MidSouth Week in Review:
March 13, 2020

A wild week saw the S&P decline 17% through Thursday and the Dow to suffer its worst one-day decline since 2008, before recovering 9.0% today and to close out the week with a -9.5% decline.  Yesterday’s close of down 23.2% year-to-date caused the U.S. stock market to officially be in a bear market (-20%).  The market suffered a sharp decline on Monday after Saudi Arabia announced an oil price war that sent oil prices down 30% and wholesale gas prices down 50 cents.  Treasuries hit record low yields, sending the 10-year Treasury yield to below 0.4%.  However, the primary reason for the stock market decline has been the coronavirus outbreak.  Hopefully the preventive measures we have taken in the U.S. and the possibility of the virus diminishing by April as the weather warms will hopefully be a positive for the stock market.

Mortgage refi’s spiked 79% this week as homeowners rushed to take advantage of lower rates.  Bitcoin declined to $3,800 today from a February high of $10,240.  Gold declined to $1,527 from last week’s high of $1,700.  The Dollar Index rose 4.5% from last weeks low.  With interest rates at record low levels, dividend paying stocks should be excellent performers for the remainder of the year.  According to the CME Group, the odds of a Wednesday interest rate cut are 100%. – Wall Street Journal and New York Times

BuzzBits

Insider Buying – during the first two weeks of March outstripped sales by the most since 2011.  When insiders are buying they think their companies are very undervalued – Washington Service

It’s a Tough Life – Doctors must go to school for years and years often with “little sleep and with great sacrifice to their first wife” – Roy G. Blount Jr.

Investor vs. Speculator – The investor’s primary interest lies in acquiring and holding suitable securities at suitable prices vs. the speculator who cares mainly about anticipating and profiting from market fluctuations.  If you’re an investor, price fluctuations have only one significant meaning – an opportunity to buy wisely when prices fall sharply and to sell wisely when they advance a great deal – Ben Graham

Coronavirus Fatalities – Through Wednesday, 1000+ of the virus cases had been reported in the U.S., with 32 deaths.  31 of the deaths had occurred in the State of Washington and 18 in a nursing home in Kirkland, WA – New York Times …. A strange coincidence is that the worst affected COVID-19 cases are along the 40^th latitude, in the countries that run from the Seattle/Washington area around to New York, France, Italy, Iran, Wuhan, South Korea and Japan ….. China had only 19 new cases of the virus on March 8 vs. 5,090 on February 13, a 99.6% decline vs. 568 in Japan, 242 in South Korea and 827 in Italy  – New York Times

Bond Yields – The 30-year Treasury bonds traded at a 0.7% yield Monday before hitting a yield of 1.55% today.  If one had purchased the bond at the 0.7% level, their $1000 investment would now be worth only $796, at a 2% yield $707, 3% $545, 4% $424, 5% $332 – Dan Gager

Women Workers – now compose more than half of the U.S. workforce.  In 1960, only 3.8% of women earned more than their husbands vs. today when about half of the women say they out-earn their husbands – TD Ameritrade survey, Pew Research Center

Not Too Smart – Saudi Crown Prince Mohammed bin Salman was possibly responsible for the recent killing of a dissident journalist, the detention of four senior members of his royal family and the decision for a steep cut in oil prices by increasing Saudi production, which was the catalyst for Monday’s market drop.  The decision caused crude to drop to $30 a barrel from its $65 level in January, which is well below the country’s estimated break-even price of about $80 a barrel – Jay Kumar ….. A decision by the Saudi’s to not increase oil production would most likely result in a sharp stock market rally.

The Rule of 72 – determines how long it will take to double your money – divide the rate of return by 72.  An 8% return would take 9 years to double (72÷9).

Seniors – make up 20% of the labor force above 65 vs. 12%, 20 years ago.  30% of seniors work because they need the money, but the others simply want to work.  Working seniors are less apt to suffer from depression and have a longer life expectancy than the early retirees – The Kiplinger Letter ….. A SimplyWise survey conducted before this week’s big market drop found that about 40% said they would delay retirement if the stock market dropped an additional 10%.  About 25% of the respondents said a large stock market decline may prompt them to take Social Security benefits sooner than planned – Bloomberg

Taxes – The top 10% of earners, pay 45% of all income taxes vs. 28% in France vs. 27% in Sweden.  The bottom quartile pay 5.1% of taxes vs. 39.6% for the top 1% vs. 45.1% for the top 0.1%.  The top 1% retain 18x as much income at the bottom quartile but pay 219 times as much in taxes vs. the top 0.1% who have 31x as much income and pay 482 times as much in taxes, than the bottom quintile – Wall Street Journal

buzz@msifund.com

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