MidSouth Week in Review
June 24, 2022

Weekly Update from Fund Manager Buzz Heidtke, MidSouth Investment Fund

Jun. 28, 2022 | RedChip Companies

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




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.



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