MidSouth Week in Review
November 12, 2021

Weekly Update from Fund Manager Buzz Heidtke, MidSouth Investment Fund

Nov. 15, 2021 | RedChip Companies

Because of investor concerns about mounting inflation, the S&P declined 0.3% for the week.  The S&P had eight consecutive up days through Monday, for its longest run since 1997.  Bitcoin surged from 60,260 to 68,476.  The Dollar made a 15-month high, as the 6.2% inflation rate hit a 31-year high.  The 7-day nationwide average for Covid cases declined 11% for the week.  October unemployment declined to 4.6% from 4.8% in September and is down 0.5% in 2 months.  The inflation worries caused gold to hit a 5-month high and silver a 3-month high.  Home prices rose by more than 10% in the 3Q, but price growth slowed from earlier in the year.  Sources:  Wall Street Journal and New York Times




The Old Days – In 1942, only 12% of the stocks on the NYSE traded higher than 16x earnings and 29% traded at less than 4x earnings.  A seat on the NYSE traded for $17,000 and only 320,000 shares traded on the day following Lincoln’s birthday – GRANT’s Interest Observer ….. The S&P is selling at 22x 12-month forward earnings and 30% above the average of the past two decades - CFRA


Aging – “I will never be an old man.  To me, old age is always fifteen years older than I am.” – Bernard Baruch (1870-1965), American Financier


Crazy – GM made more than 10x as many cars as Tesla last year, yet Tesla has a market value 10x greater than GM.  Rivian, the electric-truck maker that went public this week, has a $135 billion valuation vs. $89 billion for GM, yet has only delivered 156 vehicles – Wall Street Journal


Interest Rates – With the Fed announcing they will quit buying bonds next year, expect bond yields and inflation to rise.  Firms that stand to lose the most from higher interest rates include heavy borrowers, high growth names and bond holders – Valeat Research


A Crazy Month – was October 2008 when the S&P declined 11.1% on 10-13, followed by a 9.0% gain on 10-15, followed by a 10.0% gain on 10-28, followed by a 6.7% gain on 11-13 and a 6.5% gain on 11-21.  The Dow had its 3rd worst month decline since 1950 that month of October (-14.1%) – Stock Traders Almanac ….. The morning after 10-13, I was seen eating my cereal with a fork, thinking the world had come to an end – Buzz


Condo Sales – are booming as buyers who stayed away from cities during the pandemic are more comfortable in urban areas.  This summer, condo sales as a share of all sales of existing homes hit a 14-year-high – The Kiplinger Letter


Apple – makes $11,600 every second, $696,000 every minute, $41.8 million every hour and $1 billion every day.  Of the company’s $366 billion in annual sales, 52% comes from iPhone and 9% from iPad – Apple’s 2021 annual report


Bad Education – 84% of Chicago public school students graduate when only 26% of 11th-graders are proficient in reading and 27% in math – SAT


Elon Musk – announced that he may begin selling up to 10% of his Tesla holdings.  The world’s richest man has a $210 billion stake in Tesla.  The stock declined 19% from Friday’s close on the news – Wall Street Journal ….. Musk had 41% of his shares pledged as collateral on December 2020 – Zero Hedge


Discount Stores – Consumers are increasing shopping at them, a sign that families are feeling the pinch from the highest inflation since the 1990s.  Spending at these stores was up 65% last week vs. 2019 and up 21% from the prior week – Bloomberg ….. Inflation is at a 31-year high – USA TODAY


10-Year Mutual Fund Returns – Large Cap Stocks 9.15%, Small Cap Stocks 10.39%, International Stocks 5.67%, Fixed Income 2.97% - George Mason University


Zillow – lost $381 million in the 3Q and took a $304 million write-down on homes it bought at higher prices than it expected to sell them for..  Zillow sees additional write-downs in the 4Q of around $259 million – Barron’s


Price Increases – vs. a year ago: Fuel oil +59%, gasoline +50%, car and truck rentals +39%, piped utility gas service +28%, used cars and trucks +26%, hotels and motels +26%, beef and veal +20% - New York Times


The Worst Bear Markets – The worst was at the beginning of the Great Depression in 1929 when the Dow declined 86%.  Ouch!  The second worst began in October of 2009, when the Dow declined 54% - Stock Traders Almanac


Mortgage Rates – have ticked down a bit recently but The Mortgage Bankers Association expect rates to rise to around 4% by the end of next year.


Credit Card Debt – The stress of carrying credit card debt through adulthood is linked to poor health, including joint pain or stiffness that interferes with daily activities.  Another problem is that those with debt have little money to pay for resources to protect their health – University of Missouri study ….. A JAMA Internal Medicine study found that people who developed dementia had a higher risk of skipping credit card payments starting six years before the diagnosis.


The Rudeness Epidemic


The pandemic may have had a lethal effect on American manners.  Lawyers are reporting ruder clients.  Restaurants are reporting ruder clients.  Flight attendants, for whom rude clients are no novelty, are reporting mayhem; passenger fines have exceeded $1 million this year.  Re-entry into society is proving to be a little bumpy – THE VIEW


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. 


"I work with many of the companies that would be RedChip companies. And we certainly ascribe to the same view that the RedChip Companies do, which is Discovering Tomorrow's Blue Chips Today."

  • Bob McCooey, Senior Vice President, NASDAQ Stock Market