Captain’s Log

Postcard from the edge
It took 36 years for NASA's Voyager 1 spacecraft to reach the edge of the solar system. To be precise, Voyager 1 recently ventured out of the heliosphere into interstellar space. Voyager 2, its sister craft which was also launched in 1977, is not far behind.

The enormity and vastness of space is daunting, where distance is measured in astronomical units (AU). Each AU is equal to the distance from the sun to the Earth. Voyager 1 is estimated to be at a distance of 125 AU. That's roughly 18.8 billion kilometres from the Earth. It takes about 17 hours for the Voyager's signal to reach NASA's Jet Propulsion Laboratory.

Captain's log (arithm)
A chart published by NASA neatly illustrates the journey traversed by Voyager 1 so far (www.jpl.nasa.gov/news/news.php?release=2013‐278). The chart is shown in logarithmic scale, meaning that each increment increases the measurement by a factor of ten; each set distance beyond 1 AU represents 10 times the previous distance. The distance markers are equally spaced on the chart, so 1 to 10 is the same as the distance between 10 and 100, even though the former is a distance of 9 AU and the latter is 90 AU.

The distance travelled by Voyager 1 has compounded at an annual rate of 14.4%. If the spacecraft were an investment, and the distance travelled the return on investment, its performance would beat the S&P 500 stock index's 8.2% compounded return over the same 36-year period. Based on available data, the annual compound rate of the stock index since 1871 (142 years) is 4.2%. In contrast, the pace accelerated - at an annualised rate of 14.1% - in the last five years or so. The increase was aided by low interest rates and an abundance of liquidity courtesy of the U.S. Federal Reserve’s quantitative easing programmes.

Incidentally, the largest percentage one-day decline for the S&P 500 index was the crash on 19 October 1987, when it cratered by 20.5%. On an annualised basis, the growth rate would have been - 100%, since if that rate of decrease were to have continued for a year, the index would have been zero long before the year was out.

Even such a serious one-day drawdown did not leave a lasting mark, however, nor did it usher in an era of economic depression, as was the case after the 1929 crash. Since the meltdown in 1987, the index has compounded at an annualised rate of 8.1%. That’s a feat that the Voyagers would not be able to achieve should they encounter a black hole!

William Liu
Chief Investment Officer