MidSouth Week in Review
October 1, 2021

Weekly Update from Fund Manager Buzz Heidtke, MidSouth Investment Fund

The S&P declined 4.8% in September for its worst monthly decline since March 2020.  Consumer confidence declined for the 3^rd straight month and dropped to a 7-month low as expectations grow dimmer.  The Dollar hit a 12-month high so it might be a good time to travel out of the country.  Crude oil hit nearly a 3-year high on Tuesday.  Coal is up 192% vs. last years low.  Jobless claims increased for the 3^rd straight month.  Cotton hit a 10-year high and has doubled since last year.  Bank stock rose 3.1% on Monday to give them their best yearly performance since 1997.  The 10-year Treasury yields rose to 1.55%, its high level since April. 

Sources:  Wall Street Journal and New York Times

BuzzBits

Asset Class Returns – for the 10-year period ending 9-30-21, including total and annualized returns:  Bitcoin 14,358,805% - 201.8%, NASDAQ 100  630% - 20.3%, U.S. Large Caps 320% - 14.3% - YCharts

Misers – aren’t fun to live with, but they make wonderful ancestors – David Brenne

Bank Stocks When interest rates are rising, bank stocks do better.  With the Fed signaling last week that they are going to quit buying Treasuries, interest rates have began rising, going from 1.13% on the 10-year Treasury to about 1.54% this week – Buzz ….. In 1981, amid high inflation and a recession, Treasury yields on 10-year notes hit 15.82% and have been in a record 40-year bull market ever since – Barron’s ….. When rates are rising, as a result of an economy recovering from recession, small-cap value stocks tend to outperform larger cap growth – Bryan Rich, Forbes Billionaire’s Portfolio

Flu Shots – The 2021-2022 season may come early and be more severe than usual.  Get your annual flu shot by the end of October.  Flu shots can be given before, after or at the same time as the Covid-19 vaccination.  The flu vaccine also may protect against some serious Covid side effects – BottomLine

Billionaires – The 400 wealthiest households effective tax rate is just over 8% vs. the average rate for all taxpayers is 14%.  The 100 wealthiest have become $469 billion richer since the start of the year because of gains on their stock holdings.  Biden supports a proposal to tax billionaires for asset appreciation on an annual basis – Menu, Wall Street Journal

Strange – My barber, housekeeper and massage therapist have all gotten Covid and none of them had ever gotten the Covid vaccine.  Thankfully I have had three shots – Buzz

Charitable Giving – 88% of wealthy households gave to charity in 2020.  The study was based on a survey of households with $1 million+ of net worth and/or household incomes of $200k+ - New York Times

Mail Delivery – Beginning today the U.S. Postal Service will start to “implement new service standards” for first class mail and periodicals – slowing the target delivery time by about 30%.  Additionally, beginning Monday and ending on December 26, the USPS will temporarily increase prices on all commercial and retail domestic packages because of the holiday season – NPR

Home Buying – Just 29% think now is a good time to buy a house, a decline of more than half since March.  It’s the smallest share of positive respondents since 1982 when the average mortgage rate topped 15% - University of Michigan survey….. 30-year mortgage rates rose to 3.21% this week vs. 3.07% last week – Wall Street Journal

7,000 Steps – Researchers found that people who logged at least 7,000 steps a day had a 50% to 70% lower risk of premature death than those who took fewer than 7,000.  The greatest reduction in mortality came between 7,000 and 10,000 steps, after which the benefits levelled off – THE WEEK

Electric Cars – comprised 4% of new vehicles sold this year in the U.S.  In Norway, two thirds of new cars sold so far this year have been battery or plug-in electric vehicles – Wall Street Journal

The Wealth Gap – The average Black household has $840,900 less in net worth than the average White household.  Black descendants of people enslaved represent 12% of the national population but hold less than 2% of the nation’s wealth – New York Times

Strange – Last Sunday, Baltimore Ravens Justin Tucker hit a record-setting 66-yard field goal that bounced off the crossbar for the win.  That same day, the Cardinals tried a record 68-yard field goal attempt that failed, but it was returned with a record setting 109-yard touchdown ….. In 1970, NFL kickers made 59% of their field goal attempts vs. 85% last year – New York Times

Benefits of Covered Calls

Covered calls are a relatively low-risk options trading strategy that can potentially help you generate income on equities you already own in a flat or mildly up-trending market.  They also offer limited risk protection, confined by the amount of premium received, that can sometimes be enough to offset modest price swings in the underlying stock price.  A covered call is generally a neutral to slightly bullish strategy that involves selling a call option on a stock you already own for a premium.  Typically, you would choose a strike price above the price range you think the stock will remain in before the contract’s expiration date.  A call option gives the purchaser the right to buy your stock at the option’s strike price until the contract expires.

If the underlying stock price rises to the stock price, the call purchaser will likely exercise their contract, obligating you to sell the underlying shares.  This outcome generates both income in the form of the premium and a profit from the stock sale.  Note that since you will no longer own the stock, if its price continues to rise, you miss out on those additional gains.  If the underlying stock price stays below the strike price, the contract expires worthless.  You get to keep both the income generated by the premium as well as the underlying shares.  If the stock price declines, your losses are offset up to the amount received in the premium – Charles Schwab

This material does not necessarily represent the views of the presenting party, nor their affiliates.  This information has been derived from sources believed to be accurate.  Please note – investing involves risk, and past performance is no guarantee of future results.  The publisher is not engaged in rendering legal, accounting or other professional services.  If assistance is needed, the reader is advised to engage the services of a competent professional.  This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty.  This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such.  This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results.  Investments will fluctuate and when redeemed may be worth more or less than when originally invested.  All economic and performance data is historical and not indicative of future results.  Market indices discussed are unmanaged.  Investors cannot invest in unmanaged indices.