MidSouth Week in Review:
August 16, 2019

The S & P rose 1.6% today to recover from yesterday’s two-day, 4% panic decline, over recession worries.  For the week, the S & P declined 0.9%.  The first inverted yield curve in 10 years caused former Fed chair Alan Greenspan to comment that he sees no barriers to prevent negative yields, such as they currently have in much of Europe.  Foreign investors held a record $6.5 trillion of U.S. Treasuries in May 2009.  On Wednesday, the 30-year Treasuries dropped below 2% for the first time ever.  30-year mortgage rates remained unchanged at 3.6% vs. 4.53% a year ago.  GE declined 20% this week over fraud charge accusations before recovering 12% today on the announcement of several insider buys.  Canopy Growth, the world’s largest pot company, suffered a 20% decline on the announcement of a $1.5 billion loss.  The Argentine peso fell 30% against the dollar.  About 17 years ago their currency had a similar collapse so I took a vacation to Buenos Aires and stayed in a 4-star hotel at a bargain price and took six of us, including someone from the State department and his wife, out for a nice dinner with wine for less than $100, including the gratuity.  I went to London in June, where the pound is currently $1.21 vs. $1.34 in March

BuzzBits

Inverted Yield Curve – occurred Wednesday when the yield on the 10-year Treasury bonds fell below the 2-year Treasury yields.  This event has occurred five times since 1978, with an average 4.9% return for the S & P over the following 6-month period and a 13.5% average return over the following 12-months – Dow Jones Market Data …..Inverted yields since 1956 have resulted in recessions occurring approximately 15-months after the inversion – Merrill Lynch

Inheritance – “Leave your children enough so they can do anything, but not enough so they can do nothing.” – Warren Buffett

Dividend Payers – This week 10-year Treasury yields dropped to 1.52%, suggesting that investors may begin looking at dividend paying stocks as a bond alternative.  Approximately 60% of S&P  500 stocks currently offer a yield of 1.7% or better – FactSet ….. 30-year Treasury bond yields declined to a record low of 1.98%.

L.A. Homeless Population – jumped 12% this year to nearly 59,000.  Why?  Over the past six years in L.A., the median household income grew 23% while the rent increased 67%.  A white person must earn $47.52 an hour, more than triple the minimum wage, too afford the average monthly rent of $2,471.  Homelessness is up 47% in San Francisco since 2017, where the median one-bedroom apartment now rents for $3,690 a month.  Ouch! – THE WEEK

The Wealth Gap – The typical white family has 10x’s as much wealth as the typical black family ($171k vs. $17.6k) and 8x’s the wealth of a typical Hispanic family ($171k vs. $20.7k).  A black family in the 50^th percentile of wealth has the same wealth as a white family in the 20^th percentile of wealth.  The typical black family headed by someone with a college degree, but no graduate degree, born in the 70’s and 80’s, barely had any more wealth than the typical black household headed by a non-grad – New York Times

I Quit!!! – 3.43 million U.S. workers quit their jobs in June vs. 1.79 million in June 2009, which is indicative of a greater level of confidence in finding a replacement job – Department of Labor

The Juiced Ball – Because home runs have surged in the Major Leagues over the past few years, many have speculated it’s the ball, which caused two Triple-A-leagues to switch to the Major League’s baseball vs. the cheaper ball previously used.  What happened?  The two Triple-A leagues have seen their home run production surge 60% vs. last year.  The Double-A teams, using the cheaper balls, are on pace for a 9% decrease in total home runs this season – Wall Street Journal ….. During the steroid era, Major League home runs rose 81% from 1992 to 1998.  To-date, Major League home runs are in line to be 67% more than in 2014 - Buzz

Business Schools – Of the 92,800 people who took out Fed loans in 2016 and 2017, the average amount owed is $39,900.  MBA grads of Northwestern have an average debt load of $116,200.  Harvard estimates the full cost of its two-year MBA program is $220,000, including living expenses.  Their grads can expect to earn $140,000+ after graduation – Education Department

Trash – New Yorkers throw away 12,000 tons of trash and recyclables daily.  It takes 8,000 employees to haul away the trash, with a $1.7 billion annual budget – New York Times

buzz@msifund.com

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