CHEER UP! $14 trillion ain't bad!

BIRD ON HEAD

Holiday Outing

Wonderful new moon this evening….
Took Erin to the Long Beach Aquarium today. It was very busy. It was crowded with visitors. We left around 2:30 PM and the parking structure was full.
On the drive down I was struck by all the trucks leaving the harbor. Commerce has not stopped.
Abundance!
I asked how many different species were on exhibit.
I learned that the total number of animals is 12,500 and more than 650 species are represented. Very impressive.
It was a fantastic Los Angeles type of day. Bright sun. Warm. And the traffic on the 405 was not bad.

Changing Times

WARREN BUFFETT ADVICE

With that in mind, here are Warren Buffett Watch's 'timeless' predictions.
1. Recessions can't be avoided forever. As 2007 was coming to a close, Buffett told our Becky Quick that if unemployment picks up significantly, the "dominoes" will fall and the U.S. economy will fall into recession in 2008. He was right, but not alarmed. "It is the nature of capitalism to periodically have recessions. People overshoot." (He told Becky she's young enough to expect to see 6 or 7 or them.)
AP
The economic downturn takes its toll at the almost-empty Bayshore Town Center Mall in Milwaukee, Wisconsin.
2. We'll survive current and future recessions just as we've survived past problems. As Buffett told us in August, 2007, (and repeated throughout 2008): "We've got a wonderful economy... There's never been anything like that in the history of the world. We live seven times better than the people did a century ago on average... We've had problems all along. If you look at the last century, we had that Great Depression and World War Two, we had the Cold War, we had the atomic bomb, but the country does well."
3. Recessions will create opportunities. "I made by far the best buys I've ever made in my lifetime in 1974. And that was a time of great pessimism and the oil shock and stagflation and all those sort of things. But stocks were cheap." Fast-forward to October, 2008, and Buffett's Why I'm Buying U.S. Stocks Now.
4. All stocks won't be cheap. Like Ted Williams waiting for the right pitch, a successful investor waits for the right stock at the right price, and it doesn't happen every day. "What’s nice about investing is you don’t have to swing at pitches. You can watch pitches come in one inch above or one inch below your navel, and you don’t have to swing. No umpire is going to call you out." You get in trouble, Buffett says, when you listen to the crowd chanting "Swing, batter, swing!"
5. The crowd will make mistakes. Buffett cites this piece of advice from his mentor Benjamin Graham: "You’re neither right nor wrong because other people agree with you. You’re right because your facts are right and your reasoning is right—and that’s the only thing that makes you right. And if your facts and reasoning are right, you don’t have to worry about anybody else."
6. Investors will mistakenly think falling stock prices are bad. "If they reduce the price of hamburgers at McDonald's today I feel terrific. Now I don't go back and think, gee, I paid a little more yesterday. I think I'm going to be buying them cheaper today. Anything you're going to be buying in the future, you want to have get cheaper."
Walt Disney (1950)
Cinderella rushes for the exit as midnight approaches
7. Good times will prompt bad decisions. In his 2000 Letter to Berkshire shareholders, Buffett compared the crowd that buys big when prices are high to Cinderella at the ball. "They know that overstaying the festivities - that is, continuing to speculate in companies that have gigantic valuations relative to the cash they are likely to generate in the future - will eventually bring on pumpkins and mice. But they nevertheless hate to miss a single minute of what is one helluva party. Therefore, the giddy participants all plan to leave just seconds before midnight. There’s a problem, though: They are dancing in a room in which the clocks have no hands."
8. There will be more dancing at another wild party followed by another painful hangover. Looking back at the Internet bubble, Buffett is quoted as saying, "The world went mad. What we learn from history is that people don’t learn from history."

Symbols

Lights
A Tree
Stockings
Carols concerts music
Gifts
Candy
Eggnog
A party
Reunions
Travel
Colors, red and green
Log on the fire

SALES INCREASE IN NOVEMBER

By Bob Willis and Courtney Schlisserman
Dec. 24 (Bloomberg) -- Consumer spending in the U.S. fell less than forecast as cheaper gasoline left Americans with more cash, while jobless claims climbed to a 26-year high, signaling purchases will keep sliding into 2009.
Spending dropped 0.6 percent in November, and rose for the first time in six months after accounting for inflation, the Commerce Department said today in Washington. First-time unemployment benefit claims jumped to 586,000, and durable-goods orders declined less than anticipated, other reports showed.

It rose when adjusted for inflation.
Consumer spending rose in November.
Sounds like good news.
What's wrong with falling prices?

False Economy

I am sure there is a moral to this story. I'm not sure what the moral is.

I keep a jar of instant coffee in the kitchen. I'm addicted. If I skip the morning coffee I get a terrible headache in the afternoon.

The jar was getting low. We had a baggy full of some old instant coffee to take on trips. The old baggy coffee got added to the coffee in the jar.
But the old coffee had gone bad.
So now none of the coffee could be used.

Luckily for me the local Vons is open 24 hours. So the problem was easily solved.

But the old saying is. One bad apple spoils the bunch.

Count Your Blessings

Almost Christmas
Season's greetings

We have so much.
We have more than anyone has ever had in the history of the world.
And yet we always seem to cry for more
And if anything is taken away
We get so upset!!!!

I looked in my overflowing closet and thought that I really don't want anything for Christmas this year. I have too much already. I really have too much.
And all the material things are burdens.
They are baggage that must be handled.

Better to be more free
Better to have fewer things
Better to have peace
Better to have love

Worthy of Credit NEW BANKS

What I have gleaned from the news is that auto sales are down largely because of poor access to credit for buyers.
This is not exactly the fault of manufacturers. Sales are down for all brands of car.
We are still in a time of failure of financial institutions.
The explanation for this is largely obscure.
We are told it is bad debts on the books of banks.
Maybe this would be a good time to open a new bank? Unencumbered by the old obligations.
WHY ARE NEW BANKS NOT OPENING?
Is it so hard to open a bank?

We are relying on all the old institutions that have solvency problems.
I do not understand why new institutions are not opening. Monetary policy right now is very stimulative. Interst rates are at all-time lows.
WHERE ARE THE NEW BANKS?

The Story Doesn't Add Up

Recently some big crooks have been exposed.
Why only now?
The way they tell it, there was plenty to suspect for a long time.
It just doesn't add up!

Madoff had a Ponzi hedge fund.
Nobody checked. All done in secret.
Billions of dollars involved.
It just doesn't add up!

The whole credit crisis doesn't add up.
The wars we are constantly fighting don't add up.
The wild gyrations in markets don't add up!

There must be a message here. I'm not sure what it is.

My suspicion is that people have a tendency to lie. The truth is lost. If they told the truth. It would add up. The story would make sense.

Is the truth stranger than fiction? It may be strange. But it should add up. It should balance.

Choose your own truth?
Politicians are working for the public good.
They are working for their own good.

They don't know what good is.

Some Good News But Still Spun Negative

Dec. 12 (Bloomberg) -- Confidence among U.S. consumers unexpectedly improved this month from the lowest level in 28 years, reflecting a record drop in gasoline prices that gave temporary relief to household budgets.
The Reuters/University of Michigan preliminary index of consumer sentiment rose to 59.1 from 55.3 in November. The reading exceeded every forecast in a Bloomberg survey of economists.
While declining energy costs may have given Americans some boost this month, rising unemployment, declining household wealth and fluctuations in the financial markets will continue to discourage spending.
“The consumer has had this incredibly dramatic pullback the last couple of months,” said Stephen Gallagher, chief U.S. economist at Societe Generale in New York. Today’s sentiment reading “is not nearly enough to suggest a rebound in spending, but it could suggest a stabilizing.”
Economists had forecast the University of Michigan sentiment measure would drop to 54.5, according to the median of 59 projections in a Bloomberg News survey. Estimates ranged from 50 to 58.

They still find an economist, Stephen Gallagher, to say that the improvement is "not nearly enough to suggest a rebound in spending."
No matter what the economic news is it always seems to get a negative spin.

SHORT THE SHORTS

Somehow I don't like to short stocks.
Two reasons
The risk is unlimited. The stock could go up 1000%. When you are long you only have 100% at risk.
Seems mean to me. Betting against somebody's business.

But I have found something I enjoy shorting.
I enjoy shorting the shorts.

Easy to do

There are several short ETFs. Exchange traded funds.
My favorite to short is SDS. Ultra short S&P 500.
Ultra magnifies it by 2. If S&P 500 is down 2% then SDS is up 4%.

But you can short the SDS.
Then if the market is up 2% you are up 4%.
Why bother? Why not just go long the S&P 500?

You don't need cash to short a stock. When you short cash actually comes into your account. You do need equity, but not cash.
So, do you believe that stocks will be higher eventually? Then shorting the shorts is a great strategy.
Plus shorting the shorts seems to eliminate the unlimited liability.

In The News

Couple of headlines seen
"US AUTO INDUSTRY WILL LIKELY DISAPPEAR" Paul Krugman
"Things are going to get worse before they get better." Obama

I would like to see an optimistic leadership. I would like to see upbeat news about the economy. This negative spin has been going on for years. Even when the economy was doing well the predictions of a recession were ubiquitous.

It all looks like propaganda.
Why is the captain trying to sink the ship?

What is there to gain from running everything down?

I assume everyone is trying to get more personal power. The propaganda is all working to give more power to cetain individuals.

What if there were no crime?
The police would be out of work. Attorneys, judges, courthouse workers, prison guards would all find their services to be in less demand. How could they really desire less crime or less conflict or less litigation. It is to their advantage to have more problems. More problems give them more power.

The medical establishment gains from illness.

The military establishment gains from global conflict.

Bankers thrive on debt and borrowing.

Others live on vices of all sorts, addictions to drugs, nicotine, alcohol, gambling.

Let's move a little in a different direction. Let's do away with these needs by living well. Just living well. Each of us. Living wisely. Carefully. Responsibly.

A step in the right direction is to recognize the propaganda for what it is.
Every news story-be sceptical. Why should we live in fear? Who gains when we are afraid?

What We Really Need

I often remind myself that I have more than I need. Maybe I am just lucky, but I believe most people have more than they need. Therefore most of the complaining comes from that other place called greed.
We are a nation of the overweight.
This comes from having more than we need.
More food than we need.
Here is an idea for the California budget.
Suppose a need for $100 billion but revenue of only $90 billion.
Let it be known that everyone who does business with the State of California can expect a 10% pay cut.
MAGIC! BALANCED BUDGET
Anyone who doesn't want to play that way can go elsewhere.
(This would not apply to bond interest and such)
I could certainly live with a 10% pay cut. No problem.
Then they would have less need to lay workers off etc.