MidSouth Week in Review
June 18, 2020

Weekly Update from Fund Manager Buzz Heidtke, MidSouth Investment Fund

Jun. 18, 2020 | RedChip Companies

It wasn’t too long ago that the markets never moved more than 1% in a day.  Not anymore.  My portfolio has moved more than 1% for ten consecutive days.  On Monday, my six-day return was my biggest ever, followed by my largest ever one-day loss yesterday.  Wild!  The National Bureau of Economic Research made it official Monday, announcing the economy is in a recession.  For the week, the S&P was down 4.6% over worries about the economy and the pandemic which erased one of the fastest rallies in market history.  Bank stocks declined around 10% yesterday after the Fed announced plans to keep interest rates at low levels for years.  The Fed projected the jobless rate will decline to 9.5% by year-end.  State tax revenues fell 50% in April and state sales taxes fell 16%.  Sources – Wall Street Journal and New York Times





High Multiple Stocks – Never overpay for a stock.  More money is lost than any other way by projecting above-average growth and paying an extra multiple for it – Charles Neuhauser, Bear Stearns ….. Hot stocks such as Amazon, Netflix and Salesforce.com are all trading at 50+ times 2020 anticipated earnings.  The 50 most expensive stocks in the S&P rose 11.3% from December 31 through June 3 vs. the cheapest 50 that were down 16.8% over the same period – Drew Dickson, Albert Bridge Capital


Bumper Sticker – spotted on a Manhattan taxi:  Horn broken, watch for finger – Playboy


Beat Up Stocks – If a battered stock refuses to sink any lower, no matter how many negative articles appear, that stock is worth a close look – James L. Frazier, Control Investor


Where Am I? – Last Sunday I was walking by a hair salon and an elderly woman was standing out front.  I commented, “It looks like it’s been a while since you’ve had your hair cut”, and she replied, “Yep”.  She then said, “I don’t know why this place hasn’t opened yet”, so I looked on the window at the opening hour’s sign and then said to her, “They are not open on Sunday’s.” To which she replied, “It’s Sunday?” - Buzz


Bullish Sign – 39% of investors surveyed by AAII are bearish on U.S. stocks for the upcoming 6 months.


Homes – According to the Census Bureau, the size of new single-family homes has declined to 2,301 square feet vs. 2,417 ten years ago.  A recent survey of millennials indicated that 23% will not be buying a home “anytime soon” as a result of coronavirus – Quicken.com


Capital Gains – are tax exempt for singles with taxable income up to $40,000 and for married couples filing a joint return with income up to $81,000.  The top rate of 20% starts at $441,551 for singles and $496,601 for joint filers – The Kiplinger Tax Letter


Taxing Teenagers – If they are a regular employee and make less than $12,400, they owe no taxes and do not need to file a tax return. However, Social Security (6.2%) and Medicare withholding may apply – Schwab


Preparing For a Surge – Research shows it can take up to 14 days for those newly infected with the coronavirus to exhibit symptoms of the disease.  As a result, cases linked to the ongoing protests will begin appearing in the next week or two.  As of June 9, 22 states had increased cases of the coronavirus – TIME ….. Only 7% of coronavirus deaths are of those under 55.  21% of deaths are of those 65 to 74, 27% between 75 and 84 and 33% are 85+ - Brookings Institute


Spending – by Americans declined 13.6% in April.  If this level of decline continues for 12 months, household spending would be reduced by $15,200 over the course of a year – Commerce Department ….. The consumer-price-index declined 0.1% in May, after declines of 0.8% in April and 0.4% in March – Wall Street Journal ….. Household net worth dropped 5.6% from 4Q 2019 through this year’s 1Q due to the pandemic, the biggest decline since the early 1950’s – Federal Reserve


Gun Sales – doubled in April.  The decision to buy a gun is typically motivated by self-protection.  Men who buy a gun for the first time are 8x more likely to kill themselves by gunshot and women are 35x more likely.  Most suicide attempts are impulsive and most do not die – New England Journal of Medicine study of 700,000 first time handgun buyers.


Roundabouts – converting an intersection with a traffic signal to a roundabout results in a 78% decrease in fatalities and injuries .  The downside has been more crashes, mostly fender-benders, at mainly two-lane roundabout – Wall Street Journal


Treasury Yields – The yield on the 10-year Treasuries has been below 2% for a record 9 months – Treasury Department


Working From Home – A Gallup survey found that three out of five workers who have been working from home during coronavirus would like to continue working remotely – Kiplinger’s Personal Finance








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