MidSouth Week in Review:
September 24, 2018

Weekly Update from Fund Manager Buzz Heidtke, MidSouth Investment Fund

The S & P rose 0.8% for the week as both it and the Dow made record highs.  The 10-year Treasuries broke out of the 2.6% - 3.0% trading range to 3.07%, its highest level since May, causing the Regional Bank Index to rise 3% for the week.  Jobless claims fell to a 49-year low.  Total net worth of U.S. households rose into record territory in the 2Q, propelled by rising home and stock prices.  A recent Gallup poll found that a record low of 12% of those surveyed feel the economy is the most important issue facing the U.S.

BuzzBits

Warning Signal – Last year 76% of the company’s going public were unprofitable and slightly less than the 81% figure at the time of the dotcom bubble of the late 1990s.  The four decade average is 38% - CNBC ….. Unprofitable companies in the Russell 1000 returned 13.5% last month vs. 5.5% for the broader index – Wall Street Journal

Burt Reynolds – died this month, leaving nothing in his will to his 30-year-old adopted son that he had with Loni Anderson, before leaving her for a cocktail waitress.  His niece will be the executor of his $5 million estate.  A trust was set up during Reynold’s lifetime for his son, which probably wasn’t a bad idea.  Most financial planners suggest setting up a trust to provide monthly income for their kids that are not good with money or are in a bad marriage, to protect them from themselves.  The kids that are financially prudent can receive a lump sum immediately from the estate.  Merrill Lynch Credit foreclosed on Reynold’s home in 2011.  Sad!

The New Bitcoin - Tilray (TLRY - $123) went public in July at $17 a share before surging to $300 a share on Wednesday.  The pot stock lost $7.8 million on $21 million in revenue in 2017 and lost $12.8 million last quarter and has a book value of a mere $33.8 million.  Wednesday’s valuation hit $23 billion as the stock rose $145 from Tuesday’s close.  Yesterday, many brokerage firms began limiting transactions to sell only, due to the wild price fluctuations.  In the early 1980’s, silver quickly rose from around $5 an ounce to nearly $50, causing many brokerage firms to suffer huge financial losses.  The exchanges then began limiting transactions to sell only, causing the price of silver to quickly decline to below $5 an ounce.  I had a friend who was a trader at a major brokerage firm, who had to be carried off in a straight-jacket after being caught on the short side as silver surged.  Bunker Hunt also got wiped out from the silver collapse – Buzz ….. Men accounted for 75% of all cannabis-related securities trades over the past month, according to TD Ameritrade.  At the end of last year, baby boomers were more likely to trade marijuana stocks, but now TD Ameritrade’s seeing more interest among Millennials.  The younger cohort also trades more actively, about 25% more than other groups – Financial Advisor

Housing Starts – rose a modest 1.9% last month vs. July.  The reason for the weakness: Mortgage rates are near seven-year highs and rising prices are cutting into affordability.  A tight labor market and steep construction-material prices are raising builders’ costs.  The new tax law’s limit on deductions for mortgage interest and state and local taxes makes owning a home less enticing in some states.  Existing home sales fell in August from a year earlier, the sixth straight month of declines – Wall Street Journal  

Ten Years Ago – From September 2008 through February 2009 the S & P declined 42%, including a 17% drop in October – BTN Research ….. “Our stock declined from $113 to $6 a share during the 1999-2000 internet bubble bust.” – Amazon CEO Jeff Bezos

Generation Z – who were born from the mid-1990s to the early 2000s, saw their parents suffer hard times during the 2008-2009 recession; causing them to apparently become a little more serious than the Millennial group.  College freshmen who think being well-off financially is important has risen from 30% in the early 1970’s to nearly 80% today.  College freshmen who spend time partying has declined from around 80% in 1990 to less than 60% today.  The share of freshmen who used loans to pay for college peaked in 2009 at 53% and has declined almost every year to 47% in 2016 – UCLA survey …. More than two-thirds of teens say they would rather communicate with their friends online vs. in person – Common Sense Media Poll

The Best and Worst – Stock market annualized returns during presidential terms.  The best:  Coolidge (25.5% from 1923 through 1929), Clinton (15.2% / 1993-2001), Obama (13.8% / 2009 – 2017), McKinley (11.3% / 1897 – 1901).  The worst:  Hoover (-30.8% / 1929-1933), G.W. Bush (-6.2% / 2001-2009), Cleveland (-4.9%) / 1893-1897), Nixon (-4.1%) / 1969-1974).  Since his election, Trump has had a 22 month annualized return of 18.1% - Kiplinger’s Personal Finance

Social Security Program – is expected to go negative this year for the first time since 1982, with expenses slightly exceeding revenue – Social Security

Motorcycles – Almost 50% of owners are ages 50 and older vs. the median age of 32 in 1990.  Sales peaked in the U.S. in 2007 at 1.1 million bikes vs. 538,000 in 2017.

buzz@msifund.com

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