MidSouth Week in Review:
October 18, 2019

The S&P rose 0.6% for the week that saw many investors begin to move funds from tech stocks to safer defensive dividend paying stocks.  The FANG stocks declined 2.3% for the day.  The U.S. dollar declined to a two month low and the British pound rose to $1.30 vs. $1.19 in May.  U.S. retail sales slipped 0.3% in September vs. an expected 0.2% increase.  Housing starts declined 9.4% last month.  Many economists expect the Fed to cut interest rates this month to keep the longest expansion in history on track.  IBM fell 7% for the week after reporting a revenue decline for the quarter.  Bitcoin dropped to $7952, a four month low.  On this day in 1867, the U.S. bought Alaska from Russia for $7 million (2 cents per acre), despite the objection from many politicians.  The president at the time was Andrew Johnson, who was impeached in 1868.

The Drudge Report gives Warren a 48.3% chance of winning the Democratic Presidential nomination vs. 15.2% for Biden vs. 9.8% for Buttigieg.  They give Trump a 41.5% odds vs. 24.4% for Warren on winning the general election.

BuzzBits

Unusual Market Stats – The NASDAQ has had a 926% return over the past 17 years vs. a 360% return for Warren Buffet’s Berkshire Hathaway stock.  Over the past 20 years, International stocks have returned 110%, the S & P 500 221%, Long Term U.S. Bonds 329%, Gold 365% - Charlie Bisello

Who is Rich? – An income of $75,000 – Town & Country… $75,000 income and net worth of $25,000 – Fortune … An income of $80,000 to $100,000 – Price Waterhouse – 1989 survey

Long Term  Bonds – There has been talk of the U.S. government taking advantage of the low interest rate environment by issuing 50-year or 100-year bonds.  If you purchased a 50-year bond with a 2.5% coupon and the yield rose to 4%, you would be down 30% on your investment.  You would also be down around 30% if you purchased a 3%, 100-year bond and yields rose to 5% - Buzz

Inequality by Degrees – Whether you graduate from college is largely determined by your parents income.  In the U.S., 77% of children born into the top income quartile will earn a degree by age 24, but for the bottom quartile that number is a mere 9% - “Educated: A Memoir”, Tara Westover

Anybody But Bernie – The Vermont senator made an effort last week to act true to form, as his campaign unveiled a plan that promises to “put an end to the corporate greed ruining our country.”  His proposal calls for giving workers 20% of their companies’ shares and 45% of their firms’ board seats, and it also would ban large-scale stock buybacks, return the federal corporate tax rate to 35% from 21% and require companies to give stock to workers who lose their jobs due to outsourcing or automation – MarketWatch

U. S. Births – fell to a 32-year low last year.  Why?  Child-rearing is expensive, career opportunities for women have improved, student loans are a drain, house prices are high.  The number of workers per Social Security recipient has fallen to 2.8 vs. five in 1960 – Barron’s ….. 55% of millennials do not have a retirement account and among the 45% who do, 12% aren’t contributing to it – Business Insider

8% Pension Returns – At one time, 8% was the standard annual return goal for most pensions.  Not today.  In 2010, 59 of the large funds tracked had assumed return rates of 8% and another 30 had higher return goals.  As recently as 2015, only 32 plans have assumed rates of 8% or higher – Pensions & Investments

The IRS – conducted 380,000 audits last year, or 39% of the total on low-income taxpayers.  Low level employees can quickly audit these returns, while looking for abuse of the use of tax credits, whereas it “takes senior auditors hours upon hours to complete the exam” of a richer taxpayers return – THE WEEK

Robots – As they have become more powerful, a lot of jobs are doomed to disappear.  An Oxford study estimated that nearly half of all U.S. jobs were at risk because of artificial Intelligence (AI).  Automation has already made manufacturing, mining, agriculture and other industries less labor-intensive.  Each industrial robot is estimated to replace 3.3 workers.  Manufacturers could lose up to 20 million jobs by 2030 – Oxford Economics

A 25% Market Drop – will occur if Trump adds more tariffs or if either Sanders or Warren become president – Leon Cooperman, hedge fund manager

Divorces – are near a 40-year low.  However, the divorce rate among those 50 and over has doubled since 1990, because people are living longer than ever before.  The divorce rate for those under 50, while declining, hovers around 30% - RIAIntel

buzz@msifund.com

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