MidSouth Week in Review:
September 17, 2018

Weekly Update from Fund Manager Buzz Heidtke, MidSouth Investment Fund

The S & P 500 was up 1.2% for the week.  Retail sales were up a mere 0.1% with disappointing results in the clothing and auto sectors.  Volkswagen announced they were discontinuing production of their Beetle, which dates back to 1938.  U.S. Beetle sales have declined from 339,700 in 2017 to 15,000 this year.  Median household income increased 0.1% to $61,372.  Poverty levels declined 0.4% to the lowest level since 2006.  The total value of all cryptocurrencies has declined 76% from its January high.  Apple introduced their biggest and most expensive ever lineup in trying to get their owners to upgrade and to fork over more for their devices.

Hurricane Florence was fortunately downgraded from a category 5 to category 1 storm, although flooding is still expected to be a problem.  That storm reminds me of around 10 to 15 years ago when a hurricane was heading toward the bottom of Florida and was projected to split the state.  At the time I owned a small casualty insurance company Universal Insurance (UVE - $45.20), that had most of their homeowner policies in Florida.  The stock quickly dropped about 50% to the $3 level before the storm eventually moved west toward the Gulf, as I breathed a sigh of relief.

Billionaire hedge fund manager Ray Dalio predicts the U.S. economy is about two years from a downturn, which will see the dollar plunge as the government prints money to fund a swelling deficit.  Because Americans will not be able to buy all the Treasury bonds the Fed will have to print more money to make up for the deficit.  Dalio said that during the next downturn, inequality will generate greater internal conflict than the 2008 collapse.

BuzzBits

Inverted Yield Curve – is when the yield on the one-year Treasuries is less than the yield on the 10-year Treasuries.  A recession has occurred within two years of an inverted yield curve nine out of ten times since 1955 – Federal Reserve Bank of San Francisco ….. The current spread between the ten-year and two-year Treasury is just 0.21 percentage points.  Since the Great Depression, large-cap stocks have averaged only a 1.5% return in the two-year period following the inversion.  The best annualized returns came from bonds (5.4% to 5.9%) and gold (5.6%) – Wall Street Journal ….. Expect short-term rates to keep rising faster than their long-term cousins as the Federal Reserve continues to hike its short-term borrowing rate.  The Fed intends to raise rates several more times before the end of 2019, pushing the bank prime rate to 6.25% or 6.5% by 2020.  The Fed wants to raise rates now so it has room to lower them when a recession hits – The Kiplinger Letter

The $2 Million Tirade - Serena Williams in the finals of the U.S. Open verbally tangled with the chair umpire, costing her a warning, the loss of a point, the loss of a game and eventually the match and the $3.8 million first prize money.  Williams received $1.85 million for her second place finish and was fined $17,000 ($10k for verbal  abuse, $4k for coaching violation and $3k for racket abuse) for her confrontation with the umpire – Wall Street Journal ….. Winner Naomi Osaka, playing for Japan, is an American citizen who has lived in the U.S. since she was 3 years old.

2018 Top vs. Bottom Performers – The best performing stocks year-to-date were Advanced Micro Devices (166%), Abiomed (101%), Netflix (82%), Advance Auto Parts (68%), and Amazon (67%).  L.B. Brands (-53%) was the biggest loser.  Bitcoin declined 54%.  The U.S. was the top performing country with an 8.7% return followed by Israel (8.7%) and Saudi Arabia (8.4%).  The worst performing countries were South Africa (-26%), Argentina (-27%) and Turkey (-21%) – Pension Partners

The Oldest Colleges – The oldest is Harvard, established in 1636, to primarily train Congregational and Unitarian clergy.  In 1794, America’s first non-denominational chartered college was Blount College which later became the University of Tennessee – PLANSPONSOR

Hedge Funds – are up only 1.5% year-to-date and are on their way to a 10^th straight year of underperformance – Barclay Hedge

NFL Stats – 52% of the public follow the NFL closely vs. 58% in 2014.  50+ year-old men follow the game closer than any other group.  49% of Republican’s say they do not follow the game closely vs. only 16% in 2014 - Wall Street Journal/NBC poll

Poor Warren Buffet – has had to reduce the price of his California beach house to $7.9 million from his $11 million February 2017 listing price.  Buffet bought the home in the early 1970’s for $150,000 – Wall Street Journal

Detroit – saw home prices rise a whopping 20% during the 12-month period, ending June 30 vs. a 6.5% gain for the average single family home.  However, the median price for the Detroit homes was a mere $32,428 vs. $234,000 nationally.  87% of all buyers paid cash vs. 28% nationwide.  Many buyers are paying cash because the prices are so low also the availability of mortgages is often limited because the properties are difficult to appraise – ATTOM Data

Wills – 60% of Americans don’t have a will and the percentage is even higher for those with dependent children.  www.freewill.com is a free fill-in-line blank site worth considering - https://www.nytimes.com/2018/09/07/your-money/online-wills.html

buzz@msifund.com

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