MidSouth Week in Review:
November 16, 2018

Weekly Update from Fund Manager Buzz Heidtke, MidSouth Investment Fund

Nov. 19, 2018 | RedChip Companies

The S&P 500 declined 1.7% for the week.  The Nasdaq was down 3.5% for the week over tech worries.  Facebook declined 4% for the week on a negative New York Times article to its lowest level in a year and a half.  PG&E (Pacific Gas & Electric) declined from its 11/7 high of $49 per share to $17 per share before recovering to $24 today on the assumption that the state will assume some of the company’s California wildfire liabilities.  Goldman Sachs recently issued a dire report saying the market currently has the highest probability of a bear market in 50 years.  Goldman’s best case scenario is a 0% return over the next 12 months without a bear market.  Crude dropped to $55 a barrel this week, from its $77 October high, before recovering somewhat  on the speculation that Saudi Arabia will cut production.  Natural Gas soared to $4.80 from its $3.00 October low on speculation of a colder winter.  Bitcoin declined from its Wednesday high of $6400 to $5300, its lowest level in 14 months and down 72% from its December 2017 high.
Hope everyone has a great Turkey day with family and friends.
Dividend Aristocrats (NOBL) – consist of S & P 500 stocks with a 25-year history of increasing shareholder payouts.  Since 1989, the Dividend Aristocrats have outperformed the S & P 500 by 2.15 percentage points annually.  During the 1990-2017 period, the group returned 12.1% annually vs. 9.8% for the S & P 500 and with less volatility – Seeking Alpha ….. Dividend Aristocrats outperform because companies don’t normally increase their dividends unless their future looks promising - Buzz
Connecticut – Before 1991, the state had no income taxes and attracted higher earners from all over the Northeast.  The state led the country in growth, but the fairytale ended in 1991 with the enactment of a 4.5% flat income tax.  Since then, in 2011 they raised their top rate to 6.5% on income above $500k and to 6.99% in 2015, causing the rich to flee the state.  They also imposed a 10% surtax on corporate income above $100 million in addition to an 8.25% corporate rate.  Connecticut had a GDP growth rate of 9.3% in 2007 that has declined by 0.5% annually since.  Additionally, their two largest corporations, Aetna and General Electric have recently fled the state.  Sad! – Wall Street Journal ….. During the 2015-2016 period, the state lost 7,944 tax returns to Florida with an average adjusted gross income of $253,187 – IRS..…Wells Fargo recently raised the minimum down payment to buy a house in Fairfield, CT to 25% from 20%.  The new standard, applies to loans above $601,450.  The median home price in the county tops $1 million. - Bloomberg
Tax Loss Selling – When you sell part of your stock holdings in a company, the IRS assumes that you are selling the first shares purchased.  To avoid problems on selective transactions, instruct your broker to denote the “purchase date” on your sales confirmation - Buzz
Long Term Care Services – Nationally the annual median cost of a private room in a nursing home has climbed to $100,375.  The most expensive state for nursing home care is Alaska where the annual median cost of a private room is $330,873.  The median cost for a room at an assisted living facility is $111,195 in D.C.  For retirees who choose to live in their own home but receive care there, home health aides are available but they’ll cost $68,640 annually in Hawaii, the most expensive state – Genworth Financial survey
Split Congress – Republicans control the Senate and Democrats will have a majority in the House.  Over the past 80 years (1938 to 2017), the S & P 500 has averaged gaining 11.1% per year when control was split, regardless of the party in the White House – BTN Research
Ouch! – The FAANG stocks have averaged declining 25% from their recent highs:  Facebook (-36.2%), Apple (-16.8%), Amazon (-22%), Netflix (-32.1%), Google (-16.6%).
Demise of the Full-Time MBA – The University of Iowa closed its MBA program in May after 57 years of operation.  At its peak the school had 240 students but only 35 in its final 2-year class.  Wake Forest halted its program in 2014 and last month Wisconsin, one of the oldest and most prestigious business schools, announced it might also close.  Why?  The cost of the full-time MBA has soared over the years, which means companies have to pay high starting salaries so that the students can pay back their student loans.  Also many students have figured that the current return on the investment is not worth the cost – Michael Horn
Hurting – The Western Pennsylvania Teamsters and Employers Pension Fund filed for approval this month to reduce pension payments by 30% to its more than 30,000 retirees or otherwise the fund will be broke by 2029.  The pension fund has more than $700 million in assets – Pittsburg Post-Gazette
Household Income by Education – High school grads $45k, bachelor’s degree $91.8k, master’s degree $108.2k, professionals $139.1k, doctorate $140.1k.  The median income for all households 25 and older was $62,625 – Census Bureau 2017 survey
Drop the Penny – The Treasury Department lost $70 million last year to produce 5 billion pennies or 2.4 cents for every penny minted.




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