MidSouth Week in Review:
April 23, 2018

Weekly Update from Fund Manager Buzz Heidtke, MidSouth Investment Fund

The S & P 500 was up slightly for the week despite a 1.5% Thursday/Friday decline.  Contributing to the S & P weakness was Apple, that declined 4% for the day on a broker downgrade and rumors of the company dropping the IPhone X by year-end.  The big cap indexes were helped from a 4% rise in GE on rumors of a company split-up.  The Regional Bank Index (KRE) rose again 2% over the past two days as the 10-year Treasury yields rose to their highest levels since 2011.  The spread between the yields on the long-term and short-term bonds is narrowing.  When the long-term bond yields are lower than the short-term, you have what is called an inverted yield curve.  A recession normally follows an inverted yield curve over the next 12-month period.

BuzzBits

Rising Oil Prices – The glut of stored oil that kept prices low for years is almost gone thanks to production cuts by OPEC and Russia and a humming global economy.  Inventory levels have shrunk to 2.85 billion barrels during a 5-year period, representing a surplus of just 43 million barrels vs. 400 million barrels two years ago – Wall Street Journal

Appreciation – If you pick up a starving dog and make him prosperous, he will not bite you.  This is the principle difference between a dog and a man – Mark Twain

Struggling to Buy Homes – Although Millennials are the most likely to earn the lowest wages and have student loans hanging over their heads, Realtor.comreports that it’s actually Gen Xers who are having the hardest time becoming homeowners.  Specifically, 47% of Gen Xers say they’re having trouble saving for a down payment, compared to just 23% of Millennials.  In some regards, this news is hardly shocking.  Gen Xers today are plagued with child care expenses and credit card debt, and many are not yet free of their student loans.  Throw in the fact that 75% of the overall workforce currently lives paycheck-to-paycheck, and it’s no wonder so many folks in their 30s and 40s can’t manage to make the leap from renter to owner – Motley Fool

Alzheimer’s/Dementia – affects around 10% of those age 65 and older.  The prevalence increases with age.  It’s 8.4% for the 68 to 69 group, 10% among those 70 to 70, 14.85% for those 75 to 79 and 25.2% for those 80 to 84 – American Academy of Neurology

Long Term Investing – Since 1926, there has been 82 10-year investment periods, with only four showing negative returns for the period: 1929-1938 (-0.89%), 1930-1939 (-0.05%), 1999-2008 (-1.385), 2000-2009 (-0.95%) – Ibbotson Associates

Taxes – The richest 20% of households with incomes of $150,000+ will pay about 87% of income taxes.  The lower 60% with incomes of under $86,000, will pay no federal income tax vs. 2% last year – Wall Street Journal …. The top 5% of taxpayers pay more taxes than the bottom 95% of taxpayers - IRS

Facebook – The ease and speed with which internet users can and do trust tech companies with the data they crave is wildly out of proportion with the risks they’re assuming in doing so – John Herrman, New York Times

Church Attendance – 39% of Catholics report attending church in any given week vs. 45% in the 2005-2008 period vs 75% in 1955.  Attendance by Protestants has remained stable since 1955 at 36% vs. 25% for Catholics.  The percentage who identify as Catholic fell from 24% in 1955 to 22% vs. a drop from 71% to 47% for Protestants during the same period – Gallup

Where is Everybody? – Since 1990, the number employed in the newspaper publishing business has declined 62%, in dropping from 450,000 people to 173,000 – New York Times

Food Stamps – A new House proposal would require a 20-hour workweek for able-bodied adults, ages 18 through 59.  A recent study of 6,000 Kansas families who moved off welfare to work in 600 different industries saw their average income double in a year.  In 2000 there was 17 million Americans in the Food Stamp Program vs. 42 million today as the unemployment rate has dropped to near record levels at 4.1%.  In 2009 the unemployment rate was 9.5%.  – Wall Street Journal …. 74% of physicians favor a new federal policy that allows states to require applicants to work or seek a job to obtain Medicaid benefits – Merritt Hawkins survey

Income Tax Revenue – The average income tax payment is about $10,000, with 74% ($7,384) going to only three areas:  Interest debt (14.2%), Health (29.8%) and Military (29.9%) – IRS

Texture – Apple agreed to buy the magazine app company last month which lets users subscribe to more than 200 magazines for $9.99 a month – Bloomberg

Ten Things That Will Disappear In Our Lifetime -

1. The Post Office

Get ready to imagine a world without the post office. They are so deeply in financial trouble that there is probably no way to sustain it long term. Email, Fed Ex, and UPS have just about wiped out the minimum revenue needed to keep the post office alive. Most of your mail every day is junk mail and bills.

2. The Check

Britain is already laying the groundwork to do away with checks by 2018. It costs the financial system billions of dollars a year to process checks. Plastic cards and online transactions will lead to the eventual demise of the check. This plays right into the death of the post office. If you never paid your bills by mail and never received them by mail, the post office would absolutely go out of business. (I wonder how will the future church goer give their offering?)

3. The Newspaper

The younger generation simply doesn't read the newspaper. They certainly don't subscribe to a daily delivered print edition. That may go the way of the milkman and the laundry man. As for reading the paper online, get ready to pay for it. The rise in mobile Internet devices and e-readers has caused all the newspaper and magazine publishers to form an alliance. They have met with Apple, Amazon, and the major cell phone companies to develop a model for paid subscription services.  (Haven’t subscribed to the local “Pravda On The Cumberland” in many years.  In case you haven’t noticed, the local rag has lost so much money that they had to move out of their building on Broadway.   They apparently couldn’t continue to pay the mortgage.)

4. The Book

You say you will never give up the physical book that you hold in your hand and turn the literal pages I said the same thing about downloading music from iTunes. I wanted my hard copy CD. But I quickly changed my mind when I discovered that I could get albums for half the price without ever leaving home to get the latest music. The same thing will happen with books. You can browse a bookstore online and even read a preview chapter before you buy. And the price is less than half that of a real book. And think of the convenience! Once you start flicking your fingers on the screen instead of the book, you find that you are lost in the story, can't wait to see what happens next, and you forget that you're holding a gadget instead of a book.

5. The Land Line Telephone

Unless you have a large family and make a lot of local calls, you don't need it anymore. Most people keep it simply because they've always had it. But you are paying double charges for that extra service. All the cell phone companies will let you call customers using the same cell provider for no charge against your minutes.   (Don’t know many folks that still have these.   At one time, we needed one for the home security system but now most all companies have gone cellular.)

6. Music

This is one of the saddest parts of the change story. The music industry is dying a slow death. Not just because of illegal downloading. It's the lack of innovative new music being given a chance to get to the people who would like to hear it. Greed and corruption is the problem. The record labels and the radio conglomerates are simply self-destructing. Over 40% of the music purchased today is "catalogue items," meaning traditional music that the public is familiar with. Older established artists. This is also true on the live concert circuit. To explore this fascinating and disturbing topic further, check out the book, "Appetite for Self-Destruction" by Steve Knopper, and the video documentary, "Before the Music Dies." (Music for me died when “RAP” came on the scene.)

7. Television Revenues

To the networks are down dramatically. Not just because of the economy. People are watching TV and movies streamed from their computers. And they're playing games and doing lots of other things that take up the time that used to be spent watching TV. Prime time shows have degenerated down to lower than the lowest common denominator. Cable rates are skyrocketing and commercials run about every 4 minutes and 30 seconds. I say good riddance to most of it. It's time for the cable companies to be put out of our misery. Let the people choose what they want to watch online and through Netflix. (Most everyone we know uses their DVD recorders, so they can fast forward through the commercials.   How much longer will that be allowed?)

8. The "Things" That You Own

Many of the very possessions that we used to own are still in our lives, but we may not actually own them in the future. They may simply reside in "the cloud." Today your computer has a hard drive and you store your pictures, music, movies, and documents. Your software is on a CD or DVD, and you can always re-install it if need be. But all of that is changing. Apple, Microsoft, and Google are all finishing up their latest "cloud services." That means that when you turn on a computer, the Internet will be built into the operating system. So, Windows, Google, and the Mac OS will be tied straight into the Internet. If you click an icon, it will open something in the Internet cloud. If you save something, it will be saved to the cloud. And you may pay a monthly subscription fee to the cloud provider. In this virtual world, you can access your music or your books, or your whatever from any laptop or handheld device. That's the good news. But, will you actually own any of this "stuff" or will it all be able to disappear at any moment in a big "Poof?" Will most of the things in our lives be disposable and whimsical? It makes you want to run to the closet and pull out that photo album, grab a book from the shelf, or open up a CD case and pull out the insert.  (Friends, the one and only thing that I can guarantee you cannot be taken away from you is your personal relationship with Jesus Christ.)   

9. Joined Handwriting (Cursive Writing)

Already gone in some schools who no longer teach "joined handwriting" because nearly everything is done now on computers or keyboards of some type (pun not intended)

10. Privacy

If there ever was a concept that we can look back on nostalgically, it would be privacy. That's gone. It's been gone for a long time anyway.. There are cameras on the street, in most of the buildings, and even built into your computer and cell phone. But you can be sure that 24/7, "They" know who you are and where you are, right down to the GPS coordinates, and the Google Street View. If you buy something, your habit is put into a zillion profiles, and your ads will change to reflect those habits.. "They" will try to get you to buy something else. Again and again and again.

buzz@msifund.com

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