MidSouth Week in Review:
May 8, 2020

Weekly Update from Fund Manager Buzz Heidtke, MidSouth Investment Fund

May. 8, 2020 | RedChip Companies

Date: 5/8/2020


From Buzz Heidtke (buzz@msifund.com)


For the week, the S&P rose 3.4% and the NASDAQ was up 5.9%, thanks to a continued rally from the tech stocks.  In April, the U.S. economy shed a record 20.5 million jobs and the unemployment rate jumped to 14.7% vs. 3.5% a few months ago.  Two-year Treasuries hit a record low yield of 0.129%.  Crude hit the $25 level from last week’s $19.85 close.  Wholesale gas  prices rose to 93 cents a gallon from a mid-March price of below 40 cents.  Bitcoin surged to $9,997 today, up 100% from its March 12 price of $4,910.  Retailers J.Crew and Neiman Marcus filed for bankruptcy.  Wendy’s “Where’s the Beef?”, has had up to 10% of their restaurants take beef off their menus, due to the recent closure of many meat plants.  Sources: Wall Street Journal, New York Times


Steve Jobs: Last Words of Wisdom - This excellent video about Steve Jobs was released last month. https://www.youtube.com/watch?v=9y6Dg7pXfmw   Hope you enjoy.  Steve, the founder of Apple, died at age 56 in 2011 – Buzz





Bonds vs. Stocks – Historically stocks have returned nearly 10% annually vs. 5% for bonds.  However over the past 20 years, the S&P returned only 5.4% annually vs. 8.3% for long-term Treasury bonds , 7.7% for investment grade corporate bonds, 6.5% for junk bonds and 5.2% for the Bloomberg Bond Index.  Why the excess bond returns?  Inflation and the overall economy have generally been declining over for the past 20 years - @Jeffsommer


Welcome to the 1970’s – Gas is almost under $1, restaurants are all drive-in style, and everyone has shaggy hair – George Armistead


What Bear Market? – From its February high to its March low, the NASDAQ declined 32.6%.  As of today, the NASDAQ is up 1.5% year-to-date – Buzz


Home Sales – will likely plummet by 60%, as stay-at-home mandates and overall worries about the economy take the steam out of the buyers and sellers.  Zillow expects prices to drop no more than 3% by year-end.  Their forecast expects home sales to increase by 10% a month through 2021 – USA TODAY ….. A Gallup poll found that only 50% think it’s a good time to buy a house, the lowest share of Americans to have a positive view on the housing market – MarketWatch.com


Strange – Tesla has lost $144 million over the past 12 months, but its $160.63 billion market value is more than the combined $141.5 billion market value of GM, Ford, Volkswagen and Fiat Chrysler.  Tesla has a tangible net worth of $8.7 billion, which is only slightly more than the $7.1 billion that Fiat Chrysler earned over the past year – Jay Kumar ….. On Monday, Tesla hit a six-month average price valuation of $100 billion, which qualified their CEO Elon Musk to be given an option to purchase 1.69 million shares at $350 a share, which is now worth $800 million.


Doctor Visits – According to Merck, recent visits to physicians have declined 30%.  A Commonwealth Fund study found that visits had dropped by 60% from mid-March to mid-April.  Another estimate said that as many as 60,000 physicians may no longer be working in their practices by June, because of the pandemic – New York Times


Mortgage Payments – More than one million (7%) were recently delinquent on their payments, according to Fannie Mae.  That figure is expected to double to 15% in coming months – Wall Street Journal ….. Borrowers who are in financial distress can pause loan payments on federally backed mortgages for up to 12 months – The Kiplinger Letter


Suicide Rates – A recent study predicted a 32% increase in suicides in Michigan because of coronavirus.  The study also reported alcohol sales in Michigan have increased by 41% since the pandemic onset.  In Tennessee, former U.S. Congressman Patrick Kennedy told Metro Nashville Network that calls to suicide hotlines have increased by 800% - Loudwire


Office and Retail Vacancy Rates – will spike reaching 20% and 13%, respectively.  Companies will likely continue reducing their office footprint as a growing number of employees work from home – The Kiplinger Letter


Car Deals – With new auto sales collapsing, dealers are now offering financing as low as 0% and sometimes for loans and credit for as long as seven years – Wall Street Journal


Disposable Income – will likely grow 0.5% this year even amid the coronavirus shutdown.  Why?  People are staying at home and not getting out and spending money – Goldman Sachs


Marriage Rates – plunge to 6.5 per 1,000 people in 2018 vs. 16.4 in 1946, and the lowest rate since record keeping began in 1867.  This year unions are expected to drop further, but the current outbreak could create pent-up matrimonial demand that results in a burst of marriages once America rebounds socially and economically – National Center for Health Stats


Small Businesses – More than 40% of the nation’s 30 million small businesses could close permanently in the next six months because of the coronavirus pandemic – U.S. Chamber of Commerce







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