MidSouth Week in Review:
April 09, 2018

Weekly Update from Fund Manager Buzz Heidtke, MidSouth Investment Fund

Apr. 9, 2018 | RedChip Companies


The S & P 500 declined 2.2% today and -1.4% for the week, led by continued weakness in the large-cap technology sector.  The S & P lost 0.8% in the 1Q, breaking the index’s streak of nine consecutive up quarters.  The last time the S & P was down in the 1Q was 2009, but finished up 26.5% for the year.  The 2Q of the second year of the presidential cycle averages a -2.2% return and the 3Q a negative 0.9% return.

 

Bitcoin made a 6-month low today to trade in the mid 6000 level.  Cryptocurrency company Longfin (LFIN) rose from 5 to 142 in December before declining to 8 on Wednesday and rising to 28 today, before the SEC stepped in to freeze trading in the stock for security violations.

 

Comments from J.P. Morgan CEO Jamie Dimon:  “It’s not unreasonable for the U.S. to push for more equal trade terms with China; interest rates have been lower than most people expected, they may go higher and faster than people expect; index funds are very easy for investors to get out of.  It is reasonable to worry about what happens if these funds went into large liquidation” – USA TODAY

 

Analysts expect an 18.8% growth in S & P 500 earnings this year followed by a 10.4% increase in 2019.  Studies going back to 1926 show that earnings expectations are a poor predictor of stock market performance.  Valuation, according to Vanguard, were the only long term measure of future stock appreciation.  The lowest-return periods, according to Robert Shiller, had an average PE of 18.2 but ended at 9.2.  The best periods started at 10x’s but ended at 26.2x’s.  The Shiller PE, currently at 31, sits firmly in the most expensive decile historically.  Valuation trumps earnings growth – Wall Street Journal

 

BuzzBits

Active Managers vs. Index Funds – Over the past 20 years only 13% of managers in the large mutual funds beat the index funds vs. 26% in 2016 and 43% in 2017.  The best way to improve odds of investing success is to focus on funds with the lowest expenses, says Ben Johnson of Morningstar  ….. Since many of the marginal active investment managers have left the business, I predict the remaining managers will soon begin to outperform index funds.  Good managers will normally outperform the averages – Buzz

Poll Watch – Trump’s approval rating has risen to 42%, up 7% since February, according to a CNN poll.  51% of U.S. likely voters approve of Trump’s job performance vs. 48% disapproved, based on the Rasmussen tracking poll.  This is the president’s best overall job approval rating since April of last year.  President Obama earned a 46% job approval rating on April 4, 2010, his second year in office.

Financial Literacy – Back in my parents day many housewives couldn’t even write a check.  Not today!  In a 2015 survey, women lagged behind men in terms of literacy by 19% and for Gen Xers women by 18%, but for Millennials, the gap narrowed by 10%.  Also promising: Women are becoming more confident in their financial literacy: 53% of Millennial women reported that they are the most financial knowledgeable person in their household – FINRA Investor Education survey

Ivy Acceptance Rates – Harvard accepted 4.6% of its applicants for the fall class.  Princeton had 14,200 of their 35,370 applicants with at least a 4.0 grade point average.  Seven of the eight member schools had a record number of applicants.  The schools are becoming less elitist with generous financial aid packages.  More than 20% of Harvard’s and Princeton’s admissions were eligible for Pell grants aimed at low income students – Melissa Korn ….. One can improve their odds of getting accepted into a selective-college by applying early.  The Ivies selected 18.5% of early applicants vs. only 6.7% applying in the regular pool - Buzz

Anti-Social Network – A recent Nashville Business Journal survey asked if the respondents were thinking about deleting their Facebook account after the social medial network’s latest data scandal.  The results:  yes (42%), no (31%), I already did (17%), I never joined (10%).  A Digital Citizens Alliance survey found 39% believed Facebook was “not a responsible company” since it prioritized generating profits over doing “the right thing.”

Shingles – Adults age 50 and up should be vaccinated against shingles with the new vaccine Shingrix.  Get it even if you don’t remember having chicken pox or have received Zostavax – Kathleen Dooling, MD, Centers for Disease Control …. I got my Shingrix shot this week for $169 at Walgreens and am expected to get a second shot in two to six months.  GlaxcoSmithKline (GSK) received approval to distribute the drug in October of 2017.  GSK sells at 14x estimated earnings and yields 5.3% – Buzz

Growth in American Assets – 2017 saw a growth of 600,000 households with net worth’s of $1 to $5 million, not including their home, to 9.98 million.  There were 31 million in the $100,000 - $1 million mass affluent category, 1.34 million in the ultra-high-net-worth group ($5 to $25 million) and 172,000 households in the $25 million+ asset group – Spectrum Group

The Rising Retirement Age – More and more older people have realized that not having a job just isn’t for them, and it’s not all economics.  The proportion of Americans over 65 who were employed full-time or part-time had climbed to 18.8% in 2016 vs. 12.8% in 2000 – New York Times

Dirty Delhi – is one of the world’s most polluted cities and is called the “gas chamber”.  A British medical journal estimates air pollution was responsible for almost 10% of the total disease burden in 2016, so bad that people rushed to buy masks to keep their heads from spinning.  Schools were closed five days in the winter months, yet the government has made no plans to purchase air purifiers – Business Standard

One for Each – There were 6.3 million job openings in the USA as of 1/31/18.  There were 6.7 million jobless Americans as of 2/28/18 – Department of Labor

Till Death Do Us Part - https://1funny.com/til-death-do-us-part/


buzz@msifund.com

 

 

This material was prepared by MidSouth Investment Management LLC, and does not necessarily represent the views of the presenting party, nor their affiliates.  This information has been derived from sources believed to be accurate.  Please note – investing involves risk, and past performance is no guarantee of future results.  The publisher is not engaged in rendering legal, accounting or other professional services.  If assistance is needed, the reader is advised to engage the services of a competent professional.  This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty.  This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such.  This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results.  Investments will fluctuate and when redeemed may be worth more or less than when originally invested.  All economic and performance data is historical and not indicative of future results.  Market indices discussed are unmanaged.  Investors cannot invest in unmanaged indices. 


Prospera Financial will not accept orders and/or instructions transmitted by e-mail, and will not be responsible for carrying out such orders and/or instructions. Please do not transmit such information by email. Please be advised that communications regarding trades and/or account values in your account are for informational purposes only and should not be relied upon for accuracy. You should continue to rely on confirmations and statements received from the custodian(s) of your assets. This email and any files transmitted with it are confidential and intended solely for the use of the individual or entity to whom they are addressed. If you have received this email in error please notify the system manager. Securities and advisory services offered through Prospera Financial Services, Member FINRA/SIPC.




"I work with many of the companies that would be RedChip companies. And we certainly ascribe to the same view that the RedChip Companies do, which is Discovering Tomorrow's Blue Chips Today."

  • Bob McCooey, Senior Vice President, NASDAQ Stock Market