MidSouth Week in Review:
January 11, 2019
Weekly Update from Fund Manager Buzz Heidtke, MidSouth Investment Fund
Jan. 14, 2019 | RedChip Companies
The S & P was up 2.5% for the week and is up 10.4% over the past 12 trading days since Christmas. The odds favor a double digit return for the stock market this year based on the following events that normally generate positive full-year returns: Mutual fund redemptions in mid-December were the largest since 2008, the S & P declined 13% in the 3Q, it’s the third year of the presidential cycle and the first five trading days of January were positive. Macy’s declined 18% yesterday after lowering their 4Q sales and earning guidance because of disappointing Nov.-Dec. sales.
Residential real estate sales were soft during the 4Q with one service estimating an 18% 4Q decline in new home sales. A weak stock market and rising interest rates were possibly the primary cause of the decline. Several real estate sales agents have told me that 2018 was their worst ever year for sales. A problem for sales agents could be that there are many sales people. 30-year mortgage rates declined to 4.45% last week and the 15-year rates declined to 3.89% from 3.99, which should be of help. Jobless claims declined. Crude declined 2% today but was still up 7% for the week. Bitcoin declined 9% yesterday to $3,700.
BuzzBits
January’s First Five Days – During the 1950-2017 period, there were 18 times when the first five trading days of the year were up at least 1.8% and in none of those years was the market ever down for the full year. The average yearly return was 17.85% The S & P was up 2.7% for the first five days of 2019.
Market Correction – The day after you buy stocks – Yahoo
Year Three – 2019 is the third year of Trump’s four-year presidential term. The S & P has been positive during 21 of the past 23 third year’s, dating back to 1927, with an average gain of 16.1%. The reason for the outperformance is that the incumbent party will often do what is necessary to get re-elected – BTN Research
Working Older Women – 66-year-old Susan Zirinsky takes over the helm at CBS and will be the first woman and oldest to assume the job. Nancy Pelosi, 78, was re-elected House Speaker, making her the most powerful elected woman in U.S. history. Maxine Waters, 79, became the first woman and black to lead the Financial Services Committee. Glen Close, 71, beat four younger women to win the Golden Globe for best actress. Nearly a third of women aged 65 to 69 are working, up from 15% in the late 1980’s. 18% of women aged 70 – 74 work, up from 8% - New York Times
LA - CA – In 2012, CA voters approved a tax hike on high earners. Since then their student spending per pupil has increased by 65%. The California teachers union plans on striking Monday for a pay raise with the state offering to pay their substitutes around $500 a day. 40% of workers in LA County are working for cash. 95% of warrants for murder are for illegals as well as 2/3’s of births ….. The incoming governor has proposed offering a 6-month paid maternity leave for state employees. The state has the highest personal income tax rate (13.3%) and 10th highest property tax rates – LA Times, Wall Street Journal
Regional Bank Stocks – The S & P Regional Bank Index (KRE) declined 32% from its August high through its December low of 22% and suffered a three-week 27% decline from its December 3 high – Buzz
Ouch – Kentucky’s unfunded pension liability is estimated to be $40 billion or $9,000 per resident. To offset the liability, the state has been pressured to pass legislation expanding gaming and to dedicate 100% of the revenue to reducing the pension deficit – Chief Investment Officer
The Amazon of its Day - Southwest Air Co-founder Herb Kelleher died last week at the age of 87. The carrier was started in 1971 as a low budget airline that made air travel cheap enough for people who formerly relied on buses, trains or beat-up cars. Passengers soon became delighted with their flight attendants singing goofy songs or cracking jokes about in-flight safety and quickly realized they weren’t flying the typical, conservative airline. To make them unique, they selected beautiful attendants with unique personalities and put them in hot pants and go-go boots. To cut costs on maintenance they only flew Boeing 737’s. Around 1976 when they announced they were expanding outside of Texas, Braniff quickly slashed their popular Dallas-Houston fare by 50 percent. Kelleher’s financial advisors told him that if they matched Braniff’s fares Southwest would be out of business within 90 days. Realizing most of their fliers were business travelers the company simply began giving their frequent fliers a free bottle of whiskey each time they flew Southwest resulting in the company quickly becoming the biggest whiskey distributor in Texas. Soon afterwards the other airlines brought their ticket prices back up. While the other airlines were offering meals on their flights, SWA began serving only peanuts on flights to reduce costs and fares. The other airlines soon followed. Also, Southwest never had assigned seats as they determined that seat assignments and food service were costly and time consuming. Their goal was to turn flights around in less than 30 minutes so they could get more flights in per plane per day. Furthermore, all SWA employees were/are cross trained to act as either ticket agents, flight attendants, or baggage handlers (no unions at the time). Dallas-based Southwest earned $3.69 billion last year vs. Ft. Worth-based American Air who earned $1.15 billion. Southwest has reported profits for each of the past 45 years in an industry known for boom and bust. Braniff Air filed for bankruptcy in 1982 – Wall Street Journal, Top Dog, David Haspel https://youtu.be/TR7JApjgIGw
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