MidSouth Week in Review:
November 23, 2018

Weekly Update from Fund Manager Buzz Heidtke, MidSouth Investment Fund

Nov. 26, 2018 | RedChip Companies

There is an old Wall Street saw that says that when there is a fire in the  whorehouse, it gets the good girls as well as the bad.  The current downturn in the market has missed very few companies.  The S & P was down 3.5% for the week and is down 10% from its October high.  75% of its components are in correction mode and 45% are in bear market territory.  Apple is down 25% from its October high.  Although it is a given that the Fed will raise interest rates in December, the current stock market weakness might cause a deferment, which would probably give the markets a much needed spike.  10-year Treasury yields declined to 3.04% today, its lowest level since September.  Bitcoin declined 23% for the week to $4260, following a 15% decline the previous week.


Crude oil was down 7% for the day to $51 and is down 34% from its October high.  Wholesale gas prices have declined 70 cents to $1.40 a gallon from $2.10 in early October, yet the average retail price of gas in the Nashville area has declined only 20 cents.  It’s amazing how quickly gas retailers react when wholesale prices are rising and how slowly the reaction time is when prices are declining.





Beating Expectations – Remember when computers would signal buy programs when a company’s earnings exceeded estimates and the stock would soar?  Not any more!  The first 161 S & P companies that reported better-than-expected earnings this quarter saw their shares decline 5.5% the second day afterwards – Wall Street Journal ….. On Tuesday my Kohl’s (KSS) reported earnings of 98 cents vs. a 96 cent estimate and raised their full year guidance  and the stock declined 9% for the day.  And  how was your day? – Buzz


DNA – The average European-American is 0.18% Native-American.  We inherit about a quarter of our DNA from each grandparent, but only on average.  Any one person may inherit more DNA from one grandparent and less from another – New York Times ….. My dad was supposedly 100% German but my DNA came back as me being only 30% German – Buzz


Bonds – are ordinarily a buffer when stocks slump, but rising interest rates will tend to weigh on bond prices.  So stick to issues with shorter maturities which lose less in value as rates rise.  Fidelity Strategic Income (FADMX) is a bond fund with limited exposure to interest rate risks that yields 3.90%.  Fidelity Conservative Income (FCONX) is safer and yields 2.2% - The Kiplinger Letter


The Church of Sweden – lost its status as the official Church of Sweden in 2000.  Until then, the church ran the hospitals, the school, everything.   Although 60% of Sweden still pay voluntary taxes to the church, only 18% of those say they identify as Christians.  Only 1.1% of the population attended religious services weekly vs. 10% in Italy vs. 3.5% in Britain.  37% in the U.S. attend religious service on a regular basis – New York Times


The Next Bubble – A study by the Department of Education of student loan debt and historical repayment data projects that approximately 40% of student loan borrowers will default within 20 years of entering their debt repayment phase – BTN


Voter Turnout – in the mid-terms was 49.2% of eligible voters, the highest turnout in 104 years.  Nearly 70% cast their ballot to send a message of support or opposition to the President vs. 49% during the Obama mid-term election – UBS ….. Nonvoters were likely to be younger, less educated, less wealthy and Black or Hispanic.  37% of nonvoters were in the 18 to 29 category.  Only 20% of nonvoters have a  college degree vs. 42% of voters – AP VoteCast


Hyper-Inflation – Inflation in Zimbabwe surged 79.6 billion percent in 2007, so high that the government’s $100 trillion bills became worthless souvenirs soon after they were printed.  In Venezuela the inflation rate has surged 52,000% over the last 12 months.  Venezuelans have lost an average of 24 pounds each.  Malaria is on the rise as is crime.  More than 2.3 million have fled the country, including half the doctors.  Germany printed bank notes in 1923 causing the most famous bout of hyper-inflation, causing their prices to double every three and a half days and at one point it took 6.7 trillion marks to buy one U.S. dollar.  The fastest ever hyper-inflation was in Hungary in 1946, when at its peak prices were doubling every 15 hours – Brock Larmer


Household Debt – has risen for 12 straight quarters and is 21% higher than the peak 10 years ago.  Additionally, the delinquency rates rose to 4.7% in 3Q vs. 4.5% in 2Q – New York Fed


Ouch! – Eddie Lampert, who has been a major player in Sears since 2005, has seen the value of his hedge fund RBS Partners decline from $12.3 billion in 2010 to $299 million through 3Q 2018 – DATAROMA


State Median Household Income vs. Purchasing Power – The best: MS +17.9%, AR +13.3%, MO +11.8%, OH +11.4%, OK +10.5%, TN +10.4%.  The worst:  DC -33.1%, CA -28%, MD -21.1%, MA -20.5%,

CT -19.1%, AK -19.1% - The Council for Community and Economic Research



Christmas Trees


When I was six, my dad resigned his Army commission and we moved from Atlanta to Donelson, TN, a Nashville suburb community with a population of around 1,000 people.  When I was 12, I noticed that the Nashville airport was expanding and acquiring the acreage of an adjacent boys camp.  Having been to the camp, I knew that several pine trees had been planted around the camp’s lake to prevent erosion.  My 10-year old brother Lloyd and I decided to cut down several of the trees to sell as Christmas trees from our parents one-acre corner lot that adjoined a major highway.  That year we grossed around $200.  The next year we found a farmer who let us cut cedar trees from his property for us to sell.  Within a few years we were ordering a full railcar load of 1600 to 1800 trees from Ontario and unloading them around Thanksgiving and having them ready for sale by the first Friday in December.  Because we offered our trees at reasonable prices, the lot grew to become one of the largest in Nashville and supported my brother and I’s college education.


Once a lady came to visit from West Nashville asking for a flocked tree on a Sunday, three days before Christmas, and I said we had sold all of our trees.  She said she had been buying from us for years and would give anything for a flocked tree.  Feeling sorry for the lady, I glanced in the picture window of my folks home and told her I believe we do have one flocked tree left.  I sold her my folks flocked tree with ornaments for $25, which was a lot of money, considering I was working at the local grocery store for 55 cents an hour.  When my folks came home my mother came into the living room and said, “Where is our Christmas tree?”  I said, “I sold it.”  She said, “Oh Buzzie how could you!”  A few years later the head of the Nashville zoning commission told us we were operating a retail establishment on residential property.  I gave him a flocked tree and thought that was the end of it.  Seven or eight months later he came back again with his hand out for more.  So we closed the business with a greater understanding of politics – Buzz ….. The most expensive day to buy a Christmas tree is on Cyber Monday, the Monday after Thanksgiving when the trees cost an average of $81.  By December 18, the average price has dropped 21% to $64 – www.squareup.com  





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