Charlie Munger Speaks Candidly on Investing in BBC Interview

Charlie Munger was interviewed by the BBC and commented on a variety of topics. As always, Mr. Munger pulls a few punches when it comes to providing his candid assessment on investing, economics, politics, and all varieties of “human follies”.

One sure-to-be classic Munger quote from the interview was in response to a question regarding how concerned shareholders should be when they experience temporary impairments in the market value of their holdings:

You can argue that if you’re not willing to react with equanimity to a market price decline of fifty percent two or three times a century, you’re not fit to be a common shareholder and you deserve the mediocre result that you’re going to get.

And on politics:

Both parties have wings that are full of idiots. That is the nature of the game. And the reason it has worked as well as it has is that the people in the middle have sort of over time tuned out the idiots on both sides. But every once in a while, the idiots get in control. And, of course, that has terrible consequences. That’s the nature of the system.

To view the video, please click on the image below.

Comments

[prairiedog555:]

Amen to that.
I was going through some old stuff and came across an Esquire Mag from 1976. On the cover was a picture of Carter and Ford as wrestlers winking at each other and the title read: Is democracy fixed?
When was last time we really had a choice? I mean Bush VS two pompas idiots and now look what we got, a Chicago politician, are you surprised?

Oct 27 08:18 AM

[manuel:]

well you could be Smart enough to Sell once they start going down,instead of looking at your shares go down 50%, sell, look and buY again, the Market is liquid......, it seems that old school value investors are not familiar with Stop Loss but only with margin of saefty......

Oct 28 01:59 PM

[manuel:]

loosing 10 years of gains in a few months just because you love to buY and hate to Sell? No thanks......

Oct 28 02:09 PM

[Ravi Nagarajan:]

With perfect foresight, this would be possible, but for mere mortals, market timing is very difficult to accomplish. You have to be correct not once but twice - first on when to sell and then on when to repurchase. I'm not ashamed to say that I'm not capable of that. What I learned from Buffett & Munger (and what I can do reasonably well) is to buy when prices are below intrinsic value and sell when prices exceed intrinsic value. This is a vastly different philosophy from market timing. Quotes mean absolutely nothing to me except to provide opportunities to buy or sell at advantageous prices.


On Oct 28 01:59 PM manuel wrote:

> well you could be Smart enough to Sell once they start going down,instead
> of looking at your shares go down 50%, sell, look and buY again,
> the Market is liquid......, it seems that old school value investors
> are not familiar with Stop Loss but only with margin of saefty......

Oct 28 02:13 PM

[manuel:]

berkshire results could be considered mediocre, in line with any mutual fund you find next door, self indulging with your losses is not a good way to react, it is a way of perpetuating your mistakes......, again I mean no disrespect......

Oct 28 02:37 PM

[Ravi Nagarajan:]

Really?

That's a fascinating take on the history of Berkshire relative to the overall market over the past decade. Chart of BRKA vs. S&P 500:

tinyurl.com/ykjmh9c

As someone I admire used to say, "Facts are stubborn things."


On Oct 28 02:37 PM manuel wrote:

> berkshire results could be considered mediocre, in line with any
> mutual fund you find next door, self indulging with your losses is
> not a good way to react, it is a way of perpetuating your mistakes......,
> again I mean no disrespect......

Oct 28 03:07 PM

[manuel:]

You could BuY when a Stock you like is oversold and sell when it is Overbought, Relative Strenght Index is such a useful indicator, but if you only listen to Buffet you do not use it, and it is a pity, try it, you will see, you buY oversold(better if it is an oversold Support level-just check how many times that price proved to be support in the last 6 month or so, look horizontally, or you could also buY oversold breakouts if it breaks out a trading range or out of a resistence line you wait until it is oversold and you BuY) and set a Stop loss just under, and when it reaches overbought you set the stop just under overbought and during the ride up you can set trailing Stop losses as you wish, when it drops you wait until it is oversold again and BuY again if you still like the Stock, stay open, don´t be dogmatic value against technical, trY it......Wikipedia and Investopedia explain you the Indicator well, it is so easy, it works so well, it makes so much sense, just have a look, so you do not buy and hold, but somehow you hold with buying and selling once every month or two......
Buffett teaches you how to pick a Good Stock and that is ok, but than you should consider what I said...... and what I wrote about the performance of Buffett, I can not find the article any more, but someone had graphs, facts, considering the last 30 years or so and the performance was just about the one you got from any mutual fund......


On Oct 28 02:13 PM Ravi Nagarajan wrote:

> With perfect foresight, this would be possible, but for mere mortals,
> market timing is very difficult to accomplish. You have to be correct
> not once but twice - first on when to sell and then on when to repurchase.
> I'm not ashamed to say that I'm not capable of that. What I learned
> from Buffett & Munger (and what I can do reasonably well) is
> to buy when prices are below intrinsic value and sell when prices
> exceed intrinsic value. This is a vastly different philosophy from
> market timing. Quotes mean absolutely nothing to me except to provide
> opportunities to buy or sell at advantageous prices.

Oct 30 06:11 PM

[manuel:]

and you see if you buy below intrinsic value it may take you years to get to fair value and you do not sell fair, so you wait and may be it goes below intrinsic again, and it would be a pity to sell above intrinsic may be it goes even higher, so at above you just set stop losses, if 10 $ is your above and it reaches 10, why sell, just set a Stop loss at 9,5, if it continues rising to 12 you set it at 10 or 10,5, if it goes at 15 you set it at 12,5 or so, you can do as you wish. So you normally sell at 10, if you consider my advice you sell either at 9,5 or 12,5 or even 15, think about it......

Oct 30 06:20 PM

[manuel:]

it is Good to buY under intrinsic and Buffett is a great teacher on when to buY, but you should consider selling at fair as well, at fair the probabilities are 50 50 %, at under they may be are 85 15 and at above they are 15 85, just do the same at fair as I suggested you to do at above, if your fair is 8$ you set Stop losses at 8, if it goes to 12 you set it at 10,5, if it goes to 13,5 you set it at 12, you can be flexible and set them considering the Relative Strenght Index, or if you do not want to use the Index just set them as you prefere, I hope you consider my advice......

Oct 30 06:42 PM

[Ravi Nagarajan:]

We'll just have to agree to disagree. I've yet to meet anyone who has been able to time the market. I've found it possible to beat the market using value techniques and trying to avoid much trading and I sleep well at night. I'll just have to live with my mediocre results.

Oct 30 06:56 PM

[manuel:]

I just read one of your older Articles, I am a Marketing professional and I must admit it is verY well written, may be you could also saY that for private consumption Brands work well when theY relieve you anxiety over the qualitY of the product, so as an example(I am Italian) if you BuY Olive Oil you want to buY an Italian Brand which gives you some guarantee over the QualitY even if you consume it in private......, but consider this I once read that someone defined the value of a Brand as follows:

If things go bad in the economy, recession, everything crashes, strong Brands are the one that get out faster, they are the one that get the most credit from banks, after armaggeddon Coca Cola goes to the bank, everY Bank in the World give them all they need, and in one year they are profitable again and they get all the credit they need the year before......

seekingalpha.com/artic...

Oct 30 07:02 PM

[manuel:]

setting Stop loss is not much trading, it is just setting them , you sleep even Better......


On Oct 30 06:56 PM Ravi Nagarajan wrote:

> We'll just have to agree to disagree. I've yet to meet anyone who
> has been able to time the market. I've found it possible to beat
> the market using value techniques and trying to avoid much trading
> and I sleep well at night. I'll just have to live with my mediocre
> results.

Oct 30 08:50 PM

[manuel:]

I just wanted to post you an Article, it is not the one I had read before, but you could take a look:

www.smartmoney.com/inv.../

The Buffett cognoscenti have learned some lessons from the annus horribilis. They now suspect Buffett’s not as good an economist as he is an investor. As recently as his May 2008 shareholder meeting, when sidekick Charlie Munger predicted “turmoil as far ahead as we can see,” Buffett shushed him, saying the real estate bubble wouldn’t hurt the economy. Oops. “Buffett’s a great, disciplined investor,” says Bruce Greenwald, finance professor at Columbia University, “but he shouldn’t make those calls.” Others say Buffett’s gospel of buy-and-hold is outmoded, now that markets have grown increasingly volatile. It’s telling to compare his recent performance with those of hedge funds, which often dip quickly in and out of stocks. Over the past decade, the average North American stock-oriented hedge fund earned 9.7 percent a year after fees, compared with 2.9 percent for Berkshire, according to research by asset-management firm Lyster Watson & Co.

Oct 31 03:19 PM