MidSouth Week in Review
January 15, 2021

Weekly Update from Fund Manager Buzz Heidtke, MidSouth Investment Fund

For the week the S&P declined 1.5%.  The small cap Russell 2000 Index and the S&P Midcap Value Index each  made new highs for the week.  Biden announced his $1.9 trillion economic plan, which will include stimulus checks, unemployment support and minimum wage hikes at a cost of $5,750 per citizen.  According to Freddie Mac, 30-year mortgage rates rose to 2.79% vs. 2.65% the previous week.  The Dollar rose to 90.90 from its recent low of 89.10 last week.  Shedding 9.4 million jobs, December capped the worst year for U.S. job losses in records tracing back to 1939, with Hispanics, Blacks, teenagers and high-school dropouts hit particularly hard.  The federal budget deficit rose 61% to $14.4 billion in the 4Q.  The financial markets will be closed Monday in observance of Martin Luther King Day.  Sources:  Wall Street Journal and New York Times. 

BuzzBits

Democratic Controlled – Going back to 1949 there have been ten times when we have had the Democrats control both Houses of Congress and the White House.  During the first two-year periods, the Dow has averaged a 15.7% return – Bespoke & Investment Group ….. Goldman Sachs expects the S&P to rise 14% in 2021.

Politics – is supposed to be the second oldest profession.  I have come to realize that it bears a very close resemblance to the first – Ronald Reagan

The FANG Stocks – Facebook, Amazon, Netflix and Google were up 4x over the past five years, but are down 8% since August 27 vs. a gain of 9% for the S&P and 38% for the small cap Russell 2000 – Buzz

Working Remotely – has skyrocketed since January 2020, with approximately half the labor force working from home.  Many are estimating that 20% to 30% will remain working from home after the pandemic ends – New York Times

ARK Innovation ETF – surged 160% last year, expanding its assets 10-fold.  The fund concentrated bets on hot stocks such as Telsa, Roku, Square, and biotechs boosted by the coronavirus pandemic.  Between 1995 and 2012, the winners got big inflows but their future performance was unremarkable – Wall Street Journal

Coronavirus Cases – 7% of the U.S. population has tested positive for the virus and 10% in the state of Tennessee.  The national death rate per case is 0.66% or 1 in 150 cases – Buzz ….. 81% of coronavirus deaths nationwide were Americans age 65+.  Just 1% of the deaths were those under age 35 – National Center for Health Statistics ….. 8% of Congress has been infected over the past two months – New York Times

Bitcoin – Stefan Thomas, a San Francisco programmer, owns 7,002 Bitcoin ($250 million) in a digital wallet he can’t access because he lost the password.  He’s tried to guess eight times and only has two guess’s left.  According to Chainalysis, about 20% of the existing Bitcoin appear to be lost in digital wallets – New York Times

Real Estate – 63% of people who bought a home last year made an offer on a property that they hadn’t seen in person vs. 32% in 2019.  Walkthroughs on RedFin.com increased 563% since February – RedFin

Covid Transmissions – More than half of the Covid transmissions come from those who have no symptoms.  In other words, the majority of the spread is from silent carriers – JAMA Open Network

10-Year Yield – on Treasuries hit 1.17% this week.  That’s a rise of 28 basis points in a week.  In 2013, the Fed began reducing its bond buying program, which caused the yields on the 10-year bonds to surge to 3% from 1.6% in just four months and mortgage rates to jump a half a point in a week – Forbes Billionaires ….. Goldman Sachs expects the 10-year Treasury yields to reach 1.5% by year-end ….. Benefitting from the rise in interest rates, the Regional Bank Index (KRE) is up 12.5% year-to-date - Buzz

Movie Ticket Sales – peaked in 2002 at 1.58 billion tickets.  By 2019, sales had dropped 22% to 1.23 billion tickets, despite 17 years of population growth.  Ticket sales in 2020 plunged 82% to just 224 million tickets – Wolf Street

Option Trading – An average of 30 million equity option contracts traded daily or exchanged in 2020, up 50%+ vs. 2019 and that figure has risen to 40 million in recent weeks – The Economist

Outdoor Activity – has proven to be a reprieve for many households.  Camping equipment sales grew 25% in the 3Q.  For golf equipment and bicycles, sales grew 75% and 50% vs. the same period last year – Wall Street Journal

Hot Stocks – The more exciting the company, the more money you are about to lose – Alex Paris

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