MidSouth Week in Review
June 24, 2022

Weekly Update from Fund Manager Buzz Heidtke, MidSouth Investment Fund

I have been out the last two Friday’s in Northern Italy with my daughter Annsley and the grands, but am happy to be back.  For the holiday shortened week, the S&P rose 6.3%.  Last week was the worst week (-4.8%) for the Dow since 2020.  The Dollar hit a 105.6 high vs. 89.5 last July.  Biden has proposed a 3-month gas tax holiday of 18 cents per gallon and has also asked the states to suspend their own gas taxes.  Inflation in Britain hit a 40-year high at 9.1%.  Fed chair Powell acknowledged the central bank’s rate raising campaign could cause an economic downturn but said a recession is unlikely.  Crude dropped from a 124 June high to as low as 102.  The consumer price index rose 8.6% in May, its fastest pace since 1982.

My USA Truck (USAK – $14.58) today announced they are selling out at $31.72 a share.  They are being bought out at a price of 7x earnings.  There are lots of stocks now selling at low PE ratios, so I believe we could soon see the start of several buyouts.  The cheapest S&P 500 stock is U.S. Steel (X), which I own, selling at 1.16x earnings and at 53% of book value.  Sources: Wall Street Journal and New York Times

BuzzBits

Home Prices – If you bought a home today for $400,000, the annual interest payments on that mortgage would be around $2,381 at 6% interest.  If you had bought the home two years earlier, your cost would have been around $300,000 and your annual interest cost would have been $1,200, at 2.6% interest rate – Buzz ….. The monthly principal and interest payment for a buyer of an average priced home who puts 20% down, has gone up 44% since the start of the year – Axios ….. Higher interest rates have yet to slow residential construction, but they are starting to ding housing demand.  Mortgage apps recently hit their lowest level since 2018 – The Kiplinger Letter ….. The average 30-year mortgage rate rose to 6.28% last week, up from 5.55% the previous week, and 3.25% at the start of the year – CNBC.com ….. Fewer people applied for mortgages last week than any point in the past 22 years – MarketWatch ….. Housing affordability fell 29% in March vs. last year, the sharpest decline on record.  April existing homes were at their least affordable level since July 2007 – National Association of Realtors ….. 36% of U.S. households making $250,000+ a year are living paycheck-to-paycheck – Pymnts.com

Beer – is now cheaper than gas.  Drink, don’t drive.

Cryptocurrency – Bitcoin declined from $68,000 two years ago to $17,000 this week.  46,000 Americans reported  being scammed out by an estimated $1 billion from crypto coins over the period from January 2021 to March 2022 – FTC ….. In May of 2021, NFL player Trevor Lawrence decided to take his $24 million salary in Bitcoin.  After paying Fed and state taxes, he has very little left - Buzz

Recession – Goldman Sachs has raised their probability of a recession next year from 15% to 30%, while 53 other economists polled by Wall Street Journal have set the probability at 44% - GFMA SmartBrief

The Big Drop – The 3.6% unemployment rate is close to a five-decade low · The 8.6% increase in consumer prices vs. a year earlier is at a four-decade high · The recent 0.75% Fed interest rate hike is the biggest since 1994 · hourly earnings for non-managers has fallen 2.5% in the past year · The number of open jobs at  the end of April was 11.4 million, nearly double the number of unemployed workers – New York Times

Teachers – Approximately 300,000 teachers left their jobs between February 2020 and May 2022.  A recent poll shows 55% of teachers plan to leave education sooner than originally planned, up from 37% last year – The Hustle ….. There were 249 shooting incidents at schools last year and at least 152 so far in 2022 – Wall Street Journal

Savings – The nation’s savings rate soared in the early months of the pandemic and has now dropped below its pre-pandemic levels …..The savings rate was 33.8% in April 2021 vs. 4.4% in April 2022 and is now the lowest in recorded history – Bureau of Economic Analysis

Smoking – The Biden administration is moving on a plan to mandate the elimination of nearly all nicotine in cigarettes, a policy that would upend the $95 billion U.S. cigarette industry and health officials say, prompt millions of people to quit smoking – Wall Street Journal

Gun Violence – About 100 Americans die on average daily in the U.S. from gun violence – New York Times

Private Colleges – The average cost is now $80,000 a year.  Dark days are coming for most of the nations schools.  Inflation will soon hit college income statements hard.  Despite decades of tuition hikes, most Americans under-graduate institutions are in bad financial shape according to Forbes.  71% of colleges saw their grades decline – Forbes

Medical Debt – 41% of Americans carry medical debt.  42% owe $1,000 - $5,000 and 24% owe more – Kaiser Health

Summer Jobs – Between 2000 and 2010, the number of 16-to-19-year old with summer jobs fell off the  cliff.  But in 2021, teens bounced back with 36.6% of the group joining the workforce – Pew Research Center

Airbnb – business declined 80% in two months when Covid-19 hit.  Today its business has pushed above pre-pandemic level.  Their Q1 revenue came in at $1.5 billion, a 70% increase over last year.  The company isn’t profitable yet, but it’s getting close – Forbes

Ouch! – The median cost of a semi-private room in a nursing home facility is $7,908 per month or $94,900 a year.

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.