MidSouth Week in Review:
January 4, 2019

Weekly Update from Fund Manager Buzz Heidtke, MidSouth Investment Fund

The S & P surged 3.4% today following a report that the U.S. economy added far more jobs than expected in December.  For the holiday shortened week, the S & P was up 1.0%.  Apple declined 10% yesterday and the S & P declined 2.4% after Apple cut their 4Q revenue forecast due to a China slump.  In a recent CME Group survey, 90% believe that the Fed will hold rates steady or lower them in 2019 vs. less than 15% in mid-November.  10-year Treasuries declined to 2.65% vs. 3.25% in November and the 30-year bond yields dropped below the 3% level.  30-year mortgage rates declined to 4.51% and the 15-year to 3.99%.  Delta declined 10% yesterday after cutting their revenue guidance, causing the entire group to decline 5%+.  Crude oil surged from its recent $43 low to $49 today.  Manhattan home sales fell 14% last year, the industry’s steepest drop since 2009.

A few movies that I have recently seen and liked include:  “Mary Poppins Returns” about a guy whose home is getting ready to be foreclosed unless he can find a lost bank stock certificate.  Classy music.  All kids should watch but believe parents will like it better.  “The Mule”.  If you are over 60 you should like this one featuring 86-year-old Clint Eastwood as a down and out businessman who in desperation takes a job as a temporary drug courier for a Mexican cartel.  “Green Book” is about a world class African American pianist who embarks on a tour to the deep south in 1962 and recruits a tough Italian from the Bronx as his driver.  I really liked this one.  Viewer rating is 95%.  “Bohemian Rhapsody” is about singer British Freddie Mercury who was diagnosed with AIDS in the 1980’s and reunites with his former rock group Queen before he dies in 1991.  Good music. – Buzz ….. The 2018 box office sales reached an all-time high, earning nearly $12 billion in the U.S. alone.

BuzzBits

The Russell 2000 – small cap index was down 20.5% for the quarter and 12.1% for the month of December.  Going back to 1979, the index has had ten quarterly loss periods of at least 12.8%.  The average forward one-year return for the group was 31.9%, with only one losing year, 9.3% in 2001.  The average three-year return was 73% (20% annualized) and 130% (18% annualized) for five years – Ben Carlson ….. The Russell 2000 is up 8.9% in the seven-day trading period since Christmas.

Bear Market – A six to eighteen month period when the kids get no allowance, the wife gets no jewelry and the husband gets no sex – Fred Powell

The S & P 500 - lost 4.4% in 2018, breaking a streak of nine consecutive up years.  The S & P has gained an average of 9.8% annually over the past 50 years – BTN Research

Babe Ruth – in 1918, the Red Sox let pitcher Babe Ruth play first base between starts so they could keep his big bat in the lineup.  For the next 100 years, 1,539 men hit 15 home runs in a season and 5,201 pitched 50 innings, but only for Ruth did those two circles overlap, until LA Angels Shohei Ohtani, a 23-year-old rookie from Japan, joined him last year.  Before getting hurt Ohtani hit 22 homers and went 4-2 with a 3.2  ERA….On April 2,1931, left-handed 17-year-old Jackie Mitchell, pitching for her minor league Chattanooga Lookouts team against the Yankees, struck out both Babe Ruth and Lou Gehrig in an exhibition game – New York Times

College Costs – Colleges and universities that charge the highest net prices are heavily concentrated on the East and West coasts.  Middle-class and low-income students who gain admissions to schools like Harvard and Yale will pay little or no money vs. the same students at less prestigious schools will likely pay more – U.S. Department of Education

FedEx – When he was 20, Fred Smith devised the idea for Federal Express.  He outlined the idea in a paper during his junior year at Yale.  His professor thought the concept had merit, but gave Smith a “C” because he thought the system was not practical.  In 1971 at the age of 27, Smith founded FedEx and by 1983 his company’s revenues exceeded $1 billion.  Today FedEx has revenues of $67 billion and earnings of $5 billion.

The Safest Big City – is New York with a mere 30 homicides per million population vs. LA with 60, Houston with 140 and Chicago with 200 – New York Times

California Cannabis Sales – declined to $2.5 billion in 2018 from $3 billion in 2017 when only medical pot was legal.  When recreational sales became legal in 2018, the bootleggers evidently took over.  The state’s pot surplus is 13 times more than Colorado’s annual production.  The average price of regulated pot in the state is $1,183 a pound compared to around $3,000 in IL, CT and D.C – New York Times……Pot stock Tilray hit $300 a share in September before declining to $64 in December.  The $6.5 billion company still looks richly priced at 200x sales, 35x book value and losing $19 million last quarter - Buzz

Russian Residential Real Estate – Because scams are so prevalent involving the elderly, a Russian couple buying a home has to provide a certificate of sanity from a psychologist before a transaction can be completed – New York Times ….. There are more $100 bills in Russia currently than in the U.S.

buzz@msifund.com

This material was prepared by MidSouth Investment Management LLC, and does not necessarily represent the views of the presenting party, nor their affiliates.  This information has been derived from sources believed to be accurate.  Please note – investing involves risk, and past performance is no guarantee of future results.  The publisher is not engaged in rendering legal, accounting or other professional services.  If assistance is needed, the reader is advised to engage the services of a competent professional.  This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty.  This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such.  This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results.  Investments will fluctuate and when redeemed may be worth more or less than when originally invested.  All economic and performance data is historical and not indicative of future results.  Market indices discussed are unmanaged.  Investors cannot invest in unmanaged indices. 

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