MidSouth Week in Review:
November 26, 2018

Weekly Update from Fund Manager Buzz Heidtke, MidSouth Investment Fund

Dec. 3, 2018 | RedChip Companies


The S & P rose 4.6% for the week.  The Dow rose 2.5% on Wednesday after Fed Chair Jerome Powell said interest rates are close to neutral, a shift from the view he expressed two months ago.  New home sales slid 8.9% in October vs. September and down 12% vs. 2017.  Higher mortgage rates and rising construction costs created significant headwinds for home builders.  The yield on the 10-year Treasury dropped to 3.01%, its lowest level since September.  Crude oil declined to a 13-month low at the $50 level, after registering its worst month in a decade.  Goldman Sachs expects an OPEC supply cut and its announcement to lead to a price recovery.




Dividend Alternative – Cash is now competitive and will likely grow more so.  Cash yields today are higher than dividend yields for 60% of the S & P 500 today and we predict the short rates will rise to 3.5% by the end of 2019, well above the S & P 500’s 1.9% dividend yield – Bank of America - Merrill Lynch


Live 10 Years Longer – Eat a healthy diet, exercise 30 minutes or more a day, maintain a healthy weight (body mass between 18.5 and 24.9), don’t drink too much alcohol (one glass of wine a day for women, and two for men), don’t smoke (ever) – Harvard’s T. H. Chan School of Public Health


Poor Results – A recent study of endowment fund returns from 2009 to 2016 found that their returns were a mere 6.7% annually vs. 12.2% for U.S. stocks, 10.5% for a 60/40 mix of stocks and bonds and an 8% return for U.S. Treasuries.  Investment returns for the largest endowments deteriorated if the fund was located closer to Wall Street or another financial center because they were more susceptible to professional money managers’ sales pitches that lead to over-investment in exotic products with high fee structurers – Wall Street Journal ….. The Harvard endowment was the worst Ivy League performer during the period with a 4.5% annualized return – Institutional Investor


The Widowhood Effect – The increased risk for death one faces when a spouse dies.  The risk is elevated by more than 50% in the first month after death.  It then declines but remains at the 20% level for three or more years.  The loss of a female spouse by an older person often means the loss of a primary caregiver, the person who cooks, arranges his social life and makes sure he takes his pills and keeps his doctor appointments.  When men die, there is typically a reduction in pension and social security benefits to the surviving spouse as well as the loss of the person who handles the family finances.  Only 14% of widows reported making financial decisions by themselves before their spouse died – Bottomline Health


Best Day to Buy a House – was on Dec. 26 during the 2013-2017 period when the average savings was 1.3% or $2,500, according to property data analyst Atom Data Solutions.  Eight of the top ten days were in December.


Ouch! – After two weeks of protest, the French government has postponed the vote to raise gas taxes.  Their current gas tax is $3.13 per gallon vs. an 18.4 cent federal tax rate in the U.S.  The U. S. federal tax rate was last raised in 1993 - Buzz


Morgan Stanley Increases Advisor Payout – “It’s the first pay increase they have given me that I didn’t feel like bending over and touching my toes.” – investment advisor Jason Pharris


TV Viewing – among Millennials (18 to 24) has declined 36% since 2014 and among teens a 48% drop since 2014 vs. only a 2% decline from viewers 55+.  For the 3 months ending Sept. 30, cable and satellite system reports a loss of 1 million customers.  About 40% of homes led by Millennials don’t subscribe to cable or satellite services – USA TODAY


Refi’s – Because the average fixed-rate mortgage is now 4.81% vs. 3.99% a year ago, refi’s to get a better rate are almost non-existence today.  80% of refi borrowers today choose the expensive “cashout” option.  One person dropped out of their 3.75% mortgage to refi at 5.75% in order to pick-up $75,000 in cash for a home addition.  Not a smart move. – Wall Street Journal


Drug Overdose Deaths – rose to 70,237 in 2017, including 28,466 deaths involving fentanyl or a similar drug vs. 5,000 in 1980.  40,000 died from car crashes in 2017 and 15,500 from gun deaths, excluding suicides – National Center for Health Stats ….. Life expectancy fell by one-tenth of a year to 78.6 years because of the sharpest annual increase in suicides and the continued rise in opioid deaths – Wall Street Journal


Tax Rates – The average tax rate for those in the bottom 20% of taxpayers has fallen to 1.5% from 7.5% in 1979.  The average rate for the top one-percenters has dropped from 38.5% in 1979 to 33.3% - Congressional Budget Office


What’s the Word?  Thunderbird! - https://drunkard.com/whats-the-word-thunderbird/





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