MidSouth Week in Review:
November 08, 2019

The S & P rose 0.7% for the week as all three major stock indexes again registered new highs.  More than 75% of S & P 500 listed companies have filed earnings reports that were above expectations.  U.S. productivity fell (0.3%) for the first time in four years.  Imports sank 1.7% in August, led by a 4.4% drop in imports of consumer goods.  The 30-year Treasuries rose to a 2.40% yield, the highest since late July, which caused weakness in the housing sector yesterday.  Earlier in the year, the 30-year Treasuries were trading at a yield of below 2%.

BuzzBits

Insider Buying – Studies have shown that insider purchasers earn abnormal excess returns of 6% to 11% per year and that insider sales do not effect returns.  What to watch for … Three or more insiders buy company stock at about the same time • Their new purchases equal at least 5% of what they already own • Their purchases are made in the open market with their own money rather than exercising company stock options • The company has steady or increasing annual earnings – Jonathan Moreland, Insider Insights ….. To review recent insider trading, go to www.FinViz.com/insidertrading.ashx

Poor Kids – Tweens and teens from families that make less than $35,000 per year spend nearly two hours more with screen media each day than their peers with incomes over $100,000 – Common Sense

Bear Markets – The S & P has averaged a 35.8% decline in the past eight bear markets since 1948 vs. a 11.2% average return from 5-year Treasuries with no negative return periods.

Heart Attacks – have declined 70% over the past 50 years and are down 38% since 1995, for those over 65.  Why?  Increased use of statins and other cholesterol–lowering drugs … use of coronary angioplasty to open arteries … lifestyle changes such as quitting smoking, eating a balanced diet, exercising regularly and reducing stress – Harvard, Yale and Boston U. study ….. Life expectancy was 47 years in 1900 vs. 78 years today.  Cancer deaths have declined 1% annually over the past couple of decades – National Institutes of Health

Elizabeth Warren – has proposed a “Medicare for all” plan at a cost of $20.5 trillion.  She plans to move the entire $52 trillion health care system to the books of the federal government.  To cover the added costs, she plans to impose a tax on financial institutions, tax profits from investments that increase in value on an annual basis, raise taxes on corporations from 21% to 35%, tax overseas corporate profits, tax billionaires at 6% of their net-worth and place a tax on corporations that equates to what they currently pay for employees health care – New York Times ….. CNBC said that under Warren’s tax proposal, Bill Gates would have a $13.5 billion tax bill this year, primarily due to the 44% rise in Microsoft shares.  My question: Does he get a $13.5 billion check the next year from the government if Microsoft stock declines 44%? - Buzz

Home Sales – People are staying in their homes for around 13 years vs. eight in 2010, causing inventories to dwindle to the lowest level in 37 years of record-keeping.  Home construction hasn’t been keeping up with demand due to a shortage of labor and land.  The shortage has helped drive the median home price up 75% to $340,000, since 2010 – Wall Street Journal ….. The median age of first time home buyers increased to a record 33.  The median age of all buyers hit a record 47 vs. 31 in 1981 - Bloomberg

Income Inequality – The top quintile of households have 60x as much income as the bottom quintile ($295,904 vs. $4,908).  However, the bottom group averages receiving $45,389 in government transfers and $3,313 from charitable and family sources and pay $2,709 in taxes, mostly sales, property and excise taxes, resulting in a net income of $50,901.  The average top-quartile pays $109,125 in taxes, netting $194,906 or only 3.8x as much as the bottom quartile – Wall Street Journal

Long Term Care – About 7 of 10 (69%) turning 65 today will eventually need the services.  While one-third will never need long-term care service, 20% will need it for longer than five years.  Assisted living care goes for $2,881 monthly in MO, semi-private room in VT goes for $128,663 a year and an average private room for $135,415 – www.genworth.com/COSTOFCARE

Leading in the Polls? – is no indication of who will win the primary.  Only one time (Hillary Clinton) in a crowded primary since 2004, has the front runner gone on to win the Party’s nomination – Wall Street Journal/NBC poll

The 1929 Market Crash/The Depression Era

When I first got into the brokerage business at Spencer Trask, an institutional firm that was started around 1867 that was an early financial supporter of Thomas Edison, I had the opportunity to work with four older gentlemen who guided me in my investment career.  One was named Gene, who had a stock market net worth of $950,000 (worth $14 million in today’s dollars) in 1929 and was going to cash out when his holdings hit $1 million.  It never happened and Gene lost everything and soon married a rich lady to bail him out.  When he died he had a large holding of gold and gold coins.  The next fellow was Bob, who at age 28 had a fancy car and belonged to two country clubs.  His family owned the largest bank in Indianapolis and a brokerage firm.  One day his uncle told him the brokerage firm was closing the next day.  Bob asked if he could take out his $50,000 from the firm.  His uncle said “There is nothing left.”  He later loaned his uncle some money that he never got back.  Bob later married the first of three rich women.  The next guy was Sol, who probably didn’t have a high school degree but knew much more about accounting than I did, who had a minor in accounting.  Sol taught me Jewish accounting (Common sense investing and how to do math in my head instead of using my financial slide rule).  Sol worked for his uncle in downtown Nashville and would go down to the local brokerage firm (J.C. Bradford) at lunch every day to trade.  There was a commission charge on only one side of the trade for day traders and stocks could be purchased on margin for as little as 5% of the purchase price.  Sol’s uncle once asked him why he was trading stocks at lunch and he said, “Cause I am making more there than I am working for you.”  After Sol got wiped out in the market, it took him until 1943 to pay off his debt.  He said every time he would go out on the street he would look out to see if his banker was there.  Sol later became the highest producing broker at J. C. Bradford in 1939.  The last fellow I worked with was Everett, who owned a home building firm prior to entering the brokerage business.  After leaving the brokerage business he worked on his golf game while often shooting his age before finally retiring at age 99.

My grandfather Heidtke had a plumbing supply company in St. Paul that he lost as well as his home and my grandmother.  On my Mother’s side, she lived in a small community in Tennessee.  They survived along with the eight kids by all living together and pitching in financially to help.  Most families living in small towns were hardly affected by the depression, since they had very little to lose.  The unemployment rate reached nearly 25% during the depression vs. 3.5% today.  There was a book written around 1932 about U. S. business leaders.  Many of them died during the period possibly from depression and/or suicide.  Tough times - Buzz

buzz@msifund.com

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