MidSouth Week in Review:
May 14, 2018

Weekly Update from Fund Manager Buzz Heidtke, MidSouth Investment Fund

May. 14, 2018 | RedChip Companies


For the week, the Dow rose 2.2%, its 7th consecutive up day.  Apple declined today after rising nine consecutive days.  Apple’s high today of $190 left them only having to rise 8% more to become the world’s first trillion dollar company.  The yield on the 10-year Treasuries was 2.973% vs. 3.112% for the 30-year bonds, the narrowest yield spread between the two (0.139) that has been seen in years.  The number of unfilled jobs in March rose to a record high of 6.55 million vs. just 6.59 million unemployed Americans that month.  Trump was expected to tell senior lawmakers this week that he will veto the farm bill if it doesn’t include tighter work requirements for people receiving food stamps.

 

BuzzBits

 

Stocks Are Expensive – The Shiller price/earnings ratio, which compares companies’ share prices with their inflation-adjusted 10-year earnings average, is at 31, well above the historical median of 16, a sign that future returns will be sluggish.  Yet there’s one group purchasing company shares with gusto: the companies themselves.  As the impact of new tax cuts circulates through corporate balance sheets, businesses are getting an infusion of cash, and much of the windfall is going toward buying back stock.  J.P. Morgan estimates that repurchases in 2018 will jump 51% from last year’s mark, to $800 billion, which would be a single-year record – Fortune

My Sex Life – isn’t dead, but the buzzards are circling - Maxine

Inflation is Dead – All the recent concerns about rising interest rates, rising wages and soaring deficits may be significant, but they are overshadowed by more powerful long-term forces – technology globalization and demographics are conspiring against the pricing power of companies and individuals.  Economics is about using technological innovations to solve the problems of scarce resources.  The S & P should deliver 7% annualized gains, right in line with its long-term averages between now and 2025 - economist Ed Yardeni ….The Consumer Price Index rose only 0.1% in March and 0.2% in April.

Sad – A new study shows that only 1-in-10 Oklahoma City kids ages 6-12 own a watch and only 1-in-5 know how to read it – Lorne Fultonberg ….. Some British schools are switching entirely to digital, as fewer and fewer students know how to tell time from analog clocks – THE WEEK

Rule of Nine – Retailers price items in the nine area such as $9.99 because demand falls off sharply at the $10+ level. Last fall Apple priced their iPhone 10 at $1000+ instead of slightly below $1000.  Demand was substantially below expectations.  Studies show that selling a stock in the 9 area as it appreciates is normally beneficial because demand will often diminish at the 10 area – Buzz ….. Amazon recently announced that on May 11 they will raise the price of Amazon Prime from $99 to $119.  A recent study by DealNews of 6,338 customers found that nearly 50% of customers say they will not pay for Prime at the increased price – USA TODAY

MoviePass – has been a big winner for people like myself who see lots of movies.  For only $9.99 a month a holder can see a movie-a-day at theaters for free.  Looks like the music will soon stop because the company’s parent, Helios & Matheson Analytics (HMNY), has recently seen the price of their stock suffer a 5-month decline from the  $15 level to 55 cents – Buzz ….. It’s been rumored that the company may soon offer a lifetime pass for $99.50 and throw in 100 shares of their stock with the offer.

Bank Branches – More than 1,700 were shuttered in the 12 month period ending June 2017.  Reasons: Consolidation of branches in big cities and suburbs…..banking increasingly being done online – Wall Street Journal ….Goldman Sachs believes bank stocks will post better gains than the rest of the U.S. stock market because they see only a 5% chance of a recession over the next 12 months.  Also banks will benefit from rising interest rates.

The New Tax Law – fattened corporate profits by more than 50% at the 200 largest S & P 500 companies in the 1Q because of a decline in corporate tax rates.  After tax earnings growth was 25.3% for the 1Q vs. pretax earnings growth of 12.1% - Wall Street Journal

Death of the Sedan – Ford recently announced they will quit making sedans after years of declining sales.  Last year, 70% of all auto cars were crossover, SUVs, and pickup trucks.  Profit margins are substantially higher on SUVs vs. sedans – Washington Post ….. If gas prices rise much higher, look for Ford to re-introduce their high mileage, fuel efficient sedans - Buzz

Investment Advisory Fees – that have been deducted in the past was eliminated by the recent tax law.  Commissions charged are still deductible – Financial Planning

The Fat Get Fatter – More than 70% of the U.S. adults were overweight in 2014 vs. 67% a decade earlier.  The mean waist size for American women age 20 and older was 38 inches – government health stats

Index Funds – over the last 25 years have beaten nearly 80% of active managers.  If you buy the S & P today, 22% of your money goes into the top 10 stocks vs. only 0.2% for the bottom 10.  The top half of the stocks will receive 87% vs. only 13% for the bottom half – First Wilshire

Nashville's New Wall Street Crowd to Pocket 87% Savings on Property Taxes - https://www.bloomberg.com/news/articles/2018-05-09/nashville-s-wall-street-crowd-to-score-87-savings-on-home-taxes?utm_content=business&cmpid=socialflow-twitter-business&utm_source=twitter&utm_medium=social&utm_campaign=socialflow-organic

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. 


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