MidSouth Week in Review
November 05, 2021

Weekly Update from Fund Manager Buzz Heidtke, MidSouth Investment Fund

The first week in November was a good week as the S&P, Dow, NASDAQ and the Russell 2000 indexes all made new highs.  The Dow and the NASDAQ made new highs for seven consecutive days.  For the week, the S&P was up 2.0%.  Consumer prices rose at the fastest pace in 30 years.  The Feds said it will begin tapering the pace of asset purchases.  Beginning later in November, Fed Chair Powell said he expects conditions pushing inflation to last “well into next year.”  Jobless claims dropped to 269,000 as firms avoided layoffs during the labor shortage.  The Dollar hit a 13-month high.  Avis stock rose from 171 on Tuesday to 545 on a good earnings report before declining to 271 today.  Don’t forget to set your clocks back tomorrow night.  Sources:  Wall Street Journal and New York Times

BuzzBits

Crazy – In January of this year I bought sporting goods retailer Big 5 Sporting (BGFV) at $12.58 because all outside sports, such as golf, tennis, hunting and fishing were hot.  Last Friday the stock closed at $24.18 and at 5x earnings.  This week the company announced earnings and a $1.00 special dividend, causing the stock to soar to $42.30.  I then sold the April 45 options on my stock at $12.64, giving the buyer the right to buy my stock at 45.  Today the stock closed at $30.39 and the options at $4.00.  If the stock stays below 45 between now and April, my cost basis on the stock will be a negative 6 cents – Buzz

Cluttered Desk – If a cluttered desk is a sign of a cluttered mind, of what then is an empty desk a sign? – Albert Einstein

Zillow Stock – took an 8% dive on Monday, after KeyBanc analyst Edward Yruma said that most of the homes the real estate service company purchased, with an aim to flip, were now worth less than they paid for them – MarketWatch …..On Tuesday, Zillow said that it would exit the home buying and selling business, as they try to sell about 7,000 homes, amid heavy losses and that they planned to let go of nearly 25% of their staff – Wall Street Journal ….. Zillow dropped from last Friday’s close of $104 to a $63 low on Wednesday, and is down 69% from its March high of $208.

Christmas Shopping – “If you want to buy Christmas presents, you should buy now …. There will be racks in retail that are more empty than you’d like when you go Christmas shopping.” – Puma CEO Bjorn Gulden

Higher Income Tax Rates – on corporations and the rich are now looking unlikely.  Biden promised on the campaign trail to increase tax rates for these groups.  However, Sen. Kyrsten Sinema (D-AZ) opposes higher tax rates and the Senate needs all Democrats to pass any special spending package – The Kiplinger Tax Letter

College Students – There were 17.5 million undergrad students enrolled in U.S. colleges in 2019, a 6.5% decline and the largest two-year enrollment drop in 50 years.  Community-college enrollment is down 14.1% from two-years ago – CNBC.com

The Pay Gap – between the top CEO’s and the average worker:  1965 - 21:1,  1989 – 61:1,  2020 – 351:1 Between 1978 and 2020, CEO compensation grew 1,322% vs. 18% for the typical worker – Economic Policy Institute

Millionaires – The U.S. added 1.7 million new millionaires last year, lifting its total at year-end 2021 to 22 million.  Congress imposed an income tax of 1% in 1913 on income of $3,000+ and to 6% over $500k.  The wealthy bragged about being part of the elite 3% - Wall Street Journal

Container Costs – have increased 8x.  Ocean freight costs have increased 8x.  A typical container that used to cost a couple of thousand dollars is now $16,000.  Container capacity, container rates and port congestion continue to be areas of concern – Enphase Energy

Minimum Wage – California voted to increase it to $17.64/hour, the highest in the U.S. and more than 2x the federal rate of $7.25/hour – The Hustle ….. Most firms are avoiding layoffs during the labor shortage.

Millennials Have Wealth – The median net worth of people 34 to 44 was $91,300 in 2019 vs. $64,600 in 2016.  The youngest Millennials have only $22,953 in student-loan debt, and anyone in their early 30’s have only $874 and those in their early 40’s have largely paid off their debt – Barron’s

Amazon – In seven years, Amazon has grown from a zero share of the U.S. shipping market to 21%, surpassing FedEx (16%).  USPS remains dominate with 38%, with UPS at 24% - Axios.com

Inflation – has been rising because of supply chain shortages.  Prices of meat, poultry, fish and eggs are up 15%.  Since 2020, one study showed U.S. prices were rising at the fastest rate in three decades – New York Times ….. The truck driver shortage has risen to an all-time high of 80,000 – American Trucking Association

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