MidSouth Week in Review:
March 05, 2018
Weekly Update from Fund Manager Buzz Heidtke, MidSouth Investment Fund
Mar. 5, 2018 | RedChip Companies
The S & P 500 broke a string of eleven consecutive up months with a 5.37% decline, the first time February has been negative since 2009. The Dow was down over the past four days over worries about a trade war from Trump’s decision to impose tariffs of 25% on imported steel and 10% on imported aluminum. Asian stocks posted sharp declines today. GE registered its 12th consecutive down month. U.S. consumer confidence rose more than expected, reaching a 17-year high. Jobless claims hit nearly a 50-year low of 210,000 vs. 660,000 in 2009. Auto sales slumped 2.4% in February as tightening credit conditions, higher interest rates and stingy discounts drove up monthly payments even as the broader economy rolled along.
BuzzBits
Interest Rates – on 10-year Treasuries nearly hit the 3% level in February. The Fed is expected to raise interest rates at least three to four times in 2018. Goldman Sach expects rates to rise to 3.25% by year-end, but if rates hit the 4.5% level, they predict a 20% to 25% market decline to follow – Bloomberg News
Crazy – An 11-year old Ohio kid was suspended from school for seeing a fellow student point a toy gun at another student and not reporting it to his teacher. An Alabama middle schooler called 911 after hearing some kids talking about guns on the bus. Police surrounded the bus. The caller was suspended after it was determined that his classmates were discussing harmless Nerf-brand dart guns – THE WEEK
Tariffs – A Jeep Wrangler can cost $71,000 in China vs. only $40,530 in the U.S. because of high taxes. A bottle of scotch or bourbon selling for $30 in the U.S. but would sell for around $75 in India because of their 150% import tax. A $20,000 Harley Davidson motorcycle would sell for $50,000 – New York Times
Cheap Drugs – I recently went to Walgreens to fill a 30-day prescription of Tamsulosin and was quoted a price of around $78. Using their medical card they filled my prescription for only $38. Later I picked up a free www.GoodRx.com prescription drug savings card and went back to refill my order for around $19. Researching further, I found the same drug available at a Kroger for $14 and at Costco for only $8.73, using the GoodRx card. Another site for cheap drugs is www.blinkhealthcare.com – Buzz
Dividends – have risen 14% this year for the S & P 500 stocks as a result of the 2018 corporate tax cut. More than one-fifth of the companies in the index have boosted their dividend, which will help them compete against rising bond yields. Company share buybacks have doubled in exceeding $200 billion over the past three months – Wall Street Journal
Will the Last to Leave – please lock the door. Rent a U-Haul truck from Las Vegas to San Jose and you’ll pay around $100. In the opposite direction, the same vehicle will cost you 16 times that, or nearly $2,000. Why? The Bay area is now the most expensive place in the U.S. to live. The state has the highest income tax rate at 13.3%, the Trump Tax Act limits state tax deducts to $10,000 annually, and Nevada has no state income tax – SFGATE ….. The Bay area leads the country in outward migration – RedFin …. The most recent Best States ranking had the Golden State ranked 50th in quality of life by faring poorly in the natural and social environment categories – U.S. News & World Report
Living Longer – Numerous studies have shown associations between living longer and attending religious services. One study found that women who attended service more than once a week had a 33% lower chance of dying during a 16-year study-follow-up period. Another study by PLOS One, found that worshipers were 55% less likely to die during the 18-year follow-up period vs. those who didn’t frequent the temple, church or mosque – Time
Health Savings Accounts – benefiting from workers and employers slowly increasing the understanding of the “triple tax advantage” of HSAs, 2017 saw a 11% increase in accounts and a 53% increase in assets. The average investment account holder has a $16,457 balance – PLANSPONSOR
Unqualified is the Norm – I was found to be unqualified to be a Navy pilot because of my flat feet and a depth perception problem, however the Army said I was a perfect specimen. Not so today. A think-tank study found that three-quarters of Americans ages 17 to 24 are ineligible for military service because they are too fat, have criminal records or didn’t graduate from high school - Buzz
Amazon’s Headquarters
When Amazon.com decides on the location for its second corporate headquarters in North America sometime this year, some economic experts, city planners, and labor leaders have words of advice for the winning city: Be careful what you wish for. The top 20 finalists include hot markets such as Nashville and Austin as well as large cities such as New York, Los Angeles and Boston. The groups are no doubt salivating over the prospect of adding as many as 50,000 jobs at the dazzling $5 billion campus for technology’s hottest company. They anticipate tens of millions of dollars flowing into the region each year.
Many economists generally frown on so-called megadeals – defined as more than $50 million in incentives to woo a company – but they are on the rise. “Megadeals have grown so costly that their costs to taxpayers routinely far exceed any possible benefits,” says Greg LeRoy, executive director of Good Jobs First, a research group critical of incentives. “They cause governments to grossly favor large companies over small firms, despite a large body of evidence that a subset of small, young companies, the ‘gazelles,’ account for a disproportionate share of new-job creation.”
It’s likely that the winning city will have to significantly upgrade roadways, public transportation, and other basic services to handle the addition of what amounts to a small town. The influx of tens of thousands of jobs will also drive up housing and rental costs. Most of the finalists are already “hot” housing markets, which means that the addition of Amazon to the market would add “further demand and upward pressure to housing costs,” says CoreLogic’s Frank Nothaft.
Despite the risks, one of the 20 finalist cities will be willing to take a chance. – Barron’s
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