MidSouth Week in Review:
February 20, 2018

Weekly Update from Fund Manager Buzz Heidtke, MidSouth Investment Fund

After a disastrous last week the major markets had a big recovery this week.  The S & P was up 4.7% for the week and up six consecutive days, but is still down 5% from its January 26 high.

The markets will be closed Monday in observance of President’s Day.

BuzzBits

Value Stocks – have historically tended to outperform growth in high-volatility environments, as investors seek what are perceived as safer and steadier stocks – Morgan Stanley

A Tight Squeeze – A 2016 study found that the average woman wore a size 16 to 18, yet annual spending on larger size apparel accounts for only 16% of the $112 billion U.S. market – New York Times

Investment Bonus – Beginning April 2018, REIT and MLP owners can deduct 20% of their qualified distributions (only 80% will be taxable) under the new pass-through provision of the new tax law – InvestmentNews

Professional Sports Subsidies – Taxpayers have spent more than $43 billion on tax-free bonds since 2000 to help build pro sports stadiums.  On average, taxpayers assume 78% of the cost of the stadiums.  A recent poll by the Federal Reserve found that 83% of economist agree that sports subsidies cost taxpayers more money than they bring in – THE WEEK

Stock-Trading Volume – totaled 54.5 billion shares last week in averaging 10.9 billion shares a day.  Around 1971, on Yom Kippur, less than 10 million shares traded on the NYSE.  During the late 1930’s a mere 500,000 shares was often traded for the day – Buzz

Opioids – In the 1980’s, the Federation of State Medical Board, which received up to $2 million from drug makers, recommended doctors not face punishment for prescribing large amounts of opioids and called on the board to punish doctors who under-treat pain.  By the 1990’s, juries awarded more than $16 million to patients and families whose loved ones suffered from pain, concluding the nursing homes, nurses and doctors that failed to give opioids were guilty of negligence – The Tennessean ….. Opioids deaths in 2016 totaled 64,000 vs. 52,400 in 2015.  Fentanyl deaths in 2016: up 540% in three years - The Upshot ….. This week, Purdue Pharma said it would stop promoting Oxycontin, 22 years after the painkiller hit the market, and lay off more than 50% of its sales force. 

Day Trading – “If you want to compete at that level, you need the weapons.  It’s like going to a gunfight with a knife.  You are competing with hedge funds and other Wall Street sharks who have a lot more background and resources.” – Chris Chen, Insight Financial Strategies

Personal Savings Rate – dropped to 2.4%, the lowest level since 2005.  People tend to spend more when their home value and stock portfolios are rising, because “they feel richer”. – Jordan Weissmann, www.slate.com…..Bank credit-card charge-offs rose 12.5% in the 4Q to 3.25% - Fitch Ratings

Snowflakes – Nowadays schools in the south are often closed due to only cold weather.  Not so in Moscow where they had a record 22 inches last week in 36 hours.  Moscow school children were given an unheard of day off for snow, prompting an avalanche of upsetting tweets from disapproval parents.  “There’s no reason to give children a break,” said one – THE WEEK

Family Move-ins – 31.9% of adults in the U.S. shared a home in 2017, a group that includes not just parents but grown siblings and unrelated adults vs. 28.8% in 1995.  In 2017, 14% of those were parents vs. 7% two decades ago – Pew Research Center

Deadbeat North Korea – racked up $2.7 million in bills at the winter games with their 137-member team and Kim Jong’s sister staying at the 5-star Grand Walkerhill Hotel in Seoul.  The bill was paid by South Korea.  In the 1970’s, Kim Jong’s grandfather ordered 100 Volvo’s that were never paid for.  Swedish officials claim the debt owed plus interest to be more than $300 million.  North Korea is a poor nation, yet is investing heavily in nuclear-weapons and missile programs and its leaders live lavishly – Wall Street Journal 

Consumers Ramp Up Debt

Abe Schilling, a 33-year-old car salesman in Great Falls, Mont., said he signed up for more than five credit cards over the past year, from issuers including Capital One Financial Corp. and Discover Financial Services, after he received offers in the mail.  He also took out a $36,000 loan to buy a new Jeep Grand Cherokee.

Mr. Schilling, who rents his home, said the offers have been arriving as his credit score has improved.  He previously had dozens of collections and other negative marks on his credit reports after failing to pay back bills.  With a steady income and months of debt counseling behind him, Mr. Schilling says he feels confident in his ability to pay for his debts.

So do plenty of other Americans.  In the fourth quarter, consumer debt, excluding mortgages and other home loans, rose 5.5% from a year earlier to $3.82 trillion.  That is the highest amount since the Federal Reserve Bank of New York began tracking the data in 1999. – Wall Street Journal

buzz@msifund.com

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