MidSouth Week in Review:
May 10, 2019

Weekly Update from Fund Manager Buzz Heidtke, MidSouth Investment Fund

Fears of a trade war with China caused the S&P to decline 2.7% for the week, its biggest one week decline this year.  Uber (UBER - $41.60) went public today at $45 a share with a market capitalization of around $82 billion.  Their timing was awful.  In addition to a disastrous stock market performance this week their competitor Lyft (LYFT-$51.09) reported earnings that were below expectations.  When Lyft went public in April the market was looking for an Uber IPO valuation of $100 billion+.  Since then Lyft has declined from $88 to as low as $50 today and down from last Friday’s $63 high.  On Thursday, the yield on the 10-year Treasury notes had their biggest one day decline in six weeks to 2.448%, causing the yield on the 10-year to decline below the 3-month bill yield.  An inverted yield curve often heralds a coming economic slump.

BuzzBits

Value Stock? – Warren Buffett announced his Berkshire Hathaway had taken a position in Amazon as a value stock purchase.  Amazon sells at 80x earnings, 29x tangible book value and 4x sales per share – Buzz

Men’s Health – Men are more likely than women to binge-drink, smoke, and lack health insurance.  Only 60% go to the doctor for a routine check-up.  “A guy could go decades without seeing a doctor but when he is having trouble with erections or waking up three times in the night to urinate, he will seek medical attention”, says urologist David Paolone at the University of Wisconsin – Wall Street Journal ….. Experts claim that up to 80 percent of medical bills contain errors, so always check yours.  Sometimes the bill was never run through insurance, or a processor mistyped one digit in your insurance ID and made your policy seem invalid – Real Simple

Money – is the leading cause of stress in a relationship, according to a SunTrust study, with 35% naming finances as the primary trouble spot with their partner.  Those on the same page increase their chances of success.  The greater the mismatch between a couple’s credit scores, the more likely they are to separate within the first five years…Approximately 42% of adults say knowing someone’s credit score would affect their willingness to date that person.  Women were three times as likely to consider a credit score as a major influence on a potential partner – Federal Reserve Board ….. Married couples that earn similar incomes are less likely to get separated.  Women bring at least half or more of the earnings in almost a third of cohabiting couples in the U.S. vs. 13% in 1981 – Cornell Population Center

Medicare Part D – insurance coverage costs can vary by hundreds and even thousands a year, depending on which pharmacy one uses.  In Denver, the annual cost of five drugs at one pharmacy was $688 vs. $1,687 at another just four miles away or $999 more, for the same drugs – Consumer Reports

Connecticut – is a gift that keeps on giving to low-tax states.  The state has a top income tax rate of 6.99%, which includes income from capital gains.  The state now plans on adding  another 2% to the tax on capital gains, effectively raising the top rate to 8.99%.  In 2015 and 2016, the state lost $3.9 billion in net income, mostly to Florida – Wall Street Journal

Student Drivers – Getting a driver’s license when I turned 16 was possibly the happiest day of my life.  Not today!  Only 25% of 16-year-olds have a driver’s license vs. 50%, 40 years ago.  Why the decline?  Most kids now have access to ride-hailing services such as Uber to shuttle them around town and when the young people do buy a car, its normally a used one, causing new car sales to decline.  Gen Z’s will purchase 488,000 cars this year, down from 607,000 in 2004 when Millennials were the same age – Wall Street Journal

Grandparents – spend an average of $2,562 annually on their grandkids.  One in five spent money on their grandchildren’s school or college, averaging $4,075 a year.  11% live in the same household as their grandchild.  Travel to see the grands combined with gifts and other expenses led 13% of the group to say they struggle with financial expectations – AARP

Manufacturing Jobs – have declined from 19.6 million workers in 1979 to 12.5 million today because of a surge of cheap imports – Bureau of Labor Statistics

Inheritances – tend to get squandered quickly.  Experts estimate 33% of benefactors have negative savings within two years of inheriting wealth.  Advice:  Hire a good financial advisor after inheriting wealth – SmartAsset ….. Setting up a trust is highly recommended for recipients who are not good at handling their finances – Buzz

Sub-Prime Auto Loans – 22% and 50% of those underwritten by auto-finance companies, qualified as sub-prime.  The interest rates paid are as high as 29% on a 10-year-old used car.  7.9% of these loans are 90+ days past due, rising from 2 million in 2000 to 7 million in 2018 – CURE Auto Insurance

buzz@msifund.com

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