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Charlie Munger is now 99 years old and still answering blind questions on the fly at the 2023 Daily Journal Annual Shareholder Meeting. CNBC has posted the full 2+ hour interview with Becky Quick on YouTube. You’ll miss out on his snarky tone, but you may prefer to read the transcript, kindly provided at Steady Compounding (looks to be computer-generated… psst – the name is Rick Guerin!).

Munger remains refreshing in that he doesn’t filter everything into bland nothingness. He’s not afraid to offend with his opinions. I’ve included a few of my personal highlights below.

Only 5% of money managers have the skill required to consistently beat the index averages after costs.

And if you want an example of how denial is affecting things, take the world of investment management. How many managers are going to beat the indexes? All costs considered, I would say maybe 5% could consistently meet the averages.

Everybody else is living in the state of extreme denial. They’re used to charging big fees and so forth for stuff that isn’t doing their clients any good. It’s a deep moral depravity. If some widow comes to you with $500,000 and you charge her 1 point a year for, and you could put her in the indexes, but you need the 1 point. And so people just charge somewhat a considerable fee for worthless advice. And the whole profession is full of that kind of denial. It’s everywhere.

Crypto is (still) crap.

…when you’re dealing with something as awful as crypto sh*t, it’s just unspeakable. It’s an absolute horror. And I’m ashamed of my country that so many people believe in this kind of crap and the government allows it to exist is totally, absolutely crazy, stupid gambling with enormous house odds for the people on the other side.

And they cheat — in addition to cheating and like betting, it’s just crazy. So that is something. There’s only one correct answer for intelligent people there, just totally avoid it and avoid all the people that are promoting it.

Charles Munger is a billionaire, but rarely ever gambles in a casino or at a sports book. In terms of percent of net worth, Munger has bet the equivalent of the average person betting less than 5 bucks in their entire life.

Q: How do you feel about the gambling that took place at the Super Bowl and surrounding that and the legalized gambling taking place in this country at this point?

A: Well, it’s not as bad as crypto s***. I don’t think there’s much harm in betting a modest amount you can afford on a Super Bowl game. That strikes me as a pretty — thing if you do it with a friend and not with a bookie. So I don’t have the same feeling — I obviously don’t think you should have a gambling impulse around betting against odds. If you take all the money that I have bet against odds in my whole life, I don’t think it’s more than a few thousand dollars.

I’m all in favor betting with the odds.

Big picture thoughts on the future long-term performance of Berkshire and stocks in general:

Everybody that bought Berkshire and held it for 20 years has done well. I think that will be true for those who buy at the current price. I don’t think it will be as good in the future as it was in the past, but it will be okay considering how poorly everything else is going to do. Because the valuations start higher now and because government is so hostile to business.

I would say it will fluctuate naturally between administrations and so on. But I think basically, the culture of the world will become more and more anti-business in the big democracies. And I think taxes will go up, not down. So I think the investment world is going to get harder for everybody. And — but it’s been almost too easy in the past for the investment class. It’s natural that it would have a period of getting harder. I don’t worry about it much because I’m going to be dead.

The Daily Journal’s employee 401(k) plan has only one investment option: index funds.

…look at the Daily Journal Corporation. We just put in a 401(k) plan. What are the investment options for the people at work? Zero. It’s all index funds.

What percentage of American 401(k)s have our plan, index funds required? About zero. Am I right or am I wrong? Of course, I’m right. It’s a logical thing to do.

If you can afford to self-insure, you should do so. Insurance protects you against catastrophe, but there many extra costs built into the premiums (fraud, commissions, etc). Medical insurance is an exception because the insurance-negotiated cost is often much lower than the direct-consumer-pay cost.

In my own life, I’m a big self-insured and so is Warren. It’s ridiculous for me to carry fire insurance on my house because I could easily rebuild a house if burned down. So why would I want to bother fooling around with the claims process and all kinds of things.

So if insurance — you should insure against things you can’t afford to pay for yourself. But if you can afford to take the bumps, so unusual expense coming along doesn’t really hurt you that much. Why would you want to fool around with some insurance company. If your house burned down, I would just write a check and rebuild it. And all intelligent people do that way. I don’t say all, but — maybe I should say, all intelligent people should do it my way.

There should be way more self-insurance in life. There’s a lot of waste. You’re paying when you buy insurance for the other fellows frauds, and there’s a lot of fraud in life. And you can afford to take the risk yourself and not fool around with claims and this and that and commissions and time. Of course, you self insure, it’s simpler and so forth.

Think of what I’ve saved in my life. I narrowed it. I don’t care. I never carried — never. I think once — but with one exception, I never carried collision insurance on a car. And once I got rich, I stopped carrying fire insurance on houses. I just self insure.

Past years:

• 2022 Daily Journal Shareholder meeting notes
• 2021 Daily Journal Shareholder meeting notes
• 2020 Daily Journal Shareholder meeting notes
• 2019 Daily Journal Shareholder meeting notes

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:

• 2021 Daily Journal Shareholder meeting notes
• 2020 Daily Journal Shareholder meeting notes
• 2019 Daily Journal Shareholder meeting notes

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.

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.

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.