MidSouth Week in Review:
October 25, 2019

The S&P was up 0.8% for the week as we finished off the busiest week of the quarter for corporate earnings.  Most companies that reported this week ended up beating analysts’ expectations.  Blue chip stock Texas Instruments shares declined 9% this week as the chip-maker cut their future guidance and cautioned on their future outlook.  Tesla was up 14.4% this week as the company reported a surprising profit, and officially over took General Motors as the largest automotive maker.  On Tuesday it was reported that U.S. existing home sales unexpectedly fell 2.2% for September, reversing two straight months of gains.  The Federal Reserve will meet next week and investors have given an 85% chance that the Fed will cut interest rates another 25 bps.  Lower mortgage rates have helped bolster the housing market.  Facebook's CEO, Mark Zuckerberg, faced members of the House Financial Service Committee as he answered questions about Facebook's new crypto currency project called Libra.  The possible adoption of Libra sent Bitcoin to a 3 month low of $7446.  Have a great weekend.

BuzzBits

The Bull Market – has returned 17.5% annually since it began on 3-10-09.  Over the past 50 years, the S & P has returned 9.8% annually – BTN Research

Don’t Gamble – Take all your savings and buy some good stock and hold it till it goes up, then sell it.  If it don’t go up, don’t buy it – Will Rodgers (1879-1935)

The Bond Bull Market - The bond market has had just three down years in the last 40.  Year-to-date the bond market is up 8.6% - BTN Research

Tennessee Taxes vs. Illinois Taxes – State income tax rate:  zero vs. 4.95%;  Average property taxes: $768 per $100,000 in home value vs. $2,408;  Gas taxes and fees: 27.4 cents per gallon vs. 55 cents;  Inheritance and Estate taxes: none vs. 16% above $4 million – Davin Lenok ….. An Illinois couple earning $250,000, living in a $950,000 house and driving 12,000 miles annually could expect an annual state tax bill of $35,618 vs. $7,429 for the same couple living in Tennessee - Buzz

Publicly Traded Companies – The number peaked in 1996 at 8,000, but has declined to 4,400 today – J.P. Morgan

Hemp Farming – With its strong fibers, hemp historically was grown to make industrial rope, fabric and paper.  More recently it is being used to make food additives.  The biggest use of hemp now is for making cannibidiol, or CBD, which some believe conveys calming and anti-inflammatory benefit, without the psychoactive effects of pot.  One Illinois farmer says he will gross about $75,000 an acre from his hemp vs. $1,000 an acre from his corn and beans.  Hemp farming is hard work that must be done largely by hand.  U.S. acreage planted with hemp: 265,764 in 2019 vs. 9,649 in 2016 – Wall Street Journal

Penalty Free Early IRA Payouts – Payouts before age 59 ½ are generally subject to a 10% penalty tax.  However an exemption for early withdrawals is allowed for first-time home buyers of up to $10,000 or to pay for the cost of college.  Also early withdrawals are allowed to cover very large medical expenses or a series of substantially equal payments that run for the longer of five years or until age 59 ½ - www.kiplinger.com/letterlinks/earlydistributions

“Slingin” Sammy Baugh – Because of a shortage of players due to WWII, the NFL reduced its rosters from 33 players to 28, resulting in many playing the full 60 minutes.  Playing for Washington from 1937 to 1952, Baugh led the league in 1941 in passing attempts, punting, and interceptions while playing defense – Sports Illustrated

The SALT Deduction – was passed in 2017, to put a cap on the federal deduction for state and local real estate and income taxes at $10,000 a year, which has caused home prices to be 4% lower than they would be.  Counties with high home prices and real estate taxes are suffering the most.  The worst hit was suburban of NYC and Chicago where prices have been hit by 10% to 11% - Allen Sloan, Fortune

Sluggish Fundraising -  Despite leading in several polls, Biden was in 5^th place in cash on hand ($9.0 million) at the end of the 3Q vs. Sanders $33.7 million, Warren $25.7 million, Buttigieg $23.4 million, Harris $10.5 million – Federal Election Commission data ….. Wednesday’s CNN poll gave Biden 34% of the vote vs. 18% for Warren.

China’s Economy – grew by 6% in the 3Q, its lowest quarterly growth number in 30 years vs. the U.S. that has had only eleven 3%+ GDP growth quarters since 2011 – National Bureau of Stats

Credit Cards

Credit card fees have jumped to an average of 17% with an average margin of 11.72 percentage points vs. 10.6 points two years ago.  Interest rates on private-label cards, which can be used only in certain stores, reached 27.5% this year.  If you are late on your payments your issuer could raise your interest rate to 29.9%.  The average household has a credit card balance of $8,602  At a 17% interest rate, with an $8,602 balance, it would take nearly ten years to pay off your balance by paying $150 a month or $1,800 a year.  Ouch!  Credit card companies recruit two types of consumers:  The affluent who spend a lot and pay their balance in full each month and those who make at least their minimum required payment each month and carry balances.  More people are now using Fintech firms such as LendingClub to get unsecured personal loans.  Such loans were up 18% last year.  Loans from LendingClub can be had for around 9.5% to 11%.  Schwab has also entered the personal lending business with loans available in the 8% range – The Kiplinger Letter, Wall Street Journal, Federal Reserve. 

buzz@msifund.com

This material does not necessarily represent the views of the presenting party, nor their affiliates.  This information has been derived from sources believed to be accurate.  Please note – investing involves risk, and past performance is no guarantee of future results.  The publisher is not engaged in rendering legal, accounting or other professional services.  If assistance is needed, the reader is advised to engage the services of a competent professional.  This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty.  This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such.  This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results.  Investments will fluctuate and when redeemed may be worth more or less than when originally invested.  All economic and performance data is historical and not indicative of future results.  Market indices discussed are unmanaged.  Investors cannot invest in unmanaged indices.