Search Results for: munger

Charlie Munger Daily Journal Annual Meeting 2022 Full Video, Full Transcript, and Highlights

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards and may receive a commission. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

Charlie Munger is now 98 years old and still answering questions at the 2022 Daily Journal Annual Shareholder Meeting. Yahoo Finance livestreamed the event again, and you can view the full two-hour recording on YouTube (embedded below, starts at 24:47). You’ll miss out on his snarky tone, but you may prefer to read the entire transcript, kindly provided in PDF form via @DividendGrowth and via Junto Investments.

You don’t have to agree with everything he says, but some of it is just refreshing in that it’s not the same stuff you hear elsewhere. He has a clear opinion. I’ve included a few of my personal highlights below.

One philosophy that I appreciate (but don’t necessarily follow) is to simply stay completely clear of bad things that can destroy either your financial stability or your general happiness. If you don’t own crypto, you can still live a rich and happy life.

  • Avoid treating the stock market like a casino.
  • Avoid speculating in cryptocurrencies.
  • Avoid doing something because you see someone else get rich doing it.
  • Avoid anything so addictive to you that you give up everything else. For some, it could be alcohol. Others, it could be video games.
  • Avoid “pretentious expenditure”.

On the best way to invest:

Well, it may be that you have to choose the least bad of your options. That frequently happens in human decision making. The Mungers have Berkshire stock, Costco stock, Chinese stocks through Li Lu, a little bit of Daily Journal stock, and a bunch of apartment houses. Do I think that’s perfect? No. Do I think it’s okay? Yes. I think the great lesson from the Mungers is that you don’t need all this damn diversification. You’re lucky if you got four good assets. If you’re trying to do better than average, you’re lucky if you have four things to buy. To ask for 20 is really asking for egg in your beer. Very few people have enough brains to get 20 good investments.

On making macro-economic predictions and dealing with the boom and bust cycle:

I figure that I want to swim as well as I can against the tides. I’m not trying to predict the tides.

If you’re gonna invest in stocks for the long term, or real estate, of course there are going to be periods when there’s a lot of agony and other periods when there’s a boom. I think you just have to learn to live through them.

Should we go to cash and wait for better opportunities in the future?

In my whole adult life, I’ve never hoarded cash, waiting for better conditions. I’ve just invested in the best thing I could find. I don’t think I’m going to change now. The Daily Journal has used up its cash.

On living a happy life:

You want to have reasonable expectations and take life’s results good and bad as they happen with a certain amount of stoicism. There’ll never be any shortage of good people in the world. All you got to do is seek them out and get as many of them as possible into your life. Keep the rest the hell out.

Past years:

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Charlie Munger: A Double Layer of Risk Protection

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards and may receive a commission. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

My current commute/workout/kid taxi listening is old Berkshire Hathaway shareholder meetings after finding them in podcast format. (I know, out of all the choices available, somehow I find these the most stimulating?!) Here is a educational excerpt from the 2008 BRK meeting (transcript and video available at CNBC) where Charlie Munger is discussing how Berkshire works to avoid low-probability problems that could destroy the company now and in the future.

CHARLIE MUNGER: Yeah. You can see how risk averse Berkshire is. In the first place, we try and behave in a way so that no rational person is going to worry about our credit.

And after we’ve done that, and done it for many years, we also behave in a way that, if the world suddenly didn’t like our credit, we wouldn’t even notice it for months, because we have such liquidity and are so unlikely to be — unable to be — pressured by anybody.

That double layering of protection against risk is like breathing around Berkshire. It’s just part of the culture.

[…]

We do not want to be dependent on anybody or anything else. And yet we want to keep doing things.

So, we’ve found a way to do it — we think we found a way — to do that. It may give up some of the — well, obviously gives up earning higher returns 99 percent of the time, and maybe 99.9 percent of the time.

Obviously, we could have run Berkshire with more leverage over the years than we have. But we wouldn’t have slept as well, and we wouldn’t feel comfortable — we’d have a lot of people in this room that have almost all their net worth in Berkshire, including me — and we wouldn’t feel comfortable running a business that way.

Why do it? I mean, it doesn’t — it just doesn’t make any sense to us to be exposed to ruin and disgrace and embarrassment and — for something that’s not that meaningful.

If we can earn a decent return on capital, you know, what’s an extra percentage point? It just isn’t that important.

Takeaways. The parallels for personal finance seem pretty straightforward:

  • Maintain an excellent credit reputation (score). Having a good credit score will help you borrow for a house, buy a car, lower your insurance premiums in many cases, and finance larger projects and transactions. However, that credit line may still disappear quickly in a crisis.
  • Maintain adequate liquidity separate from any credit lines. Imagine that you lose your job and can’t find a new one for six months. Can your household survive without major disruption? What if at the same time, your stocks also got a 50% haircut and everyone else is suffering as well? Do you have cash or liquid assets to tide you over?
  • Accept that this level of safety means you won’t earn the highest returns. You’ll do fine, but you may not do as well as someone else who bet it all (or more than all using leverage) what happened to be the right thing during the good times. That’s okay, because you won’t be exposed to ruin.
My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

This Becky Quick Quote Sums Up the Buffett and Munger Partnership

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards and may receive a commission. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

After finishing up the 4-part CNBC Squawk Podcast containing the full “Wealth of Wisdom” interview with Warren Buffett and Charlie Munger, the journalist Becky Quick summed up the essence of their 60-year friendship and partnership (emphasis mine):

It’s not a complicated lesson, it’s probably just one we don’t sit on and reflect upon often enough. You should surround yourself with people who inspire you, and people you don’t want to disappoint. That’s what it’s all about, right? Making sure we are all our best selves. It’s such a universal truth. All of us can look at the relationships we’ve had over the years, and what inspires you to do better? It’s really those people who put faith in you, and wow, you don’t want to let them down.

Definitely something to reflect upon.

I enjoy all of these CNBC interviews with Becky Quick – you can see that she has a comfortable and respectful relationship with them, while still pressing them for clarity on certain issues. As soon as the interview officially ends, Becky Quick lets out a laugh and remarks:

You’d rather be in jail… than work at a corporation!?!”

Technically, Warren Buffet says he would rather be in jail with some interesting people and a good pile of books… rather than micro-managing the daily activities and hundred of employees of Berkshire subsidiaries. I get your point, Warren! 👍

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Buffett & Munger Wealth of Wisdom on CNBC: Full Video and Transcript

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards and may receive a commission. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

Update: Apparently there was a lot of the interview that wasn’t shown in the CNBC video below, but is being released in a four part series on their podcast, Squawk Pod. Let me know if you find a transcript.

Original post:

For the Buffett and Munger fans out there, Becky Quick had another CNBC special interview with the pair about their longtime friendship and partnership, called Buffett & Munger: A Wealth of Wisdom on June 29th, 2021. Thankfully, you can watch the full video online and/or read the full text transcript.

All in all, this interview didn’t offer a lot of new insights if you already listened to the 2021 Berkshire Hathaway shareholder meeting and 2021 Daily Journal shareholder meeting (Robinhood still promotes gambling and Bitcoin is still a delusion), but it did provide a little more background into their personal histories.

Here is my single favorite quote from the interview (emphasis mine):

BUFFETT: And we’re still doing it, yeah. We made a lot of money. But what we really wanted was independence. And we have had the ability since pretty much a little after we met financially we could associate with people who we wanted to associate with. And if we had, if we associated with jerks, that was our problem. But we didn’t have to. We’ve had that luxury now for, you know, 60 years or close to it. And, and that beats 25-room houses and, you know, six cars or that stuff is, what really is great is if you can do what you want to do in life and associate with the people you want to associate with in life. And, now, it, it’s and, and we both had that, that spirit all the way through.

These two friends may be famous because they are rich, but they are happy because they are able to spend their time with people that they enjoy.

Buffett and Munger explicitly wanted to get rich, so they could be independent. True freedom is the ability to control how you spend your time. But that usually takes a certain amount of money, so we have the term “financial freedom”.

I think it’s okay to say “I want accumulate a lot of money for the next X months or years”, especially if you’re in debt. As Munger has also stated, the first $100,000 is the hardest. If you really want independence quickly, then you need to embrace some pain and sacrifice to earn your freedom. This is why I try not to criticize anyone taking “extreme” measures to improve their savings rate. Some people are willing to endure a very spartan lifestyle for independence sooner, while others aren’t, or they may have a higher income and not need to give up much.

At the same time, after reaching a certain level of financial stability, we then need to figure how what game we really want to play with our limited time on this planet, beyond simply buying more luxurious stuff. Buffett enjoyed the game of capital allocation and accumulating more dollars; that was his idea of fun. He even had a partner to play the game with him. For most people, I think continuing to make more money involves more stress and hard work.

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Charlie Munger Daily Journal Annual Meeting 2021 Full Video, Full Transcript, and Highlights

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards and may receive a commission. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

It seems that every year, Charlie Munger and the Daily Journal Annual Shareholder Meeting gets more and more media attention. Which is great, as Munger is now 97 years old. Yahoo Finance livestreamed the event, and you can view the full two-hour recording on YouTube. It’s much faster to read the entire transcript, kindly provided at sites like Latticework Investing and Junto Investments. Munger covered a lot of ground, and it’s nice to see he hasn’t lost his edge. I’ve edited things down to my personal highlights below.

On the popularity of the short-term trading of stocks like Gamestop. It is nothing fancier than gambling.

…that’s the kind of thing that can happen when you get a whole lot of people who are using liquid stock markets to gamble the way they would in betting on racehorses. And that’s what we have going in the in the stock market. And the frenzy is fed by people who are getting commissions and other revenues out of this new bunch of gamblers.

A few shots at Robinhood.

I have a very simple idea on the subject. I think you should try and make your money in this world by selling other people things that are good for them. And if you’re selling them gambling services where you make profits off of the top, like many of these new brokers who specialize in luring the amateurs in, I think it’s a dirty way to make money. And I think that we’re crazy to allow it. […] Well, it’s most egregious in the momentum trading by novice investors lured in by new types of brokerage operations like Robinhood. I think all of this activity is regrettable. I think civilization would do better without it.

Nope, Robinhood is not free.

Robinhood trades are not free. When you pay for order flow, you’re probably charging your customers more and pretending to be free. It’s a very dishonorable low-grade way to talk. Nobody should believe that Robinhood’s trades are free.

On SPACs:

Well, I don’t participate at all. And I think the world would be better off without them. I think this kind of crazy speculation in enterprises not even found or picked out yet is a sign of an irritating bubble. It’s just that the investment banking profession will sell shit as long as shit can be sold.

On Treasury bonds, government stimulus, and low rates:

Well no, I don’t think we have a bubble in Treasury securities. I think they’re a bad investment when interest rates are this low. I never buy any and neither does Daily Journal. But, no, I don’t think Treasury securities are a big problem.

I do think that we don’t know what these artificially low interest rates are going to do or how the economy is going to work in the future as governments print all this extra money. The only opinion I have there is that I don’t think anybody knows what’s going to happen for sure. Larry Summers has recently been quoted as being worried that we’re having too much stimulus. And I don’t know whether he’s right or not.

On higher stock prices due to low rates:

I think everybody is willing to hold stocks at higher price-earnings multiples when interest rates are as low as they are now. And so I don’t think it’s necessarily crazy that good companies sell at way higher multiples than they used to.

On the other hand, as you say, I didn’t get rich by buying stocks at high price-earnings multiples in the midst of crazy speculative booms. I’m not going to change. I am more willing to hold stocks at high multiples than I would be if interest rates were a lot lower. Everybody is.

On why DJCO kept its Wells Fargo shares when Berkshire Hathaway sold them all off:

Well, I don’t think it’s required that we be exactly the same on everything. We have different tax considerations. […] So, you can understand why Warren got disenchanted with Wells Fargo. I think I’m a little more lenient. I expect less out of bankers than he does.

On Bitcoin:

So, I don’t think Bitcoin is going to end up as the medium of exchange for the world. It’s too volatile to serve well as a medium of exchange. It’s really kind of an artificial substitute for gold, and since I never buy any gold, I never buy any Bitcoin. I recommend that other people follow my practice.

On Costco. Munger has said in the past that 1/3rd of his net worth is in Costco.

Costco I do think has one thing that Amazon does not. People really trust Costco will be delivering enormous value. And that is why Costco presents some danger to Amazon. They’ve got a better reputation for providing value than practically anybody, including Amazon.

How do you know you really understand something? Avoid confirmation bias.

Well, I do have a tip. At times in my life, I have put myself to a standard that I think has helped me: I think I’m not really equipped to comment on this subject until I can state the arguments against my conclusion better than the people on the other side. If you do that all the time; if you’re looking for disconfirming evidence and putting yourself on a grill, that’s a good way to help remove ignorance.

Can anyone become a great investor? Bad news.

I think people have the theory that any intelligent hardworking person can get to be a great investor. I think any intelligent person can get to be pretty good as an investor and avoid certain obvious traps. But I don’t think everybody can be a great investor or a great chess player. […] I don’t think it’s easy for ordinary people to become great investors.

What does Munger advise his charitable institutions to hold as assets? Munger also has 1/3rd of his assets run by Li Lu, and the final 1/3rd is Berkshire Hathaway shares.

Well, the one charitable institution where I have had some influence for a very long time has a whole bunch of hotshot financiers in every branch of wealth management there is on the board. And that institution has two assets in its endowment account. One is a big interest in Li Lu’s China fund, which is a limited partnership, and the other is a Vanguard index fund. As a result of holding those two positions, we have a lower cost than anybody else and we make more money than practically everybody else. So you now know what I do in charitable institutions.

Most people have “happiness thermostats”:

I think most people who are assuming tolerable success in life are about as happy as they were ordained to be. They wouldn’t be a lot happier if they were richer or a lot less happy if they’d been poor. I think most people are born with a happystat. That happystat has more to do with their happiness and their outcomes in life.

More on happiness:

The first rule of a happy life is low expectations. That’s one you can easily arrange. If you have unrealistic expectations, you’re going to be miserable all your life. I was good at having low expectations and that helped me.

On choosing a spouse:

A little wisdom in spouse selection is very desirable. You can hardly think of a decision that matters more to human felicity than who you marry. […] Well, you know, I had a failed marriage, so I don’t think I’m in the perfect position to advise the young about marriage.

Here are last year’s 2020 Daily Journal meeting video, transcript, and notes. Here are links to past Daily Journal meeting transcripts and lots of additional Munger material.

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Charlie Munger: Huge Compilation of Annual Shareholder Letters, Interviews, Op-Eds, Speech Transcripts

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards and may receive a commission. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

Charles Munger is probably best known as the Vice Chairman of Berkshire Hathaway and longstanding investing partner of Warren Buffett. However, he has also been the CEO and/or Chairman of the Board of multiple other companies. This means there many additional sources of knowledge and wisdom beyond just BRK shareholder letters. I recently discovered this huge 1,000 page compilation (PDF) of everything Munger, including annual letters from Blue Chip Stamps, Wesco, and Daily Journal as well as his op-ed contributions and transcripts of speeches. Found at ValueWalk, the PDF includes links to most of the individual sources inside as well. Thanks to all the folks that worked hard to preserve this material.

There was no table of contents, so I started making a list of all the goodies inside:

Annual Shareholder Letters and Meeting Transcripts

  • Blue Chip Stamps, Annual Shareholder Letters, 1978-1982. Blue Chip Stamps was merged into Berkshire Hathaway in 1983.
  • Wesco Financial Corporation, Annual Shareholder Letters and/or Meeting Notes, 1983-2010. Wesco Financial was officially merged into Berkshire Hathaway in 2011.
  • Q&A sesssion with Charlie Munger July 1st, 2011. An event paid for by Charlie Munger after the Wesco merger.
  • Daily Journal Corporation Annual Meeting Notes and/or Transcript, 2013-2018.

Speech Transcripts, Op-Eds, Interviews, Etc.

  • Opinion Pieces, 1984.
  • Speech by Charlie Munger to the Harvard School, 1986.
  • Resignation of Mutual Savings from US League of Savings Institutions, May 30, 1989.
  • A Lesson On Elementary, Worldly Wisdom As It Relates To Investment Management & Business, 1995.
  • Practical Thought about Practical Thought?, 1996.
  • Investment Practices of Leading Charitable Foundations, 1998.
  • Foundation Financial Officers Group Master’s Class, 1999.
  • A Perverse Use of Antitrust Law, 2000.
  • Philanthropy Round Table, 2000
  • Optimism Has No Place in Accounting, 2002
  • The Great Financial Scandal of 2003
  • Herb Kay Undergraduate Lecture at the University of California, Santa Barbara Economics Department, 2003.
  • Munger speech at University of California, Santa Barbara, 2004.
  • The Pyschology of Human Misjudgment,
  • Charlie Munger – USC Commencement Speech 2007
  • Sacrificing To Restore Market Confidence, 2009.
  • Basically, It’s Over. A parable about how one nation came to financial ruin, 2009.
  • Wantmore, Tweakmore, Totalscum, and the Tragedy of Boneheadia: A Parody about the Great Recession, 2011.
  • A Conversation with Charlie Munger and Michigan Ross Dean Scott DeRue, 2017.
  • Charlie Munger, Unplugged, 2019.
  • Foreword to the Chinese Edition of Poor Charlie’s Almanack: The Wit and Wisdom of Charles T. Munger (by Louis Li).

This should keep me busy for a while!

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Charlie Munger Daily Journal Annual Meeting 2020 Full Video, Full Transcript, and Notes

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards and may receive a commission. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

If you like hearing Warren Buffett and Charlie Munger talk at the Berkshire Hathaway (BRK) annual meeting, you should also watch or listen to Charlie Munger at the Daily Journal (DJCO) annual meeting. DJCO is his personal pet project, and each year he does a Q&A session where he answers any questions by himself. CNBC recorded the full 2020 DJCO annual meeting live (embedded below). I watched the entire 2+ hour session – it’s good but long… might be better as a podcast (although I like to take notes too).

Adam Blum of ValueWalk has generously shared his full transcript as well. It’s very complete so I am too lazy to compete with that. Instead, here are my (often paraphrased) personal notes and highlights:

  • Munger has no idea what the consequences will be that the biggest shareholder in all the biggest companies are index funds.
  • Munger likes the Daily Journal and Costco because it they try to do right by their customers, as opposed to casinos for example that make money by tricking people. You should always take the high road if you can. It’s less crowded.
  • Newspaper are going away, except for maybe the Wall Street Journal and New York Times. This is bad, as now you have misleading opinion media on both sides that just keep spewing hatred. Politics is even sillier than business.
  • Chinese companies are stronger with better growth prospects than US companies. Munger is invested there (and he jokes that you aren’t). Fish where the fish are.
  • Munger is partial to Canada and their working single-payer health care system, especially how they pay lower pharmaceutical prices.
  • There is too much wretched excess in investment management. There are troubles coming.
  • Index funds will still work best for most people, if you can be patient. He notes that the average holding period among Chinese investors is very short. This is not good. He is not a fan of the popularity of gambling among the Chinese.
  • Be a survivor, not a victim. Advocating for reform is important, but on a personal level it is important to to keep plugging along. Munger doesn’t like politicians that get ahead by trying to make everyone feel like a victim. Recognize you are in a bad situation and work to make it better.
  • Munger only knows enough about Crypto to know that he should avoid it. “Too hard” pile.
  • Regarding inflation and interest rates, we should all be modest about our knowledge of economics.
  • No new book recommendations.
  • Munger does not have a hostile attitude towards China. The US should try to get along with China. China should try to get along with the US. As an aside, Munger has admiration for Japan during their 25 years of economic stasis.
  • Learn to change your mind when you are wrong.
  • Tesla – Munger will never buy it, but also never sell it short. Don’t underestimate a man that overestimates himself.
  • We should appreciate our current living standards. What is extra money really going to do for you after you have enough to eat? Medicine has greatly improved. Even with more technological advances, will life be that much better?
  • Munger has no secrets to share about his longevity.
  • His only advice on parenting is to be a good example. Preaching to his kids never worked.
  • On negative interest rates, having worked once, governments will of course try it again, likely to excess.
  • The inversion process. Figure out the easiest ways to make yourself bankrupt, and then avoid them. (Consumer debt? Medical debt?)
  • Munger is known for being rational, yet he 96 years old, enormously rich, and cares a lot about what happens to a little company called the Daily Journal. He calls it insane.
  • Having a two-party political system is good. Power corrupts. It’s better when no one side gets too much power. The ebb and flow is good.
  • American healthcare, in many ways it’s the best in the world. It is powered by a lot of smart hard-working people. However, there is a huge amount of totally unnecessary activity that costs a lot and does nothing or even causes harm. Why? There are big financial incentives to make money with unnecessary care. Change the incentives. The insurance reimbursement system is too opaque. Kaiser system is an example of doing less unnecessary care.
  • People who are deferred gratifiers do better than the impulsive ones that demand immediate gratification. He is afraid the tendency towards one or the other might be genetic.

I actually appreciate when someone admits they don’t know something, as opposed to others who seem to form a strong opinion on everything under the sun. One of Munger’s lessons is that it is important to accept what you don’t know, and make strong bets only on what you do know. That’s the only way to get outsized results.

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Berkshire Hathaway Post-Shareholder Meeting CNBC Interview 2019 Full Video, Full Transcript (Buffett, Munger, and Gates)

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards and may receive a commission. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

On the Monday after the recent Berkshire Hathaway shareholder meeting, Becky Quick of CNBC did another 2-hour interview with Warren Buffett, Charlie Munger, and Bill Gates. CNBC has thankfully posted the entire interview online along with a full transcript.

As usual, I like things directly from the source, so I watched the entire thing. Here are my notes that deal with investing:

Warren Buffet-style value investing distilled. You start out by picking a good business first. Then, you pay attention to the price. If the price is good, you buy. If the price is not attractive, you don’t. You can’t predict the mood of Mr. Market, he may be depressed or manic. (If it’s not a good business, then skip it no matter the price.)

But we watch the prices of things we do more than current events. Because in the end– we aren’t buyin’ ‘em because what’s gonna happen next month or next quarter. You know,we’re really buying ’em because we think they’ll be good businesses ten years from now. If somebody came to us with a good business today, we’d buy it. And we’d buy it regardless of what’s going on in the tariff situation. We might this wouldn’t be the case. But you might– we’re more likely perhaps to get something when other people are– fearful. You see that in a big way instantly in the market, you know, in the market for businesses. It’s– but it’s–still there in people’s minds.

On share buybacks and Apple. Share repurchases, or buybacks, are when a company buys its own shares outstanding. People argue about how this is “good” or “bad”, when really it’s all just rather pointless.

Repurchases can be the dumbest thing in the world or the smartest thing in the world. and I’ve seen both but they’re just — repurchases by the company are just like purchases to us, they’re dumb a one price and smart at another price. And I like it when companies — I like it when we’re invested in companies where they understand that. Many companies just repurchase and repurchase, you know, it’s the thing to do, and they’re encouraged to by some shareholders and by their brokers. Repurchases can be dumb. They can be smart. At Apple, they’ve been smart.

Berkshire has never bought at stock at IPO. Here’s a simple thought model that shows why buying a new-issue stock on IPO is nothing to get excited about.

WARREN BUFFETT: Well, because I looked at it, I really don’t want to discuss Uber. And I don’t have any special feelings about it than any other coming to market. But I would say that in 54 years — well, I don’t think Berkshire’s ever going to – I mean, the idea of saying the best place in the world I can put my money is something where all of the selling incentives are there, commissions are higher, you know, the animal spirits are rising. I mean, that’s going to be better than 1,000 other things I can buy where there is no similar selling enthusiasm and the desire to get the deal done on extra commissions. That’s the single best thing to buy on a given day. I mean, it’s –

CHARLIE MUNGER: And I can’t think of a time we’ve ever done it.

WARREN BUFFETT: Yeah.

BECKY QUICK: Ever bought an IPO.

CHARLIE MUNGER: Yeah. Never will.

When asked about a book recommendation, Buffett said The Moment of Lift: How Empowering Women Changes the World by Melinda Gates. There are some other practical observations about topics like politics and healthcare, if that floats your boat.

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Charlie Munger: Financially Independent at Age 38 in 1962

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards and may receive a commission. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

Despite the fresh packaging, we should remember that the “FIRE” concept (Financially Independent, Retire Early) is anything but a new concept. Even I can’t help being a little intrigued by the clickbait title “This Secret Trick Let This Couple Retire at 38”. Such an article could have been written about the 95-year-old Charlie Munger before he started investing alongside Warren Buffett:

The first 13 years I practiced law, my income [from practicing law] was $300,000 total. At the end of that 13 years, what did I have? A house. Two cars. And $300,000 of liquid assets. Everyone else’d have spent that slender income, not invested it shrewdly, and so forth.

I just think it was, to me, it was as natural as breathing, and of course I knew how compound interest worked! I knew when I saved $10 I was really saving $100 or $1,000 [because of the future growth of the $10], and it just took a little wait. And when I quit law practice it was because I wanted to work for myself instead of my clients, because I knew I could do better than they did.

Net worth analysis. According to his Wikipedia bio, the 95-year-old Munger graduated from law school in 1948. Let’s say he practiced law from 1949 to 1962. At the end of those 13 years, he states that he had $300,000 in liquid assets, a house, and two cars. The median value for a Los Angeles area house in 1962 was about $15,000. The median cost of a new car in 1962 was about $3,000. Adding this all up means his net worth in 1962 was about $321,000.

That was a significant amount of money in 1962. According this CPI inflation calculator, that is the equivalent of $2.7 million in 2019 dollars. In other words, the Munger household was financially independent when he was 38 years old.

Income analysis. He also states that in those 13 years as a lawyer, he made $300,000 total. For the sake of simplicity, let’s just say he earned the same income every year. That works out to $23,000 per year. This was a relatively high income – $193,000 per year in 2019 dollars. According to this source, the median family income in 1962 was $6,000 per year. That means he was earning about four times the median average household income.

Super-saver, super-investor, or a little of both? Maybe he shared this somewhere else, but I don’t know his saving rate or his investment return. He does boast of both not spending all that “slender” income and also about investing it “shrewdly”. We have his annual income and his final ending net worth, so you can set one and figure out the other using a compound return formula. I’m assuming everything is after-tax for simplicity again.

  • Let’s say he was a super-saver with a 50% saving rate. That means he saved $11,500 every year and invested it for 13 years. That would work out to an 10.5% annual compounded rate of return.
  • Let’s say he was a super-investor with a 20% annual compounded rate of return. That would work out to an annual savings of $5,500 per year, or a 24% savings rate.

I found that the annualized return of the S&P 500 index from January 1949 to January 1962 was about 18% when you include dividends (source). Thus, my guess is that he was somewhere between these two markers: 50% savings rate/10.5% annual investment return and 24% savings rate/20% annual investment return. These stats are definitely admirable and impressive, but also show that he didn’t hit the lottery or anything crazy.

Munger’s example reaffirms that if you have a relatively high income, save a high percentage of that income, AND invest that money into productive assets, your net worth will grow quite quickly.

A criticism of financial independence seekers is that it is pitched to “everyone” but only works for the rich. It is absolutely true that it is the easiest for high-income earners. How could it be any other way? At the same time, there are many households that earn high incomes that spend 95%+ of it every year. If these folks realize they have financial independence within their grasp, and then change their behavior to achieve it, I still view that as a positive thing. It’s always hard to spend less than the people you hang around with.

In our case, we both eventually earned six-figures, but not the entire time. When we earned a combined $60,000 a year, we lived on $30,000. When we earned a combined $100,000, we lived on $50,000 per year. When we earned $200,000, we lived on under $100,000. Would we have been able to maintain the 50% savings rate on a $60,000 income for 15 years? I’ll never know. I know it would have been much more difficult, and I’m glad we didn’t have to try. I’m also glad we started when we were young and without kids.

Managing expenses (frugality) alone will not get you there, but I still believe it is an important factor once you get your income to a certain level. I would argue that a household earning $100,000 and spending $50,000 per year is much better off in the long run than a household earning $150,000 and spending $125,000 or even $100,000 per year. Now, if someone is making minimum wage, it will be hard to have a lot left over to invest. Your efforts would be best focused on the income side of the equation.

Bottom line. Charlie Munger was born in 1924 and reached financial independence at age 38 from his earnings as a lawyer (before he became partners with Warren Buffet). While he is now best known as a billionaire investor, he took a familiar path to financial independence: solid 9-5 income, consistently high saving rate, and prudent investment of the difference. The same formula he started using in 1949 remains available 70 years later to someone starting in 2019.

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Charlie Munger 2019 Wall Street Journal Interview Transcript

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards and may receive a commission. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

The best thing I read today was definitely Charlie Munger, Unplugged, the full transcript of a 6-hour interview with Charlie Munger about his philosophies on business, investing and life, as conducted by Jason Zweig and Nicole Friedman of the Wall Street Journal. (I’ve tried to share a link via my paid WSJ subscription, but there may still be a paywall. Articles like this definitely help make me feel that my subscription is worth the money.)

I enjoy Munger’s direct and open take on many things. Honestly, I think reading his advice helps make me a better person, not investor. Also, he’s a 95-year-old billionaire – can you imagine anyone more incentivized to do exactly what they want with their remaining time? The article is rather long, so while I recommend reading the entire thing for yourself, here are some selected highlights.

How do you spend your day?

Well, I have always sought, since I quit law practice [in 1965], to have a lot of time in every day to read and think. And talk to a few friends about this or that. And I don’t do that because it will make me more money, I do it because it’s my nature. And I had to use that nature because I needed a living for a big family. But it’s just my nature.

Warren’s the same way. We both hate too many appointments in one day. We both have long segments [of free time]. The lives we live would look to anybody else like academics.

Will Berkshire Hathaway beat the S&P 500 in the future?

I think it we’ll beat it a little. But that’s not bad with a market cap of over $600 billion. That’s difficult! Most people won’t do as well as we will. I talked to Warren today. We’re buying one little company…as we sit here. And we haven’t bought anything big for a long, long time. It’s really getting hard for us. These other people will pay a lot more.

Q: If there were one company other than Berkshire you would recommend for the next decade or two, what would it be?

In America it would be Costco. Other than in America, buy the strongest companies in China.

Q: A lot of young Americans seem to be turning against capitalism, on the grounds that income inequality is out of control. What can be done about that?

The world as I know it, from personal experience and from reading, has always concentrated power.

Without the inequality, you don’t get modern private-ownership capitalism, which is what produces the plenty. And so even your kids, if they tried to make an equal civilization, and farm the land that way, would end up with not enough to eat. You’ve got to have individual ownership of a lot of things, with somebody getting and gaining for himself, because otherwise you don’t get the plenty. And the only option you have is to make the social safety net big or small, and you can make it stupid or [you can make it] wise[r], the richer you are.

In other words, the better your inequality-producing civilization that produces the plenty is, the more you’ve got to put into the social safety net. Now if you get a place like Denmark or Sweden or something, a lot of these modern students would like it better, free education, free medical care and so forth. And if you have to bet, the United States will be way more like Canada pretty soon, in terms of more free education at the university level and more Medicare and some kind of medicine for all. And that we can afford without ruining the productivity of the civilization.

…. We can afford [a higher minimum wage]. If you make it too high it will be counterproductive but yes, a prosperous civilization can have a higher minimum wage the way it can have a social safety net. Don’t make it too great and you can afford it.

I have more Democratic children than I have Republican children. I’ve got both.

On Jack Bogle.

You’ve got to remember, Bogle happened to be right about something important. But that [was] his only advantage. He was a monomaniac. And so that’s an odd characteristic. I would not pick Bogle to have the run of the place. He just was very right on one very important subject [the importance of minimizing investment costs], and therefore he’s been very useful.

On payday lenders, the lottery, and legalized gambling.

These goddamn payday lenders, they’re the scum of the earth. Everybody’s working on it but not hard enough. That’s a group that ought to be forced out of existence.

And the way we abuse the poor with the lottery! Think of how contrary it is to the interests of the poor to play the lottery. It’s like a tax on ignorance. They’re vulnerable. I don’t think we should be doing that, but of course everything like it I’m voting against. I always vote against legalized gambling. I just lose all the time. I feel like I’m pushing on a straw and somebody is just pushing back harder every time.

On selfishness and the value of a good reputation.

Another thing that really helps is people, a lot of people think that real selfishness, very extreme, is what works. But it doesn’t.

If you have a reputation for being decent to work with and unselfish, you make more money, not less. And at Berkshire, I can’t tell you the things that we have bought where the people wanted a good home for something that they love and they trusted us to take care of their loved one. That sounds ridiculous to talk about, in that language about businesses. But why wouldn’t you love something you spent your life building up? It’s very natural to love it – it’s your own creation. Of course you want it in good hands.

On his ability to delay gratification (aka “frugal cred”).

The first 13 years I practiced law, my income [from practicing law] was $300,000 total. At the end of that 13 years, what did I have? A house. Two cars. And $300,000 of liquid assets. Everyone else’d have spent that slender income, not invested it shrewdly, and so forth.

I just think it was, to me, it was as natural as breathing, and of course I knew how compound interest worked! I knew when I saved $10 I was really saving $100 or $1,000 [because of the future growth of the $10], and it just took a little wait. And when I quit law practice it was because I wanted to work for myself instead of my clients, because I knew I could do better than they did.

On opportunities.

You only get a few opportunities, and you have to grab them aggressively when they come because even in the most favored life, they’re really rare. My mother listened to all this stuff, and it meant nothing to her. She was never interested in money or worldly success, but she just appropriated the stories to me because they’d amused her.

I always feel that the opportunities are rare. I only get a few and then I have to seize them aggressively.

This last quote is definitely something that I strongly associate with Munger. Even in this interview, you notice he says it twice. It’s something to keep in the back of your mind, whether is applies to an investing opportunity, a career opportunity, or even finding a life partner. Work hard, do your analysis, but in the end you’ll have to take action to get the big results.

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Charlie Munger CNBC Interview 2019 Full Video, Full Transcript, and Notes

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards and may receive a commission. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

Here’s another Charles T. Munger interview (last one for a while, I promise!) for those of you that share a peculiar fondness for hearing someone encourage rationality, patience, and self-discipline. After the Daily Journal 2019 annual meeting, Munger did a 30-minute interview with Becky Quick of CNBC. (See similar Buffett CNBC interview.) I guess they forgave Munger’s jabs at Jim Cramer, as they posted the entire interview online along with a full transcript.

I’m going to be honest, I didn’t get as many gems out of this interview as some of his other stuff. Here was my favorite part.

The secrets to life can also fit on an index card? As Munger noted earlier, “If it’s trite, it’s right”. We’ve seen personal finance advice fit on an index card, so why not life advice as well?

BECKY QUICK: Charlie, so many of the people who come here come because they’re looking for advice not on business or investments as much as they’re looking for just advice on life. There were a lot of questions today, people trying to figure out what the secret to life is, to a long and happy life. And– and I just wonder, if you were–

CHARLIE MUNGER: Now that is easy, because it’s so simple.

BECKY QUICK: What is it?

CHARLIE MUNGER: You don’t have a lot of envy, you don’t have a lot of resentment, you don’t overspend your income, you stay cheerful in spite of your troubles. You deal with reliable people and you do what you’re supposed to do. And all these simple rules work so well to make your life better. And they’re so trite.

BECKY QUICK: How old were you when you figured this out?

CHARLIE MUNGER: About seven. I could tell that some of my older people were a little bonkers. I’ve always been able to recognize that other people were a little bonkers. And it helped me because there’s so much irrationality in the world. And I’ve been thinking about it for a long time, its causes and its preventions, and so forth, that I– sure it’s helped me.

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Charlie Munger Daily Journal Annual Meeting 2019 Full Video, Full Transcript, and Notes

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards and may receive a commission. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

If you like hearing Warren Buffett and Charlie Munger talk at the Berkshire Hathaway (BRK) annual meeting, you should also watch or listen to Charlie Munger at the Daily Journal (DJCO) annual meeting. DJCO is his personal pet project, and I feel like he lets loose more at this meeting than at BRK. For 2019, CNBC broadcast the entire 2-hour Q&A session online. Latticework Investing generously shares a full transcript as well. I choose to listen to this over any finance-related podcast.

Here are my personal notes and highlights:

Think for yourself.

[…] my definition of being properly educated is being right when the professor is wrong. Anybody can spit back what the professor tells you. The trick is to know when he’s right and when he’s wrong. That’s the properly educated person.

Index funds have become more and more successful for a simple reason. The evidence is getting stronger over time that they provide better long-term performance due to lower costs and better tax-effeciency.

Another issue of course that’s happened in the world of stock picking, where all this money and effort goes into trying to be rational, is that we’ve had a really horrible thing happen to the investment counseling class. And that is these index funds have come along and they basically beat everybody. And not only that, the amount by which they beat everybody is roughly the amount of cost of running the operation and making the changes in investments. So you have a whole profession that is basically being paid for accomplishing practically nothing. This is very peculiar. This is not the case with bowel surgery or even the criminal defense bar in the law or something. They have a whole profession where the chosen activity they’ve selected they can’t do anything.

[…] I don’t have any solution for this problem. I do think that index investing, if everybody did it won’t work. But for another considerable period, index investing is going to work better than active stock picking where you try and know a lot.

If you are trying to beat the indexes, you need LESS diversification, not more. Wait for a few fat pitches and don’t hesitate to swing. This isn’t as widely known, but Munger’s personal portfolio is roughly 1/3rd Berkshire Hathaway stock, 1/3rd Costco stock, and 1/3rd invested in Li Lu, an investment manager based in China.

But the whole trick of the game is to have a few times when you know that something is better than average and to invest only where you have that extra knowledge. And then if you get just a few opportunities that’s enough. What the hell do you care if you own three securities and J.P. Morgan Chase owns a hundred? What’s wrong with owning a few securities?

[…] So the whole idea of diversification when you’re looking for excellence, is totally ridiculous. It doesn’t work. It gives you an impossible task.

Now at a place like Berkshire Hathaway or even the Daily Journal, we’ve done better than average. And now there’s a question, why has that happened? Why has that happened? And the answer is pretty simple. We tried to do less. We never had the illusion we could just hire a bunch of bright young people and they would know more than anybody about canned soup and aerospace and utilities and so on and so on and so on. We never had that dream. We never thought we could get really useful information on all subjects like Jim Cramer pretends to have. (laughter) We always realized that if we worked very hard we can find a few things where we were right. And that a few things were enough. And that that was a reasonable expectation.

Avoid any pitches that promise easy money from stock-picking. Penny stocks, day-trading, trends, charts. All of them.

Then if you take the modern world where people are trying to teach you how to come in and trade actively in stocks. Well I regard that as roughly equivalent to trying to induce a bunch of young people to start off on heroin. It is really stupid. And when you’re already rich to make your money by encouraging people to get rich by trading? And then there are people on the TV, another wonderful place, and they say, “I have this book that will teach you how to make 300 percent a year. All you have to do is pay for shipping and I will mail it to you!” (laughter) How likely is it that a person who suddenly found a way to make 300 percent a year would be trying to sell books on the internet to you! (laughter) It’s ridiculous.

Have modest expectations in stock market returns.

Well, my advice for a seeker of compound interest that works ideally is to reduce your expectations. Because I think it’s going to be tougher for a while. And it helps to have realistic expectations. Makes you less crazy. I think that…you know they say that common stocks from the aftermath of the Great Depression, which was the worst in the English speaking world in hundreds of years, to the present time may be an index that’s produced 10 percent. Well that’s pre-inflation. After inflation it may be 7 percent or something. And the difference between 7 and 10 in terms of its consequences are just hugely dramatic over that long period of time. And if that’s 7 in real terms, but achieved starting at a perfect period and through the greatest boom in history, starting now it could well be 3 percent or 2 percent in real terms. It’s not unthinkable you’d have 5 percent returns and 3 percent inflation or some ghastly consequences like that. The ideal way to cope with that is to say, “If that happens, I can have a happy life.”

Be very careful about who you chose to partner up with in your life.

We all know people that are out married, I mean their spouses are so much better. Think of what a good decision that was for them. And what a lucky decision. Way more important than money. A lot of them did it when they were young, they just stumbled into it. Now you don’t have to stumble into it, you can be very careful. A lot of people are wearing signs, “Danger. Danger. Do not touch.” And people just charged right ahead. (laughter) That’s a mistake. Well you can laugh but it’s still a horrible mistake.

On becoming rich.

This business of controlling the costs and living simply, that was the secret. Warren and I had tiny little bits of money. We always underspent our incomes and invested. And if you live long enough you end up rich. It’s not very complicated.

“If it’s trite it’s right.”

I think personal discipline, personal morality, good colleagues, good ideas, all the simple stuff. I’d say, if you want to carry one message from Charlie Munger it’s this, “If it’s trite it’s right.” All those old virtues, they all work.

My general idea is there’s no point in fretting too much about what you can’t fix. It’s a big mistake to fill yourself with resentments and hatreds and so on. It’s such a simple idea but so many people ruin their lives unnecessarily. Envy is such a stupid thing to have because you can’t possibly have any fun with that particular sin. Who in the hell ever had any fun in envy? What good could envy possibly do for you? And somebody is always going to be doing better than you are. It’s really stupid. So my system at life is to figure out what’s really stupid and avoid it. It doesn’t make me popular, but it prevents a lot of trouble.

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.