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Bram de Haas
Bram de Haas
Articles (380)  | Author's Website |

Charlie Munger Unrestrained

My notes and annotations of the interview with Andy Serwer

May 09, 2018 | About:

Andy Serwer interviewed Charlie Munger (Trades, Portfolio) after the Berkshire Hathaway annual meeting. It was an interesting interview where Munger expounded on some of his views expressed at the meeting. He also mentioned a number of interesting companies that I've been careful to note.

Free Trade

The interview started with a few questions about the U.S China trade relations, Charlie commented:

"You don’t want to be an absolute purist for free trade. I wouldn’t want the entire steel industry to move offshore.

I’m glad we have a trade deficit with China. I welcome the chinese to the group of advanced nations. Which we enabled by our willingness to trade with them. I like what is happened. I don’t think it is unfair or bad. I’m not saying it is unthinkable to have a tariff somewhere but basically I’m a free trader.

No big nation has ever advanced faster than China.

I’m sure there are some places where someone in china hasa some advantages on someone in the U.S. in a way you or I don’t like."

Will Berkshire buy a Chinese company?

One of the most interesting answers from Munger came when Serwer asked about Berskhire buying a Chinese company (emphasis mine):

"I don’t think it is likely that we will be buying any great Chinese companies. The Chinese are proud of their companies. What I think is likely we will be invited to take part in some company because they like the company."

If there's one thing I'm learning from Munger and Buffett it's how reputation is everything. They are now taking the Berkshire brand to China and may be invited to participate in companies and help them with the stability of Berkshire's capital and presence.

Charlie specifically mentioned Berskhire has a position in BYD. Year to date it has declined pretty significantly in price:

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Will Chinese automakers enter the U.S.?

I believe Munger made Buffett buy into BYD many years ago.

"The automarket is very competitive and very fully occupied ... No one in the U.S. wants to lose the last three domestic U.S automakers. It is hard for someone to come into the U.S. My take is they will stay busy in their own part of the world for a long time.

BYD advantage is in electric cars where they are close to the cutting edge of the battery technology."

On Elon Musk

"Tesla already created more significance than anyone would have predicted

Its founder is bold and brave and swings for the fences.

Not the faintest idea how Elon Musk will turn out. Considerable chance of success and failure."

He considered Elon Musk's Twitter comment about starting a candy company wise-assery.

On Wells Fargo

At the Berkshire Hathaway meeting as well as in interviews, Buffett and Munger receive many questions about their second largest holding, Wells Fargo (NYSE:WFC). Munger echoed their usual stance:

"I don’t think for a minute Wells Fargo is rotten to the core. They had incentives to incite bad behavior. But they had what's happened. On a very long-term basis this is good for Wells Fargo."

Calling it good for Wells Fargo sounds like a stretch to me. There's a point where even Munger might want to check his endownment bias. Then again, I definitely don't think they should sell the company now.

Wells Fargo hasn't been so hot year to date:

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About the stock purchases of Ted and Todd:

I really liked this color on the input Ted Weschler and Todd Combs have around Berkshire. I'm not sure whether Munger implies they are taking an engaged approach with Apple's management or whether they are just expousing shareholder value-minded thinking at Berkshire, or also at Cupertino:

"I don’t even follow a lot of it. We would not have bought that Apple stock if not one of the young investors had steered us that way. They have been enormously constructive. They totally think about the shareholder interest. Its marvelous to have two young smart people around with that orientation. They are favorably influencing all investments they are not in charge off. For instance the Apple investment."

Munger on value investing

Munger commented on how there are different kinds of value investing. They wouldn't have bought Apple under their old framework but when influenced by either Weschler or Combs they did.

"You gotta remember all intelligent investing is value investing. Why would you want to buy something that wasn’t worth that? Who wouldn’t like to buy something that’s worth more? There are various ways to look for and various places to look for value.

It has gotten hard in the U.S. to find easy value investments because the world has gotten so competitive. We are just looking in different places (compared to before), but we are value investors.

Some people call value investors someone who’s looking at working capital. I think that’s a bad use of language. All good ways of investing are value investing."

Bitcoin

I've already covered Munger's views on bitcoin in another recent piece, but here is some of what he thinks about it:

"The computer science behind bitcoin is an extreme achievement. Lots of computer peoplelike that. I have no interest in that because it is not my subject. I see an artificial medium that people sell to each other even though it doesn’t have any intrinsic value.

Bitcoin is stupid, immoral and anti-social."

Why is it immoral?

"You could make a lot of money trading freshly harvested baby brains. You wouldn’t do it right?"

It doesn’t have any desirable social purposes. Wechat (owned by Tencent) is an effiicent payment system. If you have Wechat why would you do it in a medium where the value changes enormously?

Wechat is another Chinese company that is down a lot year to date:

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Some more commentary and advice on Bitcoin:

"Bitcoin is dementia and immorality."

"The people who are pushing it are a disgrace."

"Some things are beneath you and this is one."

Munger on Trump

"I mellowed on Trump. It is counterproductive how both parties as they now hate. I now regard all politicans higher than before.

I re-read 'The Fall and Decline of the Roman Empire.' We are way ahead of the Romans at the end. You should read it. It is very helpful. You will feel better about the present world."

"It is counterproductive to hate so much. I decided I’m going to back off. This too will pass. There will come a time when people who hate Trump will want him back."

"There are a lot of bad leaders in human history."

Disclosure: No positions

About the author:

Bram de Haas
Bram de Haas is managing editor of The Special Situations Report and Founder of Starshot Capital B.V.

Visit Bram de Haas's Website


Rating: 5.0/5 (2 votes)

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bsamsel
Bsamsel - 1 year ago    Report SPAM

love it thanks for sharing

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