MidSouth Week in Review
May 6, 2022

Weekly Update from Fund Manager Buzz Heidtke, MidSouth Investment Fund

May. 9, 2022 | RedChip Companies

For the week the S&P declined 0.2%.  Yesterday, the Dow and NASDAQ had their worst days since 2020.  The Fed raised its short-term lending rate by a half a percentage point and signaled it is planning on similar hikes soon.  The rate hike is the largest since 2000 and is in response to burgeoning inflation.  5-year, 10-year and 30-year Treasury bonds hit their highest yield levels since 2018.  The number of NASDAQ stocks down 50% this year hit an all-time record.  Wholesale gas surged to $3.77 from its April low of $3.00.  The U.S. economy shrunk by 1.4% in the 1Q, an 8.3% swing from the annualized growth recorded in the 4Q, which increases the odds of an upcoming recession.  Mortgage rates hit a 13-year high.  The U.S. trade deficit widened to a record 22.3% in March.  Sources:  Wall Street Journal and New York Times




The S&P – lost 8.7% during April, its worst month since March 2021.  The S&P has averaged a 10.8% per year return over the past 33 years – BTN Research ….. The NASDAQ dropped 4.2% last Friday, bringing its losses for the month of April to more than 13%, its worst showing since  October 2008.  Yesterday the NASDAQ declined 5% – Wall Street Journal ….. The average investor makes only 2% to 4% annually.  Why?  Because they buy at the top and sell at the bottom - Buzz


Girls Will Be Girls – I took my daughter Annsley to visit most of the best colleges and universities in North Carolina and Virginia.  On one trip when she was 15, her best friend Susan also came along.  We visited Davidson College and a student took them around the campus.  After he brought them back, I asked the girls how they liked the school, to which they replied, “It’s awful!”  When I asked them why, they replied “Because he is a senior and doesn’t even have a car.” – Buzz


Series I Bonds – On Monday, the yield on the new Series I bonds will jump to 9.62% from 7.12%.  The bond rates are based on a formula tied to inflation.  The limit on the bond purchase is $10,000 per person, per year.  The bonds can be purchased commission free at TreasuryDirect.gov after you open your bank account.  Be sure to use a bank account that you plan to maintain for a long-term.  I plan on buying the bonds and also purchasing some for my grandkids - https://www.cnbc.com/2022/05/02/i-bonds-to-deliver-a-record-9point62percent-interest-for-the-next-six-months.html


A Long Liver – The world’s oldest person, Kane Tanaka of Japan, just died at 119.  She lived through two World Wars and the influenza outbreak of 1918.  Japan has the world’s oldest population – New York Times ….. Lucile Randon, a 118-year-old French nun is now the world’s oldest living person.  Randon is also the oldest survivor of Covid – THE WEEK


Ouch! – With a down payment of 10% on the median home, the typical monthly mortgage payment is now $1,834, up 49% from $1,235 a year ago – New York Times


Woman Seeking Man – Me: buxom blonde with blue eyes.  You: elderly, marriage-minded millionaire with a bad heart.


Social Security – Social Security is a lifeline for older Americans.  For 27% of beneficiaries, Social Security makes up 90%+ of their income – AARP


Drug Overdose Deaths – last year reached their highest level ever recorded with more than 100,000 deaths vs. approximately 50,000 at the start of the Covid pandemic – New York Times


Retailers – 34% of small retail businesses were unable to make their rent payments in April vs. 6% in February.  Reasons included:  inflation, gas prices, supply chain issues, labor shortages and reduced revenues – Bisnow


Bond Yields – The yield on the 10-year U.S. Treasury note logged its biggest monthly increase to 3% in more than a decade, lifted by expectation for higher interest rates.


Cremation – In 2000, 27% of Americans who died were cremated.  In 2020, that figure had jumped to 56%.  By 2040, 80% are expected to be cremated, according to the Cremation Association of North America.


Dividend Paying Stocks – are in high demand as investors seek relief from volatility in the stock market and as the Fed continues its rate increase to tame inflation – FSI News Brief


Guns – on an average day in the USA, 124 people die every day from gun violence.  Suicide accounted for 50%+ of all U.S. gun deaths.  For people under 25, firearms were the leading cause of death.  Men were 5x more likely to die of firearm homicides and 7x more likely to die of firearm suicide than women.  Black men were 15x more likely to die by firearm homicide than white men – USA TODAY


Bonds – are no safe haven from a volatile stock market.  Shorten maturities to reduce bond price exposure – Robert Carlson, Retirement Watch


Gold – tends to hold its value in inflationary times and benefits from investors of fleeing stocks and commodities whose prices react to supply-and-demand shocks.  Recommended iShares ETF is Gold Trust (IAU) – BottomLine Personal


Estate Plans – The number of those aged 18 to 34 with estate planning documents has soared 50% since the beginning of the pandemic and Americans who have suffered a serious Covid case are 66% more likely to have a will than those who haven’t – Caring.com



Fred Astman


Below is a great MicroCapClub write-up on my friend Fred Astman (1922-2013), who passed away in 2013 and was one of the top small cap value investors in the country.  I met Fred around January of 1978, when he was running a small-cap mutual fund.  I asked him what stock he liked and he mentioned Diamond Crystal Salt.  As soon as he mentioned the name, the lightbulb went on.  It was a very cold and snowy January that year and Nashville had a record number of school closings for the month.  I bought the stock at around $17 and sold it in the $25 to $29 range that August.  Fred started out as an accountant for Lockheed before moving to the investment business.  The best investment advice he ever gave me was to never invest in a company with a negative net worth – all companies at some point have a round of bad luck and the strong will survive but the others won’t.


Until Fred’s death at 91 or 92 he was in the office daily reading his annual reports.  He died shortly after falling at an investor conference, otherwise he would still be with us.  A 1998 Wall Street Journal article had Fred as the no. 1 money manager with an 854% return.  Around 2007, his investment advisory company, First Wilshire, had the best 20-year performance record of any investment advisory firm. Miss you Fred – Buzz  http://microcapclub.com/2016/04/best-microcap-investor-youve-never-heard/



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