MidSouth Week in Review:
December 07, 2018
Weekly Update from Fund Manager Buzz Heidtke, MidSouth Investment Fund
Dec. 10, 2018 | RedChip Companies
The S & P 500 was down 4.7% for the week and down 5.5% over the past three trading days. The 10-year Treasury yield declined to 2.85% from its November high of 3.23% causing concerns about the pace of U.S. growth. The gap between the two-year and 10-year Treasuries narrowed to its smallest spread in 10 years, causing concerns about an inverted yield curve, which normally signals a recession. Because of the recent decline in interest rates, the Fed is likely to slow the rate increase pace.
Today an investment advisor friend asked about my top five stock picks. I had Jay in the office get me a list of his five favorites that we own. He gave me a list of six that were all selling between 4 to 8 times estimated earnings. That my friend is cheap. One had large insider buying, another is a play on low priced oil, another a play on higher priced oil and another is a bank whose earnings are expected to double in 3.5 to 4 years, according to their CEO. Academic studies going back to 1928 show that a package of stocks selling at less than 10x earnings will outperform the market.
A recent study indicated that the average mutual fund investor makes only a 2% return on their investment portfolio vs. a 9% average return for the general stock market. Why? The average investor buys at the top and sells at the bottom. All the major stock market indexes have declined at least 10% from their 2018 high. Another study showed that outperformance can be obtained by adding to your portfolio after a 10% market retracement.
BuzzBits
Value Investing Changes – The four largest companies today by market value do not need tangible assets. They are not like AT&T, GM, or Exxon-Mobile, requiring lots of capital to produce earnings. We have become an asset light economy – Warren Buffett
Uncle Sam – The name came from Troy, NY meatpacker Sam Wilson whose barrels of meat during the War of 1812 were stamped “U.S.” – for the United States, which conflated with Wilson’s nickname, “Uncle Sam” – New York Times
Financial Security is Sexy – The recent Merrill Edge Report finds that 56% of Americans say they want a partner who provides financial security (54% for men and 57% for women) more than they want to be swept off their feet. The study of the mass affluent also revealed that respondents prefer a partner who is career-focused over socially conscious; frugal more than philanthropic; and a saver rather than a spender.
iPhone XR – Because of sputtering sales of its most recent XR iPhone offering, Apple has been offering trade-in-deals with as much as $300 off the $749 purchase price. Apple is offering 10% off deals for active-military and veterans including iPhone’s and iPad’s. Apple’s stock has declined 27% from its October high.
One Penny Invested - at the birth of Christ and compounded semi-annually at 4% would have been worth $200,000,000,000,000,000,000,000,000,000,000 in 1922 or two million trillion times the entire estimated worth of the world – proceedings of the Sales Convention of Caldwell & Company, at the Chase Hotel in St. Louis in 1927 ….. Caldwell & Co. was the largest regional brokerage firm in the Southeast in the 1920’s, owning and or controlling several southern banks and newspapers. The company folded in 1930 due to excessive debt. I later gave my copy of the Sales Convention book to Jimmy Bradford, who was CEO of J.C. Bradford, the largest investment firm at the time in the southeast – Buzz ….. In 1969, Nashville-based Equitable Securities was the second richest brokerage firm in the country. The firm was the largest stockholder in American Express and held a large position in Holiday Inn, which the company brought public in 1957.
Fat Americans – In 1976, 15% of American adults were obese vs. 40% today – New York Times
Brevity – Barron’s did a study of power point presentations of companies in the Russell 1000. The worst performers presentations were on average 12 pages longer than the best performers. The top six stocks, based on brevity, returned 48% a year for five years – Dow Jones News
Retirement Spending – If you are a 55-to-64 year-old, spending $65,000 annually, your retirement expenditures will decline to $55,000 when you hit the 64-to-74 age bracket and to $42,000 after that. Housing costs remained steady and health care costs increased, but every other category – transportation, entertainment, clothing, food and drinks – declined sharply – Consumers’ Expenditure survey
Highways and Home Values – Home values increased 5% in the run-up leading to the opening of a highway; 2.5% to 4.3% increase in home sale prices in the year following completion of a highway; 4% reduction in sale prices of homes directly adjacent to the highway; houses near the old highway declined 4% in price; houses declined 3.5% for each mile away from the new exit ramps – Dutch Land Registry
DACHAU
My dad had the largest Army Battalion in Germany during WWII. His group was evidently responsible for cleaning up the Dachau concentration camp after the War ended. Below is a horrific excerpt of an article that he wrote for Stars and Stripes magazine that is in the U.S. Holocaust Memorial Museum in D.C. Our family later joined dad in Germany where we lived with a German family until I was nearly four-years-old. My German was soon better than my English. I still remember saying alles kaput (all is broken) referring to the bombed out city where we lived - Buzz
Scope and Contents: Consists of copies of widely reproduced images of Yugoslav survivors of the Dachau concentration camp. Also includes a typed excerpt from an article for "Stars and Stripes" written by Lt. Col. Lyman Heidtke, of the 310th Ordnance Battalion, in which he describes the Dachau concentration camp and the purposes of various areas of the camp. The excerpt and images were sent home by 2nd Lt. Robert C. March of the 334th Ordnance Battalion; when sending the material, March noted that the pictures were taken from an undeveloped roll of film from a confiscated German camera.
URL: https://collections.ushmm.org/search/catalog/irn50088
DACHAU EXTERMINATION CAMP
(The accompanying pictures were taken from an undeveloped roll of film from a confiscated German camera. July 3 & 4, 1945. Lt. Col. Lyman Heidtke, C. O. 310th Ordnance Battalion)
An excerpt from Lt. Col. Heidtke’s article:
“Located a few miles north of Munich, Dachau is only a small city with a normal native population of about 5,000. But from it emanated one of the most hideous terrorist movements the world has ever witnessed. Here it was that the infamous SS organization had its roots and here it was that the mother concentration camp was located. The camp itself can be visualized as about a mile square. Cutting the square into 12 strips a mile long. The end strip was reserved for 30,000 political prisoners of all races and creeds. The second strip could be thought of as the extermination strip. The remainder of the camp was reserved for SS troops who operated the camp …..The camp fell to the Americans on the 29th of April.”
“Our guide estimated that Dachau had ‘processed’ about 200,000 people since its opening in 1936. This is only a fraction of the estimated 4 million persons executed in daughter camps of Auschwitz in Poland and Buchenwald in Weimer. Dachau had cadred the daughter camps with trained SS personnel.”
“Several kinds of killing were done in strip number 2. There was hanging, gassing, the standing shot from about 10 paces and the kneeling shot from about 3 paces. The last mercy type being reserved for members of the SS or Wehrmacht who for one reason or another were declared surplus. Naturally a graveyard large enough to accommodate the bodies of all the victims at Dachau would present complex problems of labor and space so a crematorium was built.”
“Imagine a red brick building 150 feet long, 30 feet wide, and 12 feet high. Now divide the building up into 5 rooms in a line and number the rooms from 1 to 5. Into room 2 were marched the prisoners scheduled to take a shower. This is the clothes removal room with its hunches and clothes hooks. Looking through an inner door to room 1 can be seen the clothes disinfectant chambers and looking to the right thru another inner door to room 3 can be seen the shower room with about 20 shower heads set in the ceiling. Everything looks fine – no tricks – they undress and go into the shower room to wait for the water to be turned on. Bang! The rubber stripped steel doors close and from an unnoticed pipe in the wall comes gas! …. The whole fixtures have without any pipes to them been just set into the ceiling. But there is no confusion for thru the inner door between rooms 2 and 3 are dragged the dead bodies, placed tow at a time on steel stretchers with rollers on the underside and the bodies rolled into one of the three furnaces tailored for the purpose. Room 5 was the body storage room still blood-stained high up on all the walls and on the ceiling. Strategically placed dogs as well as guards prevented the escape of any inmate from this whole area.”
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