MidSouth Week in Review:
February 22, 2019

Weekly Update from Fund Manager Buzz Heidtke, MidSouth Investment Fund

For the week the S & P rose 0.6%.  The Dow had its 9^th consecutive up week and is up 20% over the past two months, ranking in the top ten best gains over the period since 1900.  Following the big gains, the Dow has averaged a 2% decline over the next two month period.  Goldman Sachs expects the S & P could perform better and corporate profits could be higher than is widely expected.  The head of the San Francisco Federal Reserve said there is a good chance the Fed will not raise interest rates in 2019.  Kraft Heinz (KHC) declined 28% today after missing earnings forecast and reducing their dividend.  Berkshire owns 27% of the company and declined 1.6% for the day.  Consumer confidence had a big decline in January.  In 1998, it also suffered a big drop followed by a strong rebound.  A big  drop in 2000 precluded a recession.  Copper made a 1-year high today causing me to buy copper mining company Freeport-McMoran at around $13.30.  The stock was selling in the $17 to $18 area a year ago.  Wholesale gasoline prices rose 9.5% for the week.

The Oscar’s are Sunday night with “Roma” expected to receive the Best Picture award.  I hope to see the movie Saturday night.  My favorite movie of those nominated is “Green Book”, about a black musician and his white chauffeur on tour in the south in 1962.  I don’t expect the movie to win but I haven’t heard of anyone who didn’t love the movie. - Buzz

BuzzBits

Recessions – 9 of the last 11 recessions since WWII were preceded by a  big decline in the housing market, but housing is unlikely to be the cause of the next recession, because it never fully recovered in the first place.  Home sales and prices have been sluggish in the face of rising interest rates.  The pace of construction, combined with percent-up demand from young people, suggests the sector should remain stable during the next downturn – New York Times

Golf – If you shoot above 100 you have no business playing.  If you shoot below 80 you will soon have no business.

Negative Yields – Because of uncertainty in Europe, many investors are paying their governments to hold their funds (negative returns).  The current yield on a 2-year German bond is -0.54% vs. 2.61% for U.S. Treasury bonds.  Yields on other European country bonds include; Austria (-0.48%), France (-0.46%), Sweden (-0.40%) – Wall Street Journal

Homographs – are words of like spelling but with more than one meaning.  A homograph that is also pronounced differently is a heteronym.  See if you or your kids can get both pronunciations of the following heteronyms:  Wound, produce, refuse, intimate, does, sow, invalid, present, lead, buffet, polish, dove, house, sake, are, console, deliberate, excuse.

Who Pays the Taxes – The top 0.1% pay 7.7% of all taxes.   The top 10% paid 69% of the taxes paid in 2016.  The bottom 75% paid 14% - IRS ….. The top 20% are expected to pay 87% of taxes in 2018 – CNBC …..63% in a recent survey of 1,993 registered voters said that the upper income pay too little in taxes – Morning Consultants

Murders and Rapes – 98% are by a close family member or a friend of the family – FACTS ….. 35% to 40% of murders go unsolved - FBI….. Chances that a burglary will be solved in the U.S.: 1 in 7.

Unequal Inheritances – A recent study found that two-thirds of Americans believe that leaving different sums to kids is acceptable under certain circumstances.  That’s up from 35% in 2010 and 16% in 1995.  A Merrill Lynch study found that 25% believe that kids with more children should get more.  Two-thirds thought a primary caregiver should get more.  Kids in a rocky relationship should probably have a trust.  If one child is not good with money, a trust is advisable to protect their financial future.  Resentment is often the result of uneven distribution of wealth to your kids – ThomsonONE

Moving Back Home – A romance on the rocks is the No. 1 reason adults ages 26 to 40 move back in with their parents.  For all ages, divorce or breakup was the second most common reason for moving back home.  Where do they live when they move back home:  childhood bedroom (45%), guest bedroom (26%), basement (12%), other (1%) – Homes.com

Late Retirement – 48% of working Americans anticipate working past age 65, up from 16% 30 years ago – Employee Benefit Research Institute

Port of Virginia – has seen its sea level rise by a foot and a half over the  past 100 years and port officials say it could rise by another foot and a half over the next 30 years.  The U.S. government recently released National Climate Assessment that estimated that sea levels could rise by as much as 4 feet by 2100.

High Tax States – carry high expenses.  To build a subway tunnel in Europe and Japan would cost around $160 million to $480 million a mile vs. $2.1 to $2.8 billion in New York.  Unionized tunnel workers received $111 an hour in NYC vs. $38 an hour in Detroit and $40 an hour in Germany.  High-tax Democratic states spend 50% to nearly 100% above the national averages per student in public schools.  But even as the students may have received a better education, the three  top states exited by millennials were NY, IL, and NJ – Wall Street Journal

Rules for Tipping

Americans are justifiably confused about whom they are expected to tip.  For years they tipped waitresses, bartenders, sanitation workers and postmen, but then plumbers, roofers, pool boys and personal trainers got into the act.  Americans have learned the hard way that if you don’t tip the sheet-rock guy, he’ll never come back to finish the job.

With cardiologists, it is best to adopt a wait-and-see attitude.  If the stent works, tip; if it doesn’t, don’t.  It’s’ perfectly acceptable to stiff them.  The same goes with obstetricians.  You might want to wait a few months to see if the kid is a keeper before tipping anyone involved in the delivery.  If the kid turns out to be cuddly as the day is long, an 18% gratuity is appropriate.  Otherwise just drop off a couple of twenties.

Before zip-lining across the Grand Canyon, always tip the person that straps you into the harness.  Don’t tip people who work for the IRS.  It just doesn’t look good.  Never try tipping a state trooper in Kentucky.  Mountain-climbers, attention:  Always tip the Sherpa.  Drummers should be tipped according to the length of their solos: 20% of the cover charge for a short solo; 10% for a long one.  Bass players should never be tipped; it will only encourage them.

U.S. senators will be deeply, deeply, deeply offended if offered a tip.  Congressmen are fine with it, particularly the ones from New Jersey and Louisiana.  Journalists do not expect tips, and technically are not allowed to accept them.  But given the current dismal state of the media industry, I think the tip jars are coming soon. – Joe Queenan, Wall Street Journal

buzz@msifund.com

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