Lessons From Charlie, Warren’s Munger, on How to Become a Better Investor:
Charles Munger is considered to be smarter than Warren Buffett, who is his partner. Munger is 89 years young and still very active in the business. Charlie preaches a discipline in what he calls ‘multiple mental models’, from a variety of disciplines, including engineering, mathematics, physics, chemistry and psychology. He wants to understand an investment both in its internal and external environment. He calls that the ‘Lollapalooza Effect.’ This is where anywhere from one-to-four forces are driving the investment in the same direction. The effect isn’t simple addition but more like nuclear explosion, Munger explains.
It is a multidisciplinary attack on a possible investment. 
Munger takes everything into consideration from the company’s retiree health benefits to changes in technology before making an independent price at which he’d pay for the stock. Most of us cannot understand let alone mimic Munger’s analysis of a stock. However we can buy those areas that Munger has shown an interest and allow others to manage the portfolio for us. Munger will not invest in any industry he does not understand; especially health care and technology. He wants easy to understand businesses with distinct and sustainable competitive advantages with a dominant franchise. He and Buffett buy what they believe are the best companies. They only own 41 stocks in their multi-billion portfolio. Buffett has said that there is diminishing value as you add more.
Social Security & Medicare Are 2 of The Largest Assets a Retiree Has!
Politicians call them entitlements since they can pull a ‘Lucy’ on the American public anytime they want- and they’ve done it time and time again.
Washington,DC has borrowed, misappropriated, reduced, re-defined our guaranteed benefits that have been bought and paid for through hard work and sacrifice. In order to fix the American economy , that was mismanaged and ruined by politicians, they’ve turned their sharpened pencils at the only bit of cash left in the pot. They say everyone has to pay their fair share- except them. They don’t need Medicare or Social Security; and so expect severe cuts to be made. 
and we’ll re-elect them and go madly on our way…
The chasing of yield has pumped the share price of companies beyond the point of comfortable. Money that typically runs to bonds, said Chris Wallis, chief investment officer of Vaughan Nelson Investment Management, now coming to equities. Barry Knapp, chief investment strategist at Barclays, points to Fed policy, reported last Monday’s WSJ, saying, as long as Fed policy stick to its current plan investors should stick with the stocks, and it could continue for years. Earnings better catch-up, or if it doesn’t something will pullback. 
Monday Markets Blew Away Expectations of A Contraction. Bears walked away muttering to themselves as the S&P 500 found its way to an all time high 1594 or 6 points shy of what many analysts say is the very top for 2013. Avi Gilburt of Elliott Wave said he isn’t buying into the S&P rally. Only on day trades, says he. Kodak had another moment 
as the bankrupt giant gave assets to UK retirees in lieu of cash. This is the company that invented just about everything that has to do with photography, including the digital camera. It also was involved in the shhhh business for the US government. And yet it was slow to adopt new technologies forcing it into bankruptcy. The giving of assets is an attempt to emerge from bankruptcy as a much smaller and less vital company. Retirees are expected to hold assets and sell them some time in the future for whatever value they can get.
Say cheese….
Tuesday markets edged up to close the month positive. Mitch Zacks points out that there is so much lousy economic news out there that the only thing keeping the markets moving up is the promise of Fed stimulus. It makes cash irrelevant, bonds are at the end of their tether and dividends on stocks the only game in town. Gold may be set for another move up. Reports MarketWatch.
Bob Doll, Chief Equity Strategist, Nuveen Asset Management, Inc. Revisits his 2013 Predictions:
- The US economy will muddle through with nominal growth below 5% for the 7th year in a row.
- At the end of the year Europe begins to exit its recession (Begins…!)
- US multi-nationals outperform domestically focused companies.
- Large cap stocks outperform small caps.
- The US government passes a $2-$3 trillion budget deal.
Red Wings Lose 1- Tigers Win 2 From Twins
Wednesday Markets Swooned as The Dow Gave Up 139 Points…
Hiring and Manufacturing both showed weakness as the Federal Reserve reported no new news and that they would continue their buying $85 billion a month asset plan. To be honest, that’s all you really needed to know to know that the markets are treading gently. Some may blame the sequester for some of the weakness but for sure we’ve heard nothing about jobs, stimulus from Washington pols and its as if they live in another world far-far removed from us mere mortals. We’ve been trading on Bernanke air and now time to regroup.
FACEBOOK 
may become a regular tech company, someone wrote, and last week the company showed they can produce some very nice results. Only the Street wants more and a sustainability. The company generated (get this!) $374 million of mobile ad revenue from Zero a year earlier. I am impressed! The company trades at about 18x’s earnings. Google trades around 12 and Netflix at 550 (no misprint!). Give it another year and some of the bad thoughts of the screwed up IPO will be a much dimmer memory.
A Glimmer of A Better Jobs Report Boosted Markets Thursday! While waiting for the official Friday jobs numbers the Dow soared back to where it was on Tuesday and all indices did the same. Expecting a better jobs number of at least 140,000 will fuel the markets. But to make a real dent in the jobless the numbers need to be +200,000 a month! Bill Gross reports that we’ll all lose money because the world is awash with money. Our Fed is pumping out $85 billion per month with the Bank of Japan churning another $75 billion and the ECB hinting at negative rates. The questions every investor has to ask themselves is if the markets are sustainable at the current rate of growth? A friend mentioned to check the chart of IBM, usually a barometer of market action and so here’s the chart with the 30 day Simple Moving Average crossing over the 15 day SMA. That’s telling because its signaling a market slowdown. That’s the theory.
Note that sharp dip at the end of the chart that looks like a cliff that was last Wednesday. You can go to Yahoo finance and draw the same or other charts. (When the 15 Day crosses over the 30 Day –as you can see around March in the above chart, that’s a buy signal.)
Ignoring All My Smartness The Markets Roared Ahead on Friday! 
Experts were calling for 140,000 jobs and got 165,000 non-farm jobs in April and upgrades for March and February. Still we need 200,000 and the 140,000 was a low bar that folks thought was high enough but still low enough to get the market to keep percolating. Unemployment numbers fell to 7 1/2%, the lowest in 4 years. One thing I learned is that the market is never wrong. And even as factory orders were down by 4%! And durable goods and non-transportation orders fell the markets continued their ascent. As Jimmy Cramer said on CNBC there is a lot of money coming in and has to go somewhere. So we’ll take it while still remaining defensive, and not changing anything a whole lot.
Finally-Zacks writes the recent rise of stocks boils down to the Fed getting bond yields down to where stocks and real estate are attractive, and the simple slow improvement in the economy.
Questions call Paul @ 586 295 0430 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.
Securities offered through Westminster Financial Securities, Inc. Member FINRA/SIPC.
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