S&P Hits Target

On April 1, 2009, I predicted the S&P would hit 950:

http://willworkforjustice.blogspot.com/2009/04/personal-s-target.html

I later clarified that my prediction was a range between 920 and 950. The S&P hit my range on May 6, 2009. My prediction was correct. From April 1, 2009 to May 6, 2009, the S&P rose 13.3%.

I want to emphasize something. As of May 7, 2009, I am not making any prediction about the future direction of the market. I have no idea what's going to happen. As a result, I am mostly in cash and money market funds, along with some TIPs. I've also opened up two credit union accounts. I'm only earning 1.5% interest there, but it's better than my brokerage's 0.5% rate.

Kudos to the SJ Mercury News

The SJ Mercury News has done a great job exposing excessive government spending--see links below:

http://www.mercurynews.com/news/ci_12116499

http://www.mercurynews.com/business/ci_12119850

Old news, but still worth sharing. I just attended a City Hall event where a Councilmember said that average employee salaries have increased from $78,000 to $117,000.

Charlie Munger on NBR

Here's a recent NBR interview with Charlie Munger (Susie Gharib, May 1, 2009):

http://everythingwarrenbuffett.blogspot.com/2009/05/nightly-business-review-susie-gharib.html

We can't have a modern civilization without strong financial companies. But we don't need them as swashbuckling and as crazy and as venal as they've been.

More here from Munger:  http://willworkforjustice.blogspot.com/2010/05/wisdom-from-charlie-munger.html

Update: I replaced the link below, because it no longer worked: http://www.pbs.org/nbr/site/onair/gharib/charlie_munger_of_berkshire_hathaway_090501/

Resources Lifespan

The New Scientist has a great chart showing the finite span of certain resources. See full chart here.

Environmental implications aside, I'm going to check what SLV is selling for these days.

Munger on Economics

In honor of Berkshire Hathaway's recent meeting, here is a 2003 speech Charlie Munger gave in California: [warning: PDF file]

http://www.tilsonfunds.com/MungerUCSBspeech.pdf

Here's a fun snippet:

I think that economists would be way better off if they paid more attention to Einstein and Sharon Stone. Well, Einstein is easy because Einstein is famous for saying, “Everything should be made as simple as possible, but no more simple.” Now, the saying is a tautology, but it’s very useful, and some economist – it may have been Herb Stein – had a similar tautological saying that I dearly love: “If a thing can’t go on forever, it will eventually stop.”

Sharon Stone contributed to the subject because someone once asked her if she was bothered by penis envy. And she said, “absolutely not, I have more trouble than I can handle with what I’ve got.”

Also, Munger saw our financial problems well in advance:

[Question]: …financial destruction from trading of derivative contracts. Buffett said that the genie’s out of the bottle and the hangover may be proportionate to the binge. Would you speculate for us how that scenario can play out? [The question was garbled, but the person asked about derivatives, which Buffett has called “financial weapons of mass destruction.”]

Munger: Well, of course, catastrophe predictions have always been quite difficult to make with success. But I confidently predict that there are big troubles to come. The system is almost insanely irresponsible. And what people think are fixes aren’t really fixes. It’s so complicated I can’t do it justice here – but you can’t believe the trillions of dollars involved. You can’t believe the complexity. You can’t believe how difficult it is to do the accounting. You can’t believe how big the incentives are to have wishful thinking about values, and wishful thinking about ability to clear.

Running off derivative book is agony and takes time. And you saw what happened when they tried to run off the derivative books at Enron. Its certified net worth vanished. In the derivative books of America there are a lot of reported profits that were never earned and assets that never existed.

If you're interested, my review of Munger's 2008 shareholder meeting is here.

Random Thoughts of the Day: Widows and Signs of the Apocalypse

First, a big thank you to federal Judge Christina A. Snyder. The United States government was attempting to deport foreign-born women who married American men and moved to America. In some cases, these widows had U.S.-born children with their husbands. "60 Minutes" did a story on this potential tragedy several months ago. I wrote a letter to Senator Diane Feinstein's office about this issue. Her office sent me an email a few weeks ago. Senator Feinstein supported the widows. Here is her email:

I want to thank you for writing to share your concerns regarding the so-called "widow penalty," which affects the immigration status of legal permanent resident spouses when the sponsoring U.S. citizen spouse dies.

I have great compassion for foreign nationals whose applications for legal permanent status are put into question when the sponsoring American spouse passes away. Under current immigration laws, an individual may only continue to seek adjustment of legal status if he or she was married for at least two years prior to the U.S. sponsor's death. If a couple is married for less than two years prior to the U.S. citizen sponsor's death, a foreign national cannot continue the adjustment of status process and faces the possibility of deportation.

I am an original co-sponsor of S. 815, which Senator Bill Nelson (D-FL) introduced on April 2, 2009 to ensure that surviving spouses of deceased U.S. citizens are not unfairly penalized. This bill would allow spouses who have been married for less than two years at the time of the U.S. citizen's death to continue to petition for status adjustment as an immediate relative, as long as they can prove that they entered into their marriage in good faith and not for the purpose of obtaining immigration benefits. This legislation has been referred to the Senate Judiciary Committee, on which I serve. It is my hope that this legislation will move forward in this Congress.

Judge Snyder ruled that the Dept of Homeland Security could not reject the foreign-born widows' residency applications merely because the Department failed to process the residency paperwork before the American spouses died. In case America needed more evidence that the Dept of Homeland Security is, in fact, the Dept of Douchebaggery, this story ought to be the nail in the coffin.

I hope Congress passes Senator Nelson's proposed legislation.

Second, did anyone want to slap the homeowners mentioned in this SJ Merc story? ("Sellers of high-end Silicon Valley homes put dreams on hold," 5/2/09)

Basically, a local homeowner is upset that the house she bought decades ago isn't selling for the millions she thinks it's worth. She's lowered the price from $2 million to around $1 million. She wants to move to Puget Sound, and gosh darn it if local homebuyers aren't cooperating with her well-laid plans. So what does she do? She compares her situation with the Great Depression:

"I called my mom and asked her what it was like in the Depression," said Negler, who owns the Victorian. She realized, though, that she "sounded pretty selfish. We stopped looking at ourselves as the center of the universe."

I guess she should get some credit for calling herself "selfish"--it shows she has some self-awareness that her comparison to the Great Depression is off-kilter.

Update on Trading: FXM

I bought FXM last week, believing it had dropped too much. FXM went up 4% today. I sold my shares. The trading took place in a retirement account, so I don't suffer a tax hit. For some reason, my record on short-term price movements is much better than my long-term predictions.