MidSouth Week in Review:
July 30, 2018

Weekly Update from Fund Manager Buzz Heidtke, MidSouth Investment Fund

The S & P rose 0.7% for the week as the tech sector got hit, led by a 19% decline in Facebook shares.  Facebook reported a growth in active users of only 1.5%, the slowest pace on record and below the 2.3% street estimates.  The $120 billion Facebook decline was greater than the total valuation of 91% of the S & P 500 companies.  There is talk of dropping FB out of the FANG index and to rename it the FAG index.  Twitter declined 20% today on the announcement of a slowing in its user base.  CBS had a two-day $1.8 billion market valuation decline over rumors that their CEO may be departing because of improper conduct …..The 2Q GDP rose 4.1%, the largest pace in four years ….. 10-year Treasury rose from 2.96% last week to 3.08%.  Abby Cohen of Goldman Sachs projects the yield on the 10-year Treasuries will rise to 3.6% by year-end 2019….. Bitcoin had a 30-day, 43% rise to close at $8,265 ….. Helios and Matheson (MoviePass) (HMNY) had a 1-250 stock split this week as the stock declined 90% to $2.00 a share for the week and has evidentially closed up shop.

BuzzBits

August – has been the worst performing month over the past 25 years with an average decline of 0.6% - BTN Research

Doctors – A study by the New York Stock Exchange in the late 1960’s found that doctors had the poorest investment results of any professional group studied.  Failure to seek outside investment advice was cited most often as the cause of their inferior performance.  Most physicians, who’s IQ’s are very high, felt they knew as much about investments as their advisors and would not delegate this function to others.

Dividend Paying Stocks – return on a $10,000 investment from 1-31-72 until 12-21-14 was: Dividend growers and initiators ($630,024), all dividend paying stocks ($461,904), non-dividend paying stocks ($30,316) - Goldman Sachs ….. Historically dividend grower initiates average a 9.86% return, dividend payers a 7.33% return, non-dividend payers 2.46% and dividend cutters -0.47% return – Money Magnets

Love You Dad – A study by Ameritrade of 1,519 millennials found that half expect to be a millionaire at some point.  The medium age when they expect to pay off their student debt is 31 and at age 36 expect to begin saving for retirement.  The median age the group expect to retire is 56 – Wall Street Journal ….. Three in ten Millennials say cash is their favorite long-term investment – www.Bankrate.com

Stock Buybacks – are expected to hit a record $800 billion in 2018.  Morgan Stanley projects 42.9% of the corporate tax cut savings will go towards share buybacks and dividends.

High Income Indicator – Knowing that someone owned an iPhone allowed University of Chicago economists to guess correctly whether a person was in the top or bottom income quartile, 69% of the time.  In 2004, the top product for predicting wealth was Land O’Lakes butter.  In 1992 it was Grey Poupon mustard – Investor’s Business Daily

Pension Plans – Three states account for one third of the $1.4 trillion state pension liabilities.  The Illinois crisis is so bad that it would require a 30-year property-tax increase that would cost the median Chicago homeowner $2,000 a year – economist Arthur Laffer ….. The S & P 500 has averaged a 10.2% return over the past 10 years, yet CalPERS, the largest state pension has averaged a return of just 5.6% over the period, well below its assumed rate of return of 7.5%.

1,000,000% Inflation – is expected for Venezuela in 2018, which is similar to Germany in 1923.  Before WWI the Dollar was worth 4.2 Marks; by 1923, a Dollar cost 4.2 trillion Marks.  Many workers were paid twice daily, and spent their entire paycheck that day – Wall Street Journal

Existing Home Sales – declined 2.2% in June and for the third straight month.  40% of home sales each year take place in the March – June period.  During the period, sales of homes in the $100k - $250k group fell 7.1% vs. a 6% increase in the $750k - $1 million category.  The average 30-year fixed-rate mortgage has risen from 4.03% in January to 4.57% - Freddie Mac

Student Debt Alternative – As more students balk at debt loans, some colleges are offering an alternative:  We’ll pay your tuition if you offer us a percentage of your future earnings.  Vemo Education works with nearly 30 colleges to set up the partnerships.  One participant was Andrew Hoyler, a recent Purdue grad and recently employed American Airline pilot, who is paying back 8% of his income in lieu of student debt – AP

buzz@msifund.comThe S & P rose 0.7% for the week as the tech sector got hit, led by a 19% decline in Facebook shares.  Facebook reported a growth in active users of only 1.5%, the slowest pace on record and below the 2.3% street estimates.  The $120 billion Facebook decline was greater than the total valuation of 91% of the S & P 500 companies.  There is talk of dropping FB out of the FANG index and to rename it the FAG index.  Twitter declined 20% today on the announcement of a slowing in its user base.  CBS had a two-day $1.8 billion market valuation decline over rumors that their CEO may be departing because of improper conduct …..The 2Q GDP rose 4.1%, the largest pace in four years ….. 10-year Treasury rose from 2.96% last week to 3.08%.  Abby Cohen of Goldman Sachs projects the yield on the 10-year Treasuries will rise to 3.6% by year-end 2019….. Bitcoin had a 30-day, 43% rise to close at $8,265 ….. Helios and Matheson (MoviePass) (HMNY) had a 1-250 stock split this week as the stock declined 90% to $2.00 a share for the week and has evidentially closed up shop.

BuzzBits

August – has been the worst performing month over the past 25 years with an average decline of 0.6% - BTN Research

Doctors – A study by the New York Stock Exchange in the late 1960’s found that doctors had the poorest investment results of any professional group studied.  Failure to seek outside investment advice was cited most often as the cause of their inferior performance.  Most physicians, who’s IQ’s are very high, felt they knew as much about investments as their advisors and would not delegate this function to others.

Dividend Paying Stocks – return on a $10,000 investment from 1-31-72 until 12-21-14 was: Dividend growers and initiators ($630,024), all dividend paying stocks ($461,904), non-dividend paying stocks ($30,316) - Goldman Sachs ….. Historically dividend grower initiates average a 9.86% return, dividend payers a 7.33% return, non-dividend payers 2.46% and dividend cutters -0.47% return – Money Magnets

Love You Dad – A study by Ameritrade of 1,519 millennials found that half expect to be a millionaire at some point.  The medium age when they expect to pay off their student debt is 31 and at age 36 expect to begin saving for retirement.  The median age the group expect to retire is 56 – Wall Street Journal ….. Three in ten Millennials say cash is their favorite long-term investment – www.Bankrate.com

Stock Buybacks – are expected to hit a record $800 billion in 2018.  Morgan Stanley projects 42.9% of the corporate tax cut savings will go towards share buybacks and dividends.

High Income Indicator – Knowing that someone owned an iPhone allowed University of Chicago economists to guess correctly whether a person was in the top or bottom income quartile, 69% of the time.  In 2004, the top product for predicting wealth was Land O’Lakes butter.  In 1992 it was Grey Poupon mustard – Investor’s Business Daily

Pension Plans – Three states account for one third of the $1.4 trillion state pension liabilities.  The Illinois crisis is so bad that it would require a 30-year property-tax increase that would cost the median Chicago homeowner $2,000 a year – economist Arthur Laffer ….. The S & P 500 has averaged a 10.2% return over the past 10 years, yet CalPERS, the largest state pension has averaged a return of just 5.6% over the period, well below its assumed rate of return of 7.5%.

1,000,000% Inflation – is expected for Venezuela in 2018, which is similar to Germany in 1923.  Before WWI the Dollar was worth 4.2 Marks; by 1923, a Dollar cost 4.2 trillion Marks.  Many workers were paid twice daily, and spent their entire paycheck that day – Wall Street Journal

Existing Home Sales – declined 2.2% in June and for the third straight month.  40% of home sales each year take place in the March – June period.  During the period, sales of homes in the $100k - $250k group fell 7.1% vs. a 6% increase in the $750k - $1 million category.  The average 30-year fixed-rate mortgage has risen from 4.03% in January to 4.57% - Freddie Mac

Student Debt Alternative – As more students balk at debt loans, some colleges are offering an alternative:  We’ll pay your tuition if you offer us a percentage of your future earnings.  Vemo Education works with nearly 30 colleges to set up the partnerships.  One participant was Andrew Hoyler, a recent Purdue grad and recently employed American Airline pilot, who is paying back 8% of his income in lieu of student debt – AP

buzz@msifund.com

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