MidSouth Week in Review:
January 25, 2019

Weekly Update from Fund Manager Buzz Heidtke, MidSouth Investment Fund

Jan. 28, 2019 | RedChip Companies

For the holiday shortened 4-day week, the S & P was up 0.8%.  Year-to-date the S & P is up 6.2%.  Today, Trump said a deal had been reached on legislation that would reopen the government through Feb. 15.  U.S. home sales tumbled 6.4% to their lowest level in three years in December and house price increases slowed sharply, suggesting a further loss of momentum in the housing market.  The Regional Bank Index (KRE) closed at its highest level since Dec. 3.  Rep Maxine Waters, the new chair of the financial services panel, has pledged to review the activities of the banking sector for the 10 year period following the 2008 financial crisis.




Low Optimism – Only 20.9% of investors are currently bullish on the stock market vs. the 38.5% historical average.  The last time the sentiment was so low was on May 25, 2016 when the S & P rose 34% from May 2016 through January 2018 – AAII Investor survey


D. C. vs. Vegas – Do you know the difference between Washington and Las Vegas?  In Las Vegas the drunks gamble with their own money – Anon


Bullish - Larry Fink, CEO of the world’s largest investment firm, Blackrock, says the stock market has probably put in a bottom but that for sentiment to take off, the U.S. spat with China on trade needs to get resolved.  Market technical Edward Yardeni predicts that stocks will break out to all-time highs this year.


Poor New Yorkers – qualify for the city’s subsidized housing at very attractive rates.  The only problem was that in 2018, there were more than 4.6 million applicants, with the odds of winning just 1 in 592 vs. 1 in 63 in 2011.  To qualify for the drawing, the poor New Yorkers can earn no more than $120,615 for a single person or $199,650 for a family of six – New York Times


Buy Stamps Now – On Jan. 27, postage stamps will increase by five cents with a first-class letter rising to 55 cents, the largest percentage increase since 1991, when postage increased from 25 to 29 cents.  The Forever Stamp, which is a great buy, will increase from 50 cents to 55 cents.  The USPS lost $3.9 billion in 2018, the 12th consecutive year of losses, despite growing package shipping – USA TODAY


Healthcare Spending – 63% of the $3.5 trillion that Americans spend annually for healthcare is for hospital care, 20% for physicians and clinical services, 10% for prescription drugs – Centers for Medicare & Medicaid Services


Alexandria Ocasio-Cortez – The 29-year-old newly elected Rep from NY is calling for a 70% top marginal income-tax rate.  A study done last year determined the optimal top marginal tax rate to be between 30% to 35%.  At best, a 70% marginal tax rate would maximize federal revenue in the short term before eventually slowing the growth of America and the rest of the world – Wall Street Journal ….. Senator Elizabeth Warren is proposing a wealth tax, a 2% annual levy on fortunes above $50 million and a 3% tax on the assets of billionaires - Bloomberg


Tesla – announced last week that they were reducing their headcount by 7%.  On Tuesday, they announced they were implementing a new pricing increase at their supercharger stations of 20% to 24%.  The cost of a full charge in NYC is around $18 and gets you 207 miles of range vs. a full tank of gas for a BMW 330i that costs $35.72 and will take you 358.8 miles – Electrek


Golf Course Homes – More than 200 golf courses closed in 2017.  When a course closes, prices for nearby homes fall about 25% and can plummet 40% or 50%.  Golf participation peaked in 2001 with 30 million participants vs. 24 million today.  Problems include:  younger people are not interested in the game, dues have surged and more and more people just don’t have the four to five hours of time available to play 18 holes of golf – Wall Street Journal


Millennial Millionaires – Nearly two-thirds of the group believe they will have a seven-figure net worth by the age of 45, according to a recent YCharts survey.  Only 25% of those surveyed had an investment account greater than $100k, while another 37% had balances between $25k and $100k.  44% of the participants were saving at least 15% of their income – Financial Advisor Magazine ….. A survey of investors with $25 million or more of funds finds the average age dropped by 11 years since 2014, to 47.  About nine of ten investors under 38 attributed their success to “inheritance” and “family connections” – Spectrum Group


Facebook Problems – 26% of American users deleted the app from their phone in the 12 months ending in June, while 42% took a break from checking the service for a period of several weeks or more – Pew Research Center ….. In a recent survey Facebook was named by 39.6% as the big tech company that is least trusted with their personal info – Recode.net


John Bogle 1929-2019


John “Jack” Bogle, the man who introduced low-cost, passive investments to the mutual fund industry and helped millions of small investors send their kids to college and retire better, died last Wednesday in Bryn Mawu, PA.  He was 89 years old.  The cause of death was cancer. 


Thrifty, irascible and courageous, Mr. Bogle was a personal example to many.  He was born into a well-to-do family but his father was an alcoholic and his parents divorced; his mother worked retail jobs to support the family.  After attending Blair Academy, a private and, at the time, all-boys’ school, on a full scholarship, Mr. Bogle worked his way through Princeton University.  He married his wife, Eve, in 1956.  The couple had six children, raising them in a four-bedroom house in suburban Philadelphia.


Mr. Bogle said he tried to teach his children the value  of hard work, but regretted that they didn’t have the kind of hard-knocks experiences he had as a child.  “I feel sorry for kids who grow up never taking a job because they have to,” Mr. Bogle said. – Investment News






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