Berkshire Hathaway's annual meeting was this past weekend and was filled with wit and wisdom from investing legends. In a separate interview, CNBC's Becky Quick sat down and talked with Warren Buffett, Charlie Munger, and Bill Gates.
Here's some takeaways followed by the full 2-hour video below. The first hour was just Buffett by himself and then Munger joined in, and finally Gates joins at around 1hr 20.
Buffett, Munger & Gates Interview 2019
- Buffett says continued trade war would be bad for the whole world
- On Kraft Heinz (KHC): "The company has my confidence." If he just owned Heinz, he says he'd be doing better but they paid too much for Kraft. On overpaying: "Time usually works it out, but capital could have been better deployed."
- On the Occidental Petroleum (OXY) deal he's backing: They've committed the $10 billion 100% and they don't have control over what OXY does with the money or the terms of the deal, etc. While the 8% preferred is a sweet deal for him, he noted that, "It's a bet on oil prices over the long-term more than anything else. It's also a bet on the fact that the Permian Basin is what it's cracked up to be." He and Munger feel good about doing the financing of the deal and they could have done $20bn instead of the $10bn if needed.
- He likes when Apple (AAPL) goes down, "Because they're repurchasing shares and when they repurchase shares our interest goes up and we don't lay out a dime; I love it." He's "wildly" in favor of the company's $75 billion buyback.
- "I will always react well to declining prices."
- He thinks China and the US will be the two big superpowers over the next 100 years and that the two won't always get along and there will be disagreements over various things.
- On Wells Fargo (WFC): Munger said: "I think it's a fine company; so they made one bad decision about an incentive plan. I regard it as an honest mistake not as some deep moral failure ... they just had a blind spot."
- Buffett said: "Charlie beats this into me all the time: As soon as you find a mistake, do something about it. And sometimes that's unpleasant. But I've gotta do it."
- Bill Gates on China/US: "It's the most important relationship in the world."
- Gates is also concerned about intellectual cooperation being slowed down between the two countries and things like artificial intelligence
- "Anger drives out reason." ~ Munger
" I think people should have modest expectations" about stock returns going forward, Gates says. He thinks valuations have gotten high and he's amazed at that, but he hasn't made many changes to his Foundation's equity portfolio.
- "I think stocks are ridiculously cheap... if you believe that 30 year bonds at 3% makes sense." ~ Buffett
- Buffett on what he's been reading lately: Melinda Gates' book The Moment of Lift
Video of Interview
Embedded below is the 2-hour interview with Warren Buffett, Charlie Munger, and Bill Gates:
Wednesday, May 8, 2019
Warren Buffett, Charlie Munger & Bill Gates Interview
Monday, September 24, 2018
Charlie Munger Interview: China's Weekly on Stocks
Charlie Munger of Berkshire Hathaway and Li Lu of Himalaya Capital were recently interviewed a few months ago with Chinese media: Weekly on Stocks. If you're unfamiliar, Lu is Munger's investing partner in China, where he has been investing for 15 years. We've also posted Li Lu's interview up in a separate post.
Here are a few excerpts from the interview, with full videos below.
Charlie Munger Interview With Weekly on Stocks
Munger's opinion on Chinese securities: "For investors, having more value means buying the best company in China or buying the best company in the United States. Comparing the two securities markets in China and the United States, I think the current price of the best companies in China is cheaper than the best companies in the United States. Therefore, Chinese people do not have to go abroad to find good investments, and there are many opportunities in their own countries. There are some very good companies in China and the prices are very reasonable."
When asked if he can name specifics: "Hey, we can't tell you (laughs). In short, the Chinese market is increasingly open to foreign investors, with more and more participation from abroad, and the market is becoming healthier. These are all very good and will eventually drive up market prices."
On whether Berkshire's circle of competence is expanding with recent tech investments: "At present, it is difficult for Berkshire to find good and low-priced investment products in the US market. We have hardly found anything suitable. All in all, you can also say that Apple is an electronic consumer goods company. Warren said that we may know more about consumer electronics than computer science, which is why Berkshire bought Apple stock. Also emphasize another reason why we do this. If you want to be a good investor, you must keep learning. In the process of continuous learning, the situation is changing, the reality is changing, our investment will change, and we will not be self-sufficient."
Will they make more tech investments going forward? "We don't know everything, we don't know how to understand, we only do what we know. The only company we have announced that has already invested is Apple. I think Warren said that we know Apple better than other companies. We can't know everything, so we invest in investing in assets that we can find to provide good value. Take a look at our investment in airlines. In the past few decades, we have been joking with investment airlines. Warren has a lot of jokes in this area. But suddenly, we bought stocks of each airline, because the airline's stock price has fallen sharply, it is so cheap, very potential. The conditions have changed and we are all willing to own airline stocks. Like airlines, Warren and I don't like railroad stocks for decades. After a few decades, we began to buy shares in the railway, because the world has changed and the technology has changed. In the end, there are only four large railway companies. Finally, we bought the largest and most complete railway company among the four. We changed because the world has changed. This is our investment logic. When the reality changes, shouldn't your thoughts change?"
Embedded below are the videos:
Charlie Munger Interview Videos
Video 1
Video 2
Video 3
Be sure to also check out the separate Li Lu interview we posted here.
The transcript of Munger's interview (in Chinese) is here. H/T to @TaoValue for posting the videos.
Monday, May 7, 2018
Warren Buffett, Charlie Munger & Bill Gates Interview
Today on CNBC, Berkshire Hathaway's Warren Buffett was interviewed by Becky Quick and talked about a range of topics. Charlie Munger and Bill Gates later joined the conversation. Here's some takeaways and quotes:
Warren Buffett's Thoughts
On the market: Stocks aren't in a bubble now. Though said some private deal valuations are getting high and it's harder to find bargains these days.
On the economy: Thinks the economy has picked up steam. "Yeah, I see a lot of numbers (from all BRK's businesses). Business is generally pretty strong." He cited railcar loadings, etc. Also notes you've seen some inflation.
Says he thinks it's hard for unemployment to really go much lower as they have a ton of jobs available. "If a resource is scarce, prices go up." Says certain job lines are much harder to fill these days (construction cited specifically).
On potential trade wars: "I don't think we will have trade wars of significance." He thinks there will be trade movements though. Says a trade war with China would be negative for all involved as they have a common interest.
On Amazon / Jeff Bezos: Still laments not buying it in the past, says what Bezos has done is incredible.
On moats: Cited iPhones, Costco, and Elmer's glue as examples
On Apple: Says he doesn't have to do anything because the company will buyback so many shares, so his ownership stake will go up naturally. He recently bought a ton more AAPL shares. Said he currently owns around 5% of the company but he'd like to own 100% of it. The consumer behavior was the main driver behind his ownership, as the device has woven itself into consumer's daily lives and minds, and it's a very useful product.
On owning banks: Has owned one in the past and loves the banking business but doesn't want to now because of the bank holding co act. Says Wells Fargo (WFC) was slow to act in addressing bad actions but still has a fundamentally solid business.
On bitcoin: Compared it to the tulip bubble years ago. Says it's a non-productive asset and just sits there.
On autonomous vehicles: 'Net it will be bad for the car insurance industry if autonomous vehicles become the norm.' It will be very hard to pick winners in 5 years.
On reading he recommends, Buffett again pointed to Chapter 8 of The Intelligent Investor. But this time around he also recommended Chapter 4 of Steven Pinker's new book, Enlightenment Now.
Ends his interview by reiterating: "It's very important in life to associate yourself with people that are better than you."
Charlie Munger's Thoughts
On the biggest thing he and Buffett have disagreed on: Munger wanted to buy the French stake in Costco. Buffett didn't and says he should have. "Charlie really wants to wait for the fat pitch."
Munger said, "There's a million ways to be irrational." And while Berkshire makes mistakes, they make them far less frequently than others and he thinks that's their main advantage.
Munger noted: "The Munger family is invested in China substantially. Since about 14 years ago, and I did it because I respected the man that was going to do the investing (Li Lu) and it looked undervalued and the companies looked very strong." Today, he says the best companies in China are still cheaper than the best companies in the US. "I don't think it'd be all that hard for people to find 4 or 5 companies in China to invest in."
He also said he wished Berkshire owned more of Apple. He likes that it's reasonably priced and strong, a 'very desireable combination' as well as 'very intelligent management.'
On bitcoin, Munger called it worthless artificial gold. "It's a scumball activity."
On potential trade wars with China: "It would be insane for them not to work together."
On what he's been reading recently: A book by a Chinese economist, though he didn't mention the name specifically.
Bill Gates' Thoughts
He said
that "T-bills set the rules" and he pointed out that since the 10-year
yields 3%, you've got that hurdle to get over by taking more risk. He
says asset class returns will be lower over the next 10 years.
On bitcoin: There's some really good technology as far as sharing databases etc, but the coin itself is a speculative thing. He received some for his birthday a while back but sold it, so doesn't own it now. Called it a greater fool investment, and said he'd short it if there was an easy way to do so.
Gates says there are tech stocks that are undervalued, but you're going
to get very high variance as the winner in some markets gets a high
share of the profit pool.
He owns a ton of Microsoft (MSFT) obviously,
but revealed he has a 'fantasy stock portfolio' of companies he thinks
will do well but doesn't own. "The top tech companies have a very
strong share of the profit pool right now." He obviously declined to
reveal names.
Gates also echoed Munger's China sentiment that it looked
attractive.
On tech and data privacy, thinks regulation is inevitable. But the big companies will handle that.
On Tesla (TSLA): thinks they have a great product but a very high valuation and a lot of competition coming. Says autonomous and electric vehicles are coming simultaneously and thinks 15 years from now things will be very different.
On what he's been reading recently: Hans Rosling's book Factfulness. Says it helps you think about a lot of different things in the world.
Tuesday, February 27, 2018
Charlie Munger Daily Journal Meeting 2018 Summary, Transcript, Audio Recording
Charlie Munger recently concluded his Daily Journal (DJCO) meeting for 2018. We've pulled select quotes from a full transcript and an audio recording, thanks to LatticeWorkInvesting's great effort. Here's select quotes from Munger with links to the other options below.
Summary of Charlie Munger's Daily Journal 2018 Meeting
On the banking industry: "Well, banking is a very peculiar business. The temptations that come to a banking CEO are way…the temptations to do something stupid are way greater in banking than they are in most businesses. Therefore it’s a dangerous place to invest because there are a lot of way in banking to make the near term future look good by taking risks you really shouldn’t take for the sake of the long-term future. And so banking is a dangerous place to invest and there are a few exceptions. And Berkshire has tried to (pick) the exceptions as best it could."
On incentive fees: "Suppose you’re charging say 1 and 20, one percent off the top and twenty percent of profits…or even worse, two percent off the top and twenty percent of profits…and you’ve got $30 billion or so under management and an army of young ambitious people, all of whom want to get unreasonably rich very fast. What are your chances of doing better for your clients? Well the average entity that charges those fees, the chances the clients will do well is pretty poor. That’s the reason Warren won that bet against the hedge funds. Where he bet on the S&P averages and they bet on carefully selected bunch of geniuses charging very high fees. And of course the high fees will just kill you. It’s so hard in a competitive world to get big advantages just buying securities, particularly when you’re doing it by the billion, and then you add the burden of very high fees and think that by working hard and reading a lot of sell-side research and so forth, that you’re going to do well. It’s delusional. It’s not good to face the world in a delusional way. And I don’t think, when Berkshire came up, we had an easier world than you people are facing this point forward, and I don’t think you’re going to get the kind of results we got by just doing what we did. "
On the best fee structure for investment funds: He said it's the original Buffett Partnership structure and went on to say: "Yeah, Buffett copied that from Graham. And Mohnish Pabrai is probably here…is Mohnish here? Stand up and wave to them Mohnish. This man uses the Buffett formula, and always has, he just copied it. And Mohnish has just completed 10 years…where he was making up for a high water-mark. So he took nothing off the top at all for 10 years, he sucked his living out of his own capital for ten long years, because that’s what a good money manager should be cheerfully willing to do. But there aren’t many Mohnish’s. Everybody else wants to scrape it off the top in gobs. And it’s a wrong system. Why shouldn’t a man who has to manage your money whose 40 years of age be already rich? Why would you want to give your money to somebody who hasn’t accumulated anything by the time he was 40. If he has some money, why should he on the downside suffer right along with you the investor? I’m not talking about the employees under the top manager. But I like the Buffett formula. Here he is, he’s had these huge successes. Huge in Buffett’s career. But who is copying the Buffett formula? Well we got Mohnish and maybe there are a few others, probably in the room. But everybody wants to scrape it off the top, because that’s what everybody really needs, is a check every month. That’s what is comforting to human nature. And of course half the population, that’s all they have, they’re living pay check to pay check. The Buffett formula was that he took 25% of the profits over 6% per annum with a high water mark. So if the investor didn’t get 6%, Buffett would get nothing. And that’s Mohnish’s system. And I like that system, but it’s like many things that I like and I think should spread, we get like almost no successes spreading that system. It’s too hard. The people who are capable of attracting money on more lenient terms, it just seems too hard. If it were easier, I think there would be more copying of the Buffett system."
On investor Li Lu: "What was unusual about Li Lu. Li Lu is one of the most successful investors. Imagine him, he just popped out of somebody’s womb and he just assaulted life the best he could and he ended up pretty good at it. But he was very good at a lot. He’s ferociously smart. It really helps to be intelligent. He’s very energetic. That also helps. And he has a good temperament. And he’s very aggressive, and he’s willing to patiently wait and then aggressively pounce. A very desirable temperament to have. And if the reverse comes, he takes it well. Also a good quality to have. So it’s not very hard to figure out what works. But there aren’t that many Li Lu’s. In my life, I’ve given money to one outside manager, and that’s Li Lu. No others in my whole life. And I have no feelings that it would be easy to find a second. It’s not that there aren’t others out there, but they’re hard to find. It doesn’t help you if a stock is a wonderful thing to buy if you can’t figure it out."
On his view of big consumer brand moats in the age of Amazon and Costco Kirkland etc: "Well the big consumer brands are still very valuable. But they had an easier time in a former era than they’re going to have in the future era. So you’re right about that. And of course Amazon I don’t know that much about except that it’s unbelievably aggressive. And the man who heads it is ferociously smart. On the other hand he’s trying to do things that are difficult. Costco I know a lot about because I’ve been a director for about 20 years and I think Costco will continue to flourish and it’s a damn miracle the way the Kirkland brand keeps getting more and more accepted. You’re right about that. So you’re right that it’s going to be harder for the big brands, but they’re still quite valuable. If you could own say, the Snicker’s Bar trademarks and so forth, it will still be a good asset 60 years from now. Now it may not be quite as good for the owner as it was in the last 60 years. But it doesn’t have to be. But in fact it makes it harder for you investors. It use to be the groupie could buy Nestle and they’d think, ‘Well, I’ll just sit on…(inaudible)’. I don’t think it’s quite that simple anymore. It’s harder. You’re right. But you know that."
On Buffett's claim in 1999 he could return 50% if he ran only $1 million & if that's achievable today: "Well I do think that a very smart man who’s patient and aggressive in combination, is willing to work hard, to root around in untraveled places like thinly traded stocks and other odd places. I do think a person with a lot of shrewdness, working with a small amount of capital, can probably earn high returns on capital even today ... Generally speaking, I would say, if you’re shrewd enough with small sums of money, I think you can compound pretty well. The minute you get bigger sums, I think it starts getting difficult. It’s way more difficult for all you people sitting here than it was for me when I was in your position. But I’m about to die and you have a lot of years ahead. You would not want to trade your position for mine"
On the airline industry and Berkshire's decision to invest: "Well, we did change our mind. For a long time, Warren and I (painted over) the railroad because there were too many of them, and it was too competitive, and union rules were too crazy. They were lousy investments for about 75 years. And then they finally…the world changed and they double decked all the trains and they got down to four big rail systems in all the United States in terms of freight and all of a sudden we liked railroads. It took about 75 years. Warren and I never looked at railroads for about 50 years, and then we bought one ... Now airlines, Warren use to joke about them. He’d say that the investing class would have done better if the Wright Brothers would never have invented flight. But given the conditions that were present when the stock was purchased and given the conditions of Berkshire Hathaway where it was drowning in money, we thought it was ok to buy a bunch of airline stocks. What more can I say? Certainly it’s ok to change your mind when the facts change. And to some extent the facts had changed, and to some extent they haven’t. It is harder to create the little competing airlines than it was. And the industry has maybe learned something. I hope it works better, but I don’t think its…I think the chances of us buying airlines and holding them for 100 years is going to work that well. I think that’s pretty low."
General quote: "Why would you risk what you have and need in order to get what you don’t have and don’t need? It really is stupid."
Here's the link to the full transcript and to a soft audio recording of the event; shout out to LatticeWork again for posting these up.
And for more from this great investor, head to Charlie Munger's recommended reading list.
Thursday, January 11, 2018
Warren Buffett Full Interview: On Succession, Stock Market, Bitcoin & More
Berkshire Hathaway's Warren Buffett was just interviewed by CNBC and here's a summary as well as the full video of the interview.
On succession: He says Berkshire will eventually be in a period of transition and Ajit Jain and Greg Abel have been named vice chairmen. While Buffett isn't ready to hang up his hat yet, eventually he will. He says he's in good health and if that changes he'd let shareholders know.
On stocks right now: "They're not richly valued relative to interest rates." He says that the tax act is also a huge factor in valuation. He didn't think that a 21% corporate tax rate was baked into the markets and he highlighted how such a huge change (from the previous 35% rate) is a huge change. On if he's buying stocks now: "Net, we're buying ... we're basically buyers over time." He has a unique position as the cash keeps rolling in for him to invest.
On the economy: The tax cut will be interesting to see how it affects things as the mix is changing. He said they've never tried to make money by predicting economic changes. They've never bought a company or a stock based on macroeconomics.
On interest rates: The low rates have buoyed the stock market significantly. It's a strange situation to have the Fed say their goal is 2% inflation and then people buy Treasuries at 1.5% so the government has basically said it doesn't pay to save.
On bitcoin/cryptocurrency: "In terms of cryptocurrencies generally I can say almost with certainty that they will come to a bad ending. When it happens or how or anything else I don't know. If I could buy long-term puts, a 5 year put on everyone one of the cryptocurrencies I'd be glad to do it." Though it sounds like he wouldn't be outright short given the volatility and potential for uncapped losses (hence using puts would outline exact capital at risk).
On Apple (AAPL): "The market is not yet saturated for iPhones." When Buffett himself finally buys an iPhone he joked it will finally be the end of the run.
On Berkshire's cash level: A little over $100 billion, almost all in Treasury bills. He normally likes to hold $20 billion so he's got a lot of excess. He said he wants to put it to work but obviously he hasn't yet.
"If you're buying something because it went up yesterday or last week, that's not a good reason for buying anything."
Charlie Munger then joined the conversation towards the end. He called both bitcoin and venture capital bubbles. On the latter, he said there's simply too much capital chasing too many deals. On the tax cuts, he thinks there's a chance they may work quite well. He also notes that stocks aren't as cheap as they were (20x vs 15x) but they're probably better than bonds.
Embedded below is the video of Warren Buffett's full hour-long interview with CNBC as well as Munger at the end:
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For more from the Oracle of Omaha, be sure to also check out a rare 1985 interview with Warren Buffett. And for more from Munger, check out last year's Q&A session he did.
Wednesday, June 28, 2017
Charlie Munger on The Psychology of Human Misjudgement
Investor Charlie Munger is well known for delivering his talk on The Psychology of Human Misjudgement at Harvard in 1995.
A company called Tiny has created an animated and abridged version of the speech that hits the highlights and puts a visual twist on the talk. So if you missed his talk or are looking for a quick refresh, this is a great synopsis.
Embedded below is the video of Charlie Munger on the Psychology of Human Misjudgement:
For more on this investor, check out Charlie Munger's recommended reading list.
Wednesday, May 10, 2017
Warren Buffett, Charlie Munger & Bill Gates Interview
Becky Quick on CNBC recently sat down with Berkshire Hathaway's Warren Buffett for a one-on-one interview and then was later joined by Charlie Munger and Bill Gates for a discussion on a myriad of topics. Here are some highlights:
Warren Buffett's Interview
- Talked about technology stocks a lot at Berkshire's annual meeting. Munger said they missed Google (GOOGL) and Buffett thought they should have had some insight into it because GEICO was a heavy user of it for advertising and paying per click. He wasn't sure if there was a first mover advantage or if increased competition was going to come along (Bing, etc) or if there were going to be technological advances he couldn't understand. "If I were forced to buy it or short it, I'd buy it. Same with Amazon."
- Apple (AAPL) shares were much more reasonable compared to future earnings so that's why he bought that tech stock. Likens the consumer nature of the product as a way for him to easily tell what's going on with customer preference. "You can't move people by price in the smartphone market remotely like you can in appliances ... the loyalty is huge." Notes that most items are price sensitive (TVs, etc) but AAPL's products don't seem to be.
- Recently highlighted how Buffett sold some IBM and he said that they've experimented with IBM's Watson at GEICO. In that space you have to worry about somebody coming in and jumping ahead with the utility. "The biggest value will come when it replaces human labor."
- Doesn't make trades on the basis of political election outcomes, doesn't look much at quarterly GDP numbers.
- Railroad figures show the economy is doing 'OK', 2% rate or so. Natural gas has gone up in price so that dictates the use of goal a lot of places, so coal shipments are up the most % wise.
- Housing market is getting better, but not 'booming.' Berkshire owns Clayton homes (manufactured homes), Acme brick, Berkshire Hathaway realty, Shaw flooring, Benjamin Moore paints.
- "Credit card volume will tell you a lot about the consumer., what their attitude is."
- "Packaged goods has generally been a very profitable business."
- Largest investor in four major airlines (UAL, DAL, AAL, LUV): Airlines have found a very high percentage of customers are price conscious. Yet most consumers are captive to whatever airline flies the route they need to take. Thinks consolidation of the industry has helped and it's no longer a 'suicidal business.'
- "I have no idea what the market will do in the short-term." They've got $95 billion sitting around and it doesn't make him happy that he's not earning anything on it. Says it's getting tougher to buy businesses these days, "Once you buy a business, the business doesn't know what you paid for it." "It's a very tough period to allocate capital."
- Says he's still cheap but not as cheap as he used to be. "You can afford to overpay a bit for a really fine business depending on your degree of certainty that it's a really fine business."
- Buffett says one thing he mentioned at the annual meeting no one really appreciated: that the five largest businesses today by market value ($2.5 trillion or more) you could run those businesses with no equity capital. That's a completely different world than the past when industrial giants needed a lot of capital.
- Didn't buy Amazon (AMZN) because of "stupidity." Says he was impressed by Bezos long ago but didn't think he could pull off what he has. On shares currently: "It's a big valuation ... I'm not buying any. These are powerful ideas with big potential and he's executed."
- One essential factor that determines what he thinks about market valuations: "The most important item over time in valuation is obviously interest rates." "Anybody that prefers bonds to stocks today is making a big mistake. It's ridiculous for somebody to buy a 30 year bond at these rates."
- "Every smart guy is tempted by leverage, and some of them are broken by it."
Then at the end of Buffett's 1-on-1 interview, Charlie Munger and Bill Gates also joined Buffett to talk about healthcare, tax reform, mistakes they've made, and other topics.
Embedded below is the video of Warren Buffett, Charlie Munger, and Bill Gates's interview on CNBC:
For more from these investors, be sure to check out Warren Buffett's recommended reading list as well as Charlie Munger's favorite books.
Wednesday, February 22, 2017
Charlie Munger Q&A After Daily Journal Meeting 2017
Last week we highlighted Charlie Munger's talk at the Daily Journal annual meeting for 2017.
Someone has also posted videos of Munger's Q&A session after the meeting. There's 22 short videos in total with a playlist at the bottom.
Here's a few takeaways:
- He always reads 3 or 4 newspapers every morning: WSJ, New York Times, Financial Times, LA Times
- Thinks a single-payer healthcare system would work a lot better
- They're doing a lot of stuff (investment wise) these days that they wouldn't have done in the 'old days.' Specifically mentioned Apple (AAPL): "It's a very odd thing for us to do. And obviously we've got no special insights as to how sticky Apple's business is."
- "I think young people should learn more and shout less."
- "The trouble with real estate is everybody else understands it. And the people you're competing with specialize in little blocks and they know more about the industry than you do."
- "I think a lot of easy money that comes into finance just ruins practically everything."
- BYD is another stock they never would have done back in his younger day. Partly he's betting on the horseman there as he's fanatical about his business.
- Amazon's Jeff "Bezos is utterly brilliant and utterly remorselessly ambitious. I would never bet against Jeff Bezos."
- Interested in the 'agricultural revolution' like gene splicing etc and says the world needs it as we have to get more out of our existing land.
- "If you haven't prepared (for the opportunity) then you won't seize it."
- "If you run a business where people have to trust your food, you just can't afford to have a scandal." re: Chipotle (CMG).
- Do you think Walmart (WMT) can turn into Sears (SHLD)? "Well, not for a long time."
- On the airlines: it's more concentrated (fewer players) and there's no real substitute for air travel. "I don't regard it as a perfect model." Considering how the world's changed, they thought it was a decent opportunity... but it's "not a cinch." "It's a sector bet, not a bet on individual airlines."
- Munger says he read Barrons for 50 years and found 1 investment opportunity... made $80 million on it. Then gave that money to Li Lu, who turned it into $400-500 million. Munger's also read Fortune for 60 years but never bought a stock due to it.
- "I don't like to gamble against up odds. If the odds are against me I just don't play."
- Nowadays it's tough in merger arbitrage as it's too crowded
- On John Malone: he's something of a genius and doesn't like to pay taxes and has been very successful and Munger's just ignored it. "I've always been troubled by the cable industry." Munger doesn't like the movie business either.
- Doesn't talk to Ted Weschler and Todd Combs a ton, but some. "They're both good in their own way and they both love Berkshire and they've both made contributions." Sounds as though the younger portfolio managers helped Charlie and Warren Buffett think differently about things like the airlines and Apple.
- "I don't want to be in the bottom 80% of the auto dealerships."
- On 'cloning' in investing: "I do it all the time." He added, "Of course it's useful." He talked about the trouble with it is if you pick investors later in their game (i.e. Berkshire Hathaway) you basically inherit their problems of being constrained by size because they have to invest a certain way. So Munger encouraged younger people to look at slightly younger investors, though admitted it's harder to pick out the right people to follow.
- On mistakes: "We learned a lot vicariously, but also learned a lot from unpleasant experiences. You'll learn."
Embedded below is the video playlist of Munger's Q&A session after the Daily Journal meeting. Just let the videos keep playing to see the next one out of the 22 total short clips:
Be sure to also check out Charlie Munger's talk at the Daily Journal annual meeting for 2017 as well.
Thursday, February 16, 2017
Charlie Munger's Talk at Daily Journal Annual Meeting 2017
Charlie Munger just held the annual meeting at the Daily Journal and shared his thoughts on a wide range of topics. It's a rare chance to hear from one of the investment world's great minds.
Here's a few quick takeaways and quotes followed by the full video below:
- He owns a chunk of Berkshire Hathaway (BRK.A/B) stock, a chunk of Costco (COST) stock, and then has money allocated to Li Lu's fund. He feels diversification is basically for the 'know nothing' investor.
- On why Berkshire bought airline stocks and Apple: "I don't think we've gone crazy. I think the answer is we're adapting to a business that's gotten much more difficult." Consolidation in airlines has finally happened similar to what happened in railroads
- Munger recommended the book A Man For All Markets about Ed Thorp. For other books he likes, be sure to check out out Charlie Munger's recommended reading list.
- "The success of Berkshire came from making two decisions a year over 50 years."
- "You don't want to believe in luck, you want to believe in odds."
- Regarding American Express (AXP): "If you think you know what's going to happen to payment systems 10 years out, you're probably under some state of delusion."
- On Wells Fargo (WFC): "(It) had a glitch... I don't think anything is fundamentally wrong."
- They bought Exxon Mobil (XOM) as basically a cash substitute
- Lots of opportunity still in China; strong and selling at cheap prices. Problem is they gamble a lot and believe in luck, but they're formidable workers.
- On India: "India is grossly defective because they took the worst aspects of our culture, allowing a bunch of idiots to scream and stop everything. They've taken the worst aspects of democracy." Says the country is still battling corruption.
- "One thing about doing something dumb is that you're unlikely to do it again."
Embedded below is the video of Charlie Munger's talk at the Daily Journal annual meeting 2017:
For more on him, check out the book Charlie Munger: The Complete Investor as well as notes from the previous Charlie Munger Daily Journal meetings.
Monday, May 16, 2016
Charlie Munger's Recommended Reading List
If you haven't noticed before, we've compiled a list of books recommended by top investors like Seth Klarman, Warren Buffett and many others on the right sidebar of the website. This time around we'll look at picks from Charlie Munger, Warren Buffett's business partner at Berkshire Hathaway.
One quote from Munger always sticks out: "In my whole life, I have
known no wise people who didn't read all the time - none, zero." With
that in mind, here's some of Charlie Munger's favorite books:
Charlie Munger's Recommended Reading List
Probably the most frequent recommendation from Munger
Has actually been recommended by both Munger & Warren Buffett
by Roger Fisher & William Ury
Learn how to negotiate and resolve conflict
Learn how to recognize and overcome your biases
You need an edge in order to reach solutions and effectively work with others
A look at the study of complex systems
Reveals his strategy at Intel
Biography of an industrialist genius, philanthropist, and enigma
Story of history's first billionaire
by Steven Levy
Recommended at the 2011 Berkshire Hathaway annual meeting
by Bryan Burrough & John Helyar
"One of the finest, most compelling accounts of what happened to corporate America and Wall Street in the 1980's" ~ New York Times Book Review
by James Wallace & Jim Erickson
The title says it all
The mind-boggling story of Enron
Biography of a media mogul
Autobiography of a Nobel laureate looking at whether what he learned as a scientist helps explain other aspects of life
A fascinating (and kind of crazy) look at the derivatives trading industry
Why some nations achieve success and others don't
This isn't a comprehensive list (after all, Munger reads a ton). But we've tried to focus on the most relevant business/finance books as a good starting point.
Books About Charlie Munger
And if you want to read up on Munger himself, there are a few great books in that regard as well. Be sure to check out:
Poor Charlie's Almanack Edited by Peter Kaufman
Seeking Wisdom: From Darwin to Munger by Peter Bevelin
Charlie Munger: The Complete Investor by Tren Griffin
Damn Right: Behind the Scenes with Berkshire Hathaway Billionaire Charlie Munger
by Janet Lowe
And if you still want even more reading material, head to Seth Klarman's favorite books and Warren Buffett's recommended reading list. Or, simply check out the right sidebar on the website for picks from other top investors.
Tuesday, September 29, 2015
Charlie Munger: The Complete Investor By Tren Griffin ~ Book Review
Tren Griffin recently released a new book entitled Charlie Munger: The Complete Investor. In it, he outlines Munger's investing strategy and timeless lessons by extracting pearls of wisdom from speeches, interviews, writings, and shareholder letters.
If you're unfamiliar with Munger, he is the vice chairman of Berkshire Hathaway. While Warren Buffett undoubtedly is the face of the organization, Munger has been an integral part of Berkshire's success.
After all, Buffett said that, "I have been shaped tremendously by Charlie" and Munger is largely credited with tweaking Buffett's value investing approach to focus more on quality by buying great businesses at a good price rather than merely good businesses at a great price.
While Munger is already studied and to an extent idolized by a fervent subsection of investors, the argument can be made that he actually is not as widely known or as reviewed as he should be, thanks in part to Buffett's blinding spotlight. Griffin helps to rectify that with a definitive book on Charlie Munger.
Griffin, who works for Microsoft, is the author of the blog 25iq (which we've linked to in our "What We're Reading" posts numerous times.) There, he seeks to extract wisdom from top investors, business leaders, and entrepreneurs with his signature series of "A Dozen Things I've Learned From XYZ Investor."
Munger is well known for his 'mental models' and this book superbly focuses on this critical portion of Munger's approach. By combining aspects of business with psychology, economics, ethics and more, Munger seeks to keep his emotions in check. For Munger, being a successful investor is in part achieved simply by avoiding "the common pitfalls of bad judgment."
This book will undoubtedly and rightly be compared to Poor Charlie's Almanack, the compilation by Peter Kaufman as well as another book, Damn Right: Behind the Scenes with Berkshire Hathaway Billionaire Charlie Munger by Janet Lowe.
All three books cover similar topics and content. Each book is a reflection of its curator and this is where Griffin excels by focusing on the most important concepts related to Munger, with chapters on Munger's "Worldly Wisdom" as well as "The Psychology of Human Misjudgment." The book also contains 23 pages on the important concept of 'moats' in investing.
Knowledge carnivores and avid readers will also find the
bibliography at the end of the book a savory treat. After all, the 17-page bibliography highlights sources Griffin used to amass this collection of wisdom.
The main difference between the three major books on Munger is price. Poor Charlie seems to retail for over $45 these days, and Damn Right typically goes for around $22. True value investors might seek out Griffin's version, which seems to be the cheapest at $18 for hardcover and only $13.49 for the Kindle version.
Griffin's book will be most beneficial for investors who are always looking
to improve their craft, especially in the realm of psychology, behavior,
and other qualitative aspects of investing. Investors new to Munger
entirely will also find this book extremely useful, allowing them to play
catch up on decades of wisdom in an easy 182-page read.
Investors who have already scoured every word ever written or spoken by Munger will find this book to be redundant, as it doesn't contain much new information. The book also isn't really a biography on Munger's life if that's what you're looking for.
However, one of the book's main advantages is the way the information is presented and organized. Instead of having to scour hundreds of resources on Munger to find specific wisdom, this book concisely aggregates everything into distinct chapters to easily reference in the future.
Currently ranked as the #1 Best Seller in Amazon's "Stock Market Investing" category, be sure to check out Tren Griffin's new book, Charlie Munger: The Complete Investor.
Thursday, March 26, 2015
Notes From Charlie Munger's Daily Journal Meeting 2015
Charlie Munger's Daily Journal (DJCO) 2015 meeting recently took place. Alex Rubalcava (@AlexRubalcava) attended and we've aggregated/posted his notes below with permission.
Notes From Charlie Munger's Daily Journal (DJCO) Meeting 2015
Munger on venture capital versus what he does for a living: "It's a really difficult honest way to make a living. It's not like shooting fish in a barrel, which is how I've made my living."
Software is now a bigger revenue line for DJCO than print and Munger "thinks of it like Jeff Bezos" with its operating losses as it grows.
On the switch from pompous boards to activist investors: "I like the new system even less ... Carl Icahn is a very able man but that doesn't mean he should be running the world."
"I did not succeed in life by intelligence. I succeeded because I have a long attention span."
"I think that someone my age has lived through the best and easiest period in the history of the world."
Munger referenced The Better Angels of Our Nature by Steven Pinker
"When things are damn near impossible, maybe you should stop trying."
Munger sang the praises of Posco at the meeting and also said that he thinks the moat of American Express (AXP) is less than it once was.
"I think it's very difficult to be a value investor with $200B AUM."
"Other people are trying to act smarter. I'm just trying to be non-idiotic."
"If the incentives are wrong, the behavior will be wrong. I guarantee it."
On 3G Capital: "They're teaching us something about reality."
"I don't spend too much time thinking about what is almost certain never to happen."
"The finance industry is 5% rational people and 95% shamans and faith healers."
"A lot of our respected financial institutions are just casinos in drag."
"I don't think anything that any average person can do easily is likely to be worthwhile."
"Before marriage, keep your eyes wide open. After marriage, keep them half shut."
On how to compete in a service oriented biz: identify things that annoy customers and go down the list and get rid of them
Question about if there are parallels between what's happening in TV with what's happened with newspapers: "I've been a little surprised at how well television has survived, but I'm a little suspicious about the local incumbents."
Munger talked about the Chinese air pollution documentary, "Under the Dome." He says the ability of P2P communication like that documentary is a cautionary tale for old media.
"Nobody survives open heart surgery better than the guy who didn't need the procedure in the first place."
"Index funds will be permanent owners who can never sell. That will give them power they are not likely to use well."
If you put a gun to his head and told him he had to buy a tech stock, Munger would pick Google (GOOG)
"Valeant (VRX) is like ITT and Harold Geneen come back to life, only the guy is worse this time."
Munger talked about how Singleton was born smarter than Buffett but Buffett worked harder to learn about investing.
"The way to get rich is to keep $10 million in your checking account in case a good deal comes along."
If you missed it, you can also check out notes from Charlie Munger's Daily Journal meeting last year as well for more wisdom. Be sure to also read Charlie's letter in the most recent Berkshire Hathaway annual report.
Monday, March 2, 2015
Warren Buffett's Annual Letter: 2014 Berkshire Hathaway Report
Over the weekend, Warren Buffett released his annual letter in Berkshire Hathaway's 2014 annual report. This is often labeled a 'must read' by investors.
This letter is somewhat of a 'special edition' in that both Buffett and Charlie Munger give their thoughts on Berkshire over its 50 year history.
It should also be pointed out that Buffett mentions Fred Schwed's book, Where Are The Customers' Yachts: or a Good Hard Look at Wall Street in this letter, so that's probably worth checking out as well. (You can find the rest of Buffett's recommended reads here.)
Embedded below is Warren Buffett's annual letter for 2014:
You can download a .pdf copy here.
Monday, September 15, 2014
Notes From Charlie Munger's Daily Journal Meeting 2014
Thanks to Alex Rubalcava (@AlexRubalcava) for tweeting notes from Charlie Munger's Daily Journal (DJCO) 2014 meeting recently. We've aggregated and posted the notes below with his permission:
Notes From Charlie Munger's Daily Journal (DJCO) Meeting
"We have a few shareholders and a bunch of groupies."
Charlie talked about how the legal filings notice is in structural decline, made an analogy to Kodak.
Says Thomson Reuters successfully made the transition. Also Berkshire ("We didn't have just one failing business at Berkshire. We had three!" ~ textiles, department stores, stamps)
DJCO attempting a technological transition, working to manage expectations
Working with bureaucracy, government, regulators is one of the core competencies of DJCO's software biz
"I don't like derivatives."
"There is more dementia about finance than there is about sex."
On the Berkshire/THI inversion: "Anyone who thinks this is a travesty is stark raving mad."
Charlie argued for low corporate taxes and higher consumption rates
"People like you have bid our stock up to a price I wouldn't pay"
Charlie has spent at least twenty percent of his comments inveighing against gambling
"I've always read Paul Krugman because he's the smartest leftist I've ever read, and he uses the King's English very well."
On Alibaba: "I know nothing about the company except that it's powerful."
Munger's asset allocation is basically Berkshire, Costco, and "an Asian fund" (Li Lu's Himalayan Capital?)
"All my holdings are making new highs. Am I doing it wrong?"
On avoiding mistakes: "All you have to do is take your head out of a place it shouldn't be."
Charlie praised Ron Chernow's biography of Rockefeller (Titan: The Life of John D. Rockefeller, Sr)
Do individual investors still have an advantage over institutions? Some can do it but it's very hard
On managing a portfolio of 200 stocks: "I would shrink from that responsibility."
Charlie says Buffett will write extensively in this year's annual report about the why and how of Berkshire's success and why it will continue after Warren and Charlie are no longer running it. "You will find this year's report very, very interpreting."
"I think Elon Musk is a genius and I don't use that word lightly. And he's one of the boldest men ever."
On Japan: "They've got so much stimulus you can't find a pothole on a side of a mountain anywhere in the country."
Praised a large money manager who indexes his US equities and searches for value in less efficient markets
On his partnership with Warren: "People don't ordinarily get a divorce after they've been together for fifty years. I think Einstein needed someone to talk to."
"If I were the benevolent dictator of America we would have a single payer health care with an opt out provision."
"The thing about Berkshire is that the results are prodigious but the people producing the results aren't prodigies."
On his secret to success: Get the no-brainers off his desk immediately
"I think two years from now MidAmerican will be the biggest utility company in the United States."
Charlie says he bought DJCO for $2.7 million, then dividended out the original $2.7 three years later. Company is basically cost basis zero.
Thanks again to Alex and be sure to follow him on Twitter here: @AlexRubalcava
You can also check out more thoughts from Charlie via Jason Zweig here.
Tuesday, June 10, 2014
Notes From Berkshire Hathaway's Annual Meeting 2014
Berkshire Hathaway's 2014 annual meeting has come and gone. While many of you have undoubtedly already read synopses of the event, here's a set of detailed notes for a further glimpse into the minds of Warren Buffett and Charlie Munger.
Berkshire Hathaway Annual Meeting 2014 Notes
The meeting started out with Warren Buffett (WB) discussing the results from the first quarter. $77B in float. Insurance business is great. Insurance earnings dragged down operating income, but a lot of that was foreign exchange.
Resolutions for dividend. 97% of the 'A' share voted against with 1% voting for. Almost the exact percentages of the 'B' shares as well, 97% to 2%. Almost as many people voted for WB as they voted not to put a dividend in place.
Q&A Session
WB - Both Rail and Utility could do more with debt. If they were younger, they'd probably do it. Good idea. They'd do it if a deal came along. Should not have used BRK stock in BNSF.
SH - Question about 0% interest rates.
CM - In Japan no one would have expected low rates in 20 years. Very confusing to economics professors. If not confused, then didn't understand.
WB - Collection of businesses has worked well for America. Thinks business plan is good. System for allocating capital. As if conglomerate is buying using cash or stock.
CM - They have more investment options than others. Can buy companies, insurance companies, marketable securities, etc.
JB - Forest River vs. Thor for recreational vehicles?
WB - Bought Forest River about 10 years ago. Pete sold it to PE firm in 90s. PE firm created hell for him. He quit, it went BK. Pete bought it out of BK and sold it to BRK 10 years ago. WB doesn't know the RV business and no one else at BRK does. Talks to Pete once every couple years. His company. Six IT people.
WB - Business in Marmon does business with Oil Sands. Owns some XOM with business in oil sands. Also has BNSF moving oil. Rail moves oil 2x faster than pipelines. Oil sands are important for mankind over centuries to come.
CM - Economic if NatGas is cheap and oil expensive.
-----
2ND HALF
WB - Sent out 11,000 more tickets this year compared to prior year.
BQ - Question about Energy Future Holdings. Also, other companies in umbrella of similar risk.
WB - He gets credit on Energy Future Holdings. Business models can be at risk. Geico - Mail - Phone - Internet. When change from government employees at one point they almost went broke.
CM - Remove your ignorance, scramble out of mistakes.
WB - He will be filing public statements. Has historically had 15% margins and expects those to go up over time.
SH - Expand on thoughts of investment opportunity. Why buy some companies vs others? Example, ones he bought vs. KO or Moody's.
WB - Bought a bit early in Fall of 2008 vs. early 2009. Did reasonably well overall. Plus they did get BNSF in Fall of 2009. Want to buy good businesses for reasonable prices over time.
CM - Private businesses more ideal target than stocks, and guesses that will continue, right Warren?
CM - Love buying transmission lines in Alberta. Have to adapt to BRK.
WB - Have bought a fair amount of Wells Fargo last couple years. Weak banks have bounced back the most.
AS - Geico and usage based pricing and impact on auto industry and Geico. Also, self-driving cars. Would you sell Geico if need for auto insurance went away?
WB - Won't sell. Underwriting in auto a bit different than life. Different variables. Feels very good about Geico, the management, and ability to manage risk. Self-Driving cars will be good for society and bad for auto insurers.
CM - Things can take long time. Example is movies on demand. Thinks self-driving cars will take a while.
WB - No preference for US businesses, but that seems to be where the deals are coming from. More recognition in the US. Some awareness. Lots of great things to say about Iscar. April had record sales.
SH - Circle of competency. How does one know what their circle of competency is?
WB - Good question. Need to be self-realistic. Was out of his circle of competency when he bought Berkshire Hathaway. Has also stretched in the area of retail. Ms. B (of Nebraska Furniture Mart) didn't take BRK stock because it wasn't in her circle of competency. Her areas were cash, retail, and real estate.
CM - Not that different. Someone that's 5'2" probably isn't going to be great at basketball and someone that's 350 pounds probably not going to be great at ballet. 95 year old probably not going to get the leading role in a romantic movie. Circle of competence can be a relative concept. I need to compete against idiots and there's a large supply.
CL - Question about the logic of comparing the annual change in Berkshire's Book Value vs. S&P 500.
CM - (Charlie interrupted Buffett from answering) - Doesn't make any sense. It's insane and doesn't make sense, but WB likes impossible challenges.
WB - Given that wishy washy answer, Buffett won't add to it.
JB - Question about Prices on Marmon and Iscar.
WB - Iscar was 80% then put the rest. Marmon was an installment sale with 64% was first, then 36% was 2nd and 3rd installment.
CM - Price went up as value went up.
WB - With both transactions, all feelings are good.
SH - What non-tech thing would you do if you were 23?
WB - I'd probably do what I did, go into investment business. One question he'd ask if they had to put all money in one business (not their own) for 10 years, what would it be?
CM - Larry Bird trick - asked every agent, if I don't go with you, who's the 2nd best I'd go with?
BQ - Capitalism vs. Rooms given his comments about people using AirBnB.
WB - Omaha can't size itself to the event. Doesn't like 3-day minimum rule.
CM - Nothing to add.
JG - Question about Geico. Allstate's share = 10%, State Farm's = 19%.
WB - Passing Allstate this year. State Farm is a great company. Recommends "The Farmer from Merna". Says he thinks Geico will be number one by time he's 100. Tells Geico he'll do his part.
CM - Geico is like Costco in that cost is part of its soul. Easy to talk the game, but they can back it up.
WB - Bought house in 1958. CM bought his in 1960. Life would be worse with more. At certain point there is inverse correlation.
CM - It'd be crazy.
GW - Union Pacific moving freight to Mexico, thoughts relative to BNSF?
WB - UP has edge in Mexico. KSU has good presence in Mexico, but also good prospects elsewhere.
SH - Intrinsic value difference and what are competitors to Berkshire?
WB - Intrinsic value is present value of all future cash. Aesop bird in the hand is equal to two birds in a bush. Sees no competition to Berkshire.
CM - Too tough to replicate and no one teaches it.
CL - Question about inflation from Goodhaven.
WB - Berkshire would be worse off. EPS would go up. Intrinsic value would go up in dollar terms.
WB - Having a corporate acquisition team is bad because they always want to do acquisitions.
CM - Fault goes to parents. Very hard to fix people with bad parents. Lots of problems with college business schools and economics departments.
