been tested. They had absolutely no idea whether the bomb would explode in the plane or if the plane would not be able to escape the violent blast. They were basically working on theories.

I vividly remember growing up in the aftermath of World War II during the 1950s and hearing about the atomic bomb. With the Cold War in full force, the headlines warned of impending nuclear war, and in fact, I remember seeing the nuclear test explosions on the nightly news. I also vividly recall the push for families to build their own bomb shelters in the late 1950s, equipped with food, water and other types of rationings to allow you to survive an atomic bomb attack. In school we practiced atomic bomb drills where we would hide under our desks – as if we actually would’ve avoided the devastating effects of an atomic bomb by hiding under a desk.

What I found so interesting about the Military Channel’s documentary were the interviews of the principals involved in the Japan bombings. Colonel Paul Tibbets, the pilot of the Enola Gay (named after his mother), the first aircraft to drop an atomic bomb in the history of warfare, provided some very compelling food for thought. He was an interesting character, and he described how the plans to drop the atomic bomb had occurred over many months. In fact, he and other B-29 Superfortress Bombers had flown almost daily over mainland Japan, but since their planes were flying at over 30,000 feet, the Japanese tended to ignore them. They were just too high for any aircraft fire to reach and the Japanese Zeros were incapable of doing much damage to those types of planes. For months, the crew dropped practice missions against Japanese-held islands and mainland in preparation for the final run.

On August 6, 1945, the Enola Gay departed from Tinian, a remote island in the South Pacific. After a six-hour flight from the island, the crew was over the mainland of Japan, and exactly on schedule, dropped “Little Boy” over the city of Hiroshima. The bomb was designed to explode at exactly 1,968 feet off the ground, a mere 43 seconds after it left the plane. Due to the extraordinary explosion, the crew had only a short period of time to clear the area or expose themselves to the nuclear fallout.

Obviously, the bomb caused enormous destruction, destroying nearly 4.7 square miles of the Hiroshima city and causing approximately 70,000 to 80,000 people – about 30% of the city’s population – to perish. Of course, the death toll is higher due to radiation poisoning that occurred over the years as result of the explosion. Undeniably, the bombing of Hiroshima and Nagasaki on August 9, 1945 brought a swift and complete end to World War II.

Colonel Tibbets was a national hero that was held in high esteem by the military for his part in this mission, but he was controversial because of his role in the destruction caused by the bombing. He explained in the documentary that many history teachers do not seem to understand WWII, and he reflected on a speech he was giving to a high school audience where he was introduced as the pilot in “World War Eleven.” However, he expressed no regrets in bombing Hiroshima since the Japanese government was routinely killing his friends and comrades in the military, and whatever it took to end the war was acceptable to him.

History teaches us many things, and while atomic energy is necessary and is the cleanest, most efficient type of energy available today, nuclear bombs for military purposes must never be used in the future. While this story has nothing to do with the stock market, it is a lesson well learned.

On a personal note, congratulations are also in order to my son, Josh. He and his golf teammates at Woodward Academy won the Georgia High School Association state boys golf championship by four strokes at the difficult Reunion Country Club golf course in North Atlanta.

Josh shot an outstanding 74 (two over par) at the tournament, which is even more impressive when you take into account that he triple-bogeyed a hole. In fact, five of the six players on Woodward’s team shot in the 70s at the tournament, a difficult feat that those of you who play golf understand. I’m very proud of Josh and his teammates’ accomplishment in winning this prestigious event.

As always, the foregoing includes my opinions, assumptions and forecasts. It is perfectly possible that I am wrong.

Best regards,
Joe Rollins