MidSouth Week in Review:
November 01, 2019

Both the S & P and NASDAQ made new highs this week in response to the Fed lowering interest rates for the third time this year.  Because the S & P Value Index has returned 5% since the start of August vs. 0.9% for the Growth Index, Morgan Stanley predicts the beginning of a growth stock underperformance.  Several stocks suffered large declines this week from their recent highs:  Grubhub (-43%), Tupperware (-50%), PG&E (-57%).  On Tuesday, Beyond Meat was butchered by 27% on a sales miss.  Sales of U.S. retailers fell for the first time in seven months, signaling that a widely expected slowdown in consumer spending might be under way.

Yesterday, President Trump announced that he was changing his primary residence to Palm Beach from New York City saying, “I have been treated very badly by the political leaders of both the city and the state.”  Trump may also be unaware of the state tax savings resulting from the Florida move, which would be around $1.05 million per $10 million of income.  Also, avoiding NY’s top estate tax rate of 16% shouldn’t make the kids too unhappy.

BuzzBits

The 1929 Crash – occurred 90 years ago as the Dow declined 89% over a three-year period and didn’t return to the 1929 level again until 25 years later in 1954.  The hottest stock in 1929 was RCA, that peaked at 73x earnings and more than 16x book value.  Amazon is currently trading at 78 earnings and 16x tangible book value.  Prior to the crash, National City Bank of New York traded at 120x earnings and 13x book value vs. Citigroup, the direct descendent of National City, that is currently trading at 9.6x earnings and 0.9x book value – Wall Street Journal

Kids – “I defy any parent who has been on a trip with a child who kicked the seat for 50 miles, threw his shoes out the window, lost his pet snake in Cleveland during the five o’clock traffic and spilled his slush down your back to tell me she has never considered abandoning him at the next Shell station…..We discovered through experience that the best incentive to learning is the plain old parent-inflicted fear.  Make decent grades or go out and make a living.” – Erma Bombeck (1927-1996), humorist

Trying To Sit Out a Crash – If one had missed the 10 best market days during the past 15 years, their returns would have been cut in half and would have been two-thirds less by missing the 20 best days – Wall Street Journal

Emergency Savings – of six weeks of take-home pay is advised.  A middle income family needs about $5,000 but just has $2,000.  Lower income families need about $2,500 but have just $100 of savings.  AARP found that more than 53% of families lacked an emergency savings account and a quarter of those earning $150,000+ have none – New York Times ….. The average adult earns $78,635 per year or around $67,241 after taxes.  Total annual spending comes out to $61,224, which means the average adult has $6,017 left to save each year – Bureau of Labor Statistics

Projected Stock Market Returns – Vanguard predicts returns of 3% to 5% over the next 10 years.  Morningstar is looking at annual returns of 1.8% over the same period and Boston-based asset management firm GMO expects real returns of -3.6% for large cap stocks, and -1% for small caps.  Ouch! – CNBC …. Only 27% of money managers responding to Barron’s fall 2019 Big Money Poll call themselves bullish about the market’s prospects for the next 12 months, down from 49% in our spring survey and 56% a year ago.  The latest reading is the lowest percentage of bulls in more than 20 years – Barron’s

Inexpensive Charitable Giving – Donating appreciated stock • Gifting assets that have a generous appraisal • Combining two years-worth of giving into one, when there is a large disparity of income between the two years • Those 70 ½+, in lieu of their required IRA annual taxable distributions, can elect to make annual tax-free donations up to $100,000 – Buzz

City Net Daily Exodus and Gain Stats – NYC (-277), LA (-201), Chicago (-161) … Dallas (+212), Phoenix (+200), Tampa (+143), Orlando (+137), Atlanta (+119), Vegas (+105), Austin +102) – Bloomberg …. City and state tax rates seem to have a direct correlation between the net exodus and gain figures – Buzz

Shirtsleeves to Shirtsleeves – A recent study involving approximately 2,500 wealthy families across several generations found that only 30% of the original family fortune remained at the end of the 2^nd generation and only 10% was left at the end of the 3^rd generation – Williams Group

Inflation - From 1966 through 1991 the Consumer Price Index (CPI) was up 3%+ in 25 of the 26 years.  Over the past 13 years (2006-2018), the CPI has been up 3%+ only once – Department of Labor

Tesla Valuation vs. General Motors – Stock value $56 billion vs. $53 billion • Revenue $24.4 billion vs. $45.1 billion • Net Income  -$828 million vs. $9.0 billion • Book value $4.9 billion vs. $42.8 billion - Buzz

buzz@msifund.com

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