MidSouth Week in Review:
October 5, 2018

Weekly Update from Fund Manager Buzz Heidtke, MidSouth Investment Fund

The S & P 500 was down 1% for the week as the result of rising interest rates.  The Dow made a new high on Wednesday.  The 10-year Treasuries hit a 7-year high at 3.25%, which caused Freddie Mac’s chief economist to predict a 10 to 15 basis point increase in borrowing costs next week on 30-year mortgages.  Financial stocks benefited from the interest rate rise and where unchanged for the week.  Former Wells Fargo CEO Dick Kovacevich is selling tech and other stocks in favor of banks, which stand to gain from rising interest rates.  Big banks are selling at 10x’s earnings and as a 40% discount to the market vs. the 30% normal average.  Brent crude hit $85, its highest level since 2014 vs. $27 in January 2016.  Jobless claims came in at 3.7%, the lowest level since 1969.  The FANG stocks had an average decline of 5% for the week. 

BuzzBits

The S & P 500 – has gained an average of 5% in the 4^th quarter over the past 25 years and has been up 20 of the past 25 fourth quarters – BTN Research ….. Going back to 1946, the  S & P has always been up over the 12 months following the mid-term elections – CNBC …. and going back to 1950, during the mid-term election years, the S & P has averaged a 20.97% return during the 9-month Oct-June period – Almanac Finance and Yahoo Finance

Bang for the Buck on College Costs – Student loans represent the second largest pile of household debt.  Insist on a college that you and your student can afford.  Over the past 40 years, in-state public-college costs have varied between 38% and 45% of the price of private colleges.  To further save, students may elect to start at a local community college and then transfer to the state university – TIME

IPOs – About 83% of 2018 IPO’s issued during the first three quarters involved companies that lost money over the past 12 months, the highest level on record – Wall Street Journal

Housing – sales of previously owned homes fell 1.5% in August and residential permits were down 5.6%.  Home buyers are reaching a breaking point after years of breakneck price increases that far exceeded income gains – New York Times

The Money Pit – Tesla was founded 15 years ago and has never reported an annual profit, yet has a $50 billion valuation.

Stress Kills – People who were divorced or separated were 46% more likely to die during a 14-year period vs. those who were still married.  A possible reason is that separation can increase smoking and decrease physical activity – Bottom Line Health

$15 an Hour Minimum Wage – More restaurants are going self-service.  In San Francisco and other high-cost cities, some restaurant owners are moving to a system where diners find their own tables, get their own place settings and water, and refill their own beverages.  One reason for this is new laws mandating higher minimum wages – The New York Times ….. Amazon, with a median employee compensation of $28,466, raised their minimum wage to $15 an hour this week – Wall Street Journal

The Small Business Optimism Index – reached its highest ever level in August.  The index is based upon small business owners’ expectations on hiring, business growth and profitability – National Federation of Independent Business

MoviePass – trading under the name Helios & Matheson Analytics, saw its stock rise 300% this week to 5 cents a share on the announcement of a $65 million cash infusion.  125,000 shares of the stock was worth nearly $5 million last November.  Since then the stock has had a 1 for 250 reverse split and recently proposed a 1 for 500 split.  If the last one is enacted, the 125,000 share holder would end up holding one share worth about $10.  Ouch!

Uber Driver Pay – After deducting expenses of between $3.60 and $5.10, you come up with a net earnings of $10.70 to $12.20 an hour – Quartz ….. For delivery drivers such as at Grubhub, their drivers according to two most recent surveys, make between $11.05 and $12.00 per hour – USA TODAY

China Health Care Crisis – A general practitioner in China makes around $1,340 a month and sees as many as 200 patients a day vs. about sixteen for a U.S. doctor.  There are about one doctor for every 6,660 people in China vs. one for 1,500 to 2,000 internationally and around one for every 400 in the U.S. – New York Times

MBA Applications – this year are down 7%, dropping for the 4^th straight year.  A large amount of student debt and a strong jobs market have made prospects reluctant to leave behind jobs for a year or more to pursue the expensive degrees.  A sampling of school application declines: Harvard (-4.5%), Yale (-7.6%), Georgetown (-16.2%), Rice (-27%) – Graduate Admission Council

Hello Summer - https://www.youtube.com/watch?v=7j5gc5TsKJA&feature=youtu.be

buzz@msifund.com

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