The Bare Realities, an Update

Are supermodels like Argentina’s Yamila Diaz-Rahi or Brazil’s Gisele Bündchen able to provide valuable investment insight? The answer may surprise you!

Every winter, as arctic temperatures descend upon the Northeast, Sports Illustrated contributes a welcome dose of sunshine to our frigid landscape by releasing its infamous “swimsuit issue.” Each issue contains the usual tiresome collection of impossibly beautiful women wearing – or not wearing – exotic bikinis in exotic locales. To which your editors respond, “Ho-hum.”

For dispassionate financial types such as ourselves, for whom scantily clad models are but so many inadequately dressed Homo sapiens, the swimsuit issue nevertheless offers a particular allure – investment guidance.

A few years back, your editors discovered an improbable connection between the nationality of the model appearing on each cover of the SI swimsuit issue and the subsequent direction of share prices on the national stock exchange of her home country.

After rigorous research, we concluded, “When a bikini-clad supermodel is the first from her country to grace the cover of Sports Illustrated, her appearance kicks off a four-year bull run in the stock market of her native land.”

Is this indicator a mere fluke or a can’t-miss barometer of global investment trends? Let the reader decide.

In 2001, Sports Illustrated placed the beautiful and talented Elsa Benitez on the cover of its swimsuit issue, making her the first Mexican to claim the honor. Now that the indicator has four years under its g-string, let’s check the results. Despite a very rough time for the stock market here north of the border since the early days of 2001, the Mexican bolsa has doubled since Elsa adorned the SI cover.

Sure, this strong performance might seem purely coincidental. But facts are facts. Let’s briefly review:

In 1978, Brazil’s Maria Joao became the first foreign-born supermodel to appear on the cover of SI’s swimsuit issue. Four years later, her country’s Bovespa index had soared an astounding 465%.

Next up, in 1986, the stunning Australian model, Elle MacPherson, made her first of several cover appearances. Over the ensuing four years, the Australian Stock Exchange’s 50 Leaders Index rose 75%.

The swimsuit edition continued to deliver eye-pleasing results into the 1990s. In the very first year of this new decade, the bonita Spanish senorita, Judit Masco, landed on the Sports Illustrated cover. Four years later, Spain’s IBEX index had appreciated 21%. When the Swedish beauty Vendela Kirsebom graced the cover of the magazine in 1993, the OMX-Stockholm index rose to the occasion by appreciating 161% over the next four years.

“Kiwi model Rachel Hunter might not have lasted with Rod Stewart,” we observed in our original report, “but her appearance on the 1994 cover kept SI’s winning streak alive – barely. New Zealand’s Top 40 Index rose a mere 6% over the next four years.”

Four years later, German “über-model” Heidi Klum adorned the swimsuit cover, which presaged an eye-pleasing 24% gain for the German Dax Index between 1998 and 2002.

Then, in 2002, Sports Illustrated gave the nod to Argentina, birthplace of the stunning cover model, Yamila Diaz-Rahi. We admit; we were skeptical. Argentina seemed a very dicey investment proposition, given the country’s travails at the time. Fresh on the heels of a wrenching currency devaluation and amidst mounting economic difficulties, Argentina did not seem like a red-hot investment destination. But Yamila’s appearance in a swimsuit consisting only of silver and jade argued persuasively to the contrary.

“Riches await” seemed to be the message to intrepid investors in Argentine stocks. Once again, the Argentinean stock market has delivered on Yamila’s implicit promise. Over the following four years, Argentina’s Merval more than tripled.

Perhaps these remarkably favorable results are no mere accident. After all, as we noted in our original report, “What better way to strike patriotic fervor and self-confidence in the heart of a nation – and stimulate its economy – than by splashing one of its bathing beauties on the cover of Sports Illustrated? When the Czech supermodel Paulina Porizkova first appeared in 1984, her native land was in the grip of Communist rule and had no stock exchange. Today, freedom rings in the Czech Republic and its vibrant economy is the backbone of central Europe.”

The parting of the iron curtain exposed the Czech Republic’s considerable indigenous assets – assets which are now attracting acute interest from the West. In 2000, Daniela Pestova became the first Czech to appear on the SI cover since the Prague stock exchange opened for business. Thus, for purposes of evaluating the indicator, we consider her the “first” Czech to appear. The investment consequences did not disappoint. Four years after Pestova’s appearance, the Prague PX50 Index had advanced 36% – a remarkable feat considering the fact that most other world markets fell during the same time-frame.

Pestova’s Czech comrades, Petra Nemcova and Veronica Varekova, claimed the SI covers for the homeland in 2003 and 2004 respectively. Accordingly, the PX50 continued to advance into late 2007.

Which foreign bourse or bolsa should the philogynistic global investor now consider? Israel perhaps? Bar Rafaeli, an Israeli supermodel, graced the cover of SI’s 2009 Swimsuit Edition. Since then, the Israeli stock market has nearly doubled.

Weird, huh?

Eric J. Fry
for The Daily Reckoning

The Daily Reckoning