☀️☕️ RIP Charlie Munger of Berkshire Hathaway

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RIP Charlie Munger of Berkshire Hathaway

Witty and wise, Charlie Munger, vice-chair of Berkshire Hathaway and Warren Buffett's🎓 investment partner, has passed away at 99. 

Munger played a pivotal role in shifting Berkshire’s investment strategy away from acquiring “cheap” or distressed companies, the value investment style of his Columbia professor Benjamin Graham, favouring fair companies at a great price, towards buying great companies at a fair price. The partnership yielded a startling 24.3% annual return.

Munger was an accomplished investor in his own right and was always much more than Buffett's deputy, not just influencing the approach of the firm philosophically but also leading individual investments such as BYD. Munger, though famously against diversification for investing experts, also expressed scepticism about modern investing and cautioned that unique opportunities rarely come.

His passing, just 34 days from his 100th birthday, is a reminder that a shift in Berkshire's leadership is coming with the eventual handover from Buffett to a new, and for the next generation, hand-picked team of leaders under Greg Abel.

..... ▷ MUNGER ON LIFE

“Life will have terrible blows, horrible blows, unfair blows. Doesn’t matter. And some people recover, and others don’t. And there, I think, the attitude of Epictetus is the best. He thought that every mischance in life was an opportunity to behave well. Every mischance in life was an opportunity to learn something, and your duty was not to be submerged in self-pity but to utilise the terrible blow in a constructive fashion. That is a very good idea."

“The world is not driven by greed. It’s driven by envy… I have conquered envy in my own life. I don’t envy anybody. I don’t give a damn what someone else has. But other people are driven crazy by it.”

"The great lesson of life is get (toxic people) the hell out of your life — and do it fast,"

“Almost everybody that has an unusually good result has three things: They’re very intelligent, they worked very hard, and they were very lucky. It takes all three to get them on this list of the super-successful. How can you arrange to have two or three episodes of good luck? The answer is you can start early and keep trying a long time, and maybe you’ll get one or two.”

"Three rules for a career: 1) Don’t sell anything you wouldn’t buy yourself; 2) Don’t work for anyone you don’t respect and admire; and 3) Work only with people you enjoy."

"Self-pity gets fairly close to paranoia, and paranoia is one of the very hardest things to reverse. You do not want to drift into self-pity. ... Self-pity will not improve the situation."

“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. All these simple rules work so well to make your life better.”

"Whenever you think something or some person is ruining your life, it’s you. A victimisation mentality is so debilitating."

"You'll do better if you have passion for something in which you have aptitude. If Warren had gone into ballet, no one would have heard of him."

"It's so simple to spend less than you earn, and invest shrewdly, and avoid toxic people and toxic activities, and try and keep learning all your life, and do a lot of deferred gratification. If you do all those things, you are almost certain to succeed. If you don't, you're going to need a lot of luck." 

"You have to get better and better, or you will lose. Try harder, work harder, and you'll do better."

“Early on, write your desired obituary — and then behave accordingly.”

..... ▷ MUNGER ON LEARNING

"In my whole life, I have known no wise people who didn’t read all the time - none … ZERO. You’d be amazed at how much Warren reads — and at how much I read. My children laugh at me. They think I’m a book with a couple of legs sticking out."

"Knowing what you don’t know is more useful than being brilliant."

"Obviously, if you want to get good at something which is competitive, you have to think about it and practice a lot. You have to keep learning because [the] world keeps changing, and competitors keep learning. You have to go to bed wiser than you got up. As you try to master what you are trying to do — people who do that almost never fail utterly. Very few have ever failed with that approach. You may rise slowly, but you are sure to rise."

“I constantly see people rise in life who are not the smartest, sometimes not even the most diligent, but they are learning machines. They go to bed every night a little wiser than when they got up, and boy does that help — particularly when you have a long run ahead of you.”

"I never allow myself to have an opinion on anything that I don’t know the other side’s argument better than they do."

“Wisdom acquisition is a moral duty. It’s not something you do just to advance in life.”

"Opportunity comes to the prepared mind."

"The game of life is the game of everlasting learning. At least it is if you want to win."

"Spend each day trying to be a little wiser than you were when you woke up."

"The best thing a human being can do is to help another human being know more."

..... ▷ MUNGER ON INVESTING

"A great business at a fair price is superior to a fair business at a great price."

“Capitalism without failure is like religion without hell.” 

"The game of investing is one of making better predictions about the future than other people. How are you going to do that? One way is to limit your tries to areas of competence."

"There is so much money now in the hands of so many smart people all trying to outsmart one another. It’s a radically different world from the world we started in."

"Invest in a business any fool can run because someday a fool will. If it won't stand a little mismanagement, it's not much of a business. We're not looking for mismanagement, even if we can withstand it."

“I think part of the popularity of Berkshire Hathaway is that we look like people who have found a trick. It’s not brilliance. It’s just avoiding stupidity.” 

“A great company keeps working after you are not; a mediocre company won’t do that.”

“If you've got two suitors who are eager to have you, but one is way better than the other, you're going to choose that one rather than the other. That's the way we filter stock buying opportunities. Our ideas are so simple. People keep asking us for mysteries, but all we have are the most elementary ideas."

"I have a friend who says the first rule of fishing is to fish where the fish are… The second rule of fishing is to never forget the first rule. We've gotten good at fishing where the fish are."

“There is no such thing as a 100% sure thing when investing. Thus, the use of leverage is dangerous.”

"If you're Warren, you want to be the house, not the punter,"

..... ▷ MUNGER ON DIVERSIFICATION

"The 'know-nothing' investor should practise diversification, but it is crazy if you are an expert. The goal of investment is to find situations where it is safe not to diversify. If you only put 20% into the opportunity of a lifetime, you are not being rational. Very seldom do we get to buy as much of any good idea as we would like to."

"When you know you have an edge, you should bet heavily. They don't teach most people that in business school. It's insane. Of course, you've got to bet heavily on your best bets."

“I find it much easier to find four or five investments where I have a pretty reasonable chance of being right that they're way above average. I think it's much easier to find five than it is to find 100. I think the people who argue for all this diversification — by the way, I call it ‘deworsification’ — which I copied from somebody — and I'm way more comfortable owning two or three stocks which I think I know something about and where I think I have an advantage.”

“A significant percentage of all the gains that come to all the common stockholders combined is going to come from a few of these supercompetitors."

"I think fewer and fewer people are really needed in stock picking. Mostly, it's charlatanism to charge 3 percentage points per year or something like that to manage somebody else's money."

..... ▷ MUNGER ON PATIENCE

“It’s waiting that helps you as an investor, and a lot of people just can’t stand to wait. If you didn’t get the deferred gratification gene, you’ve got to work very hard to overcome that.”

“The world is full of foolish gamblers, and they will not do as well as the patient investors.”

"What Buffett and I did is we bought things that were promising. Sometimes, we had a tailwind from the economy, and sometimes, we had a headwind, and either way, we just kept swimming. That's our system,"

“It takes character to sit with all that cash and to do nothing. I didn’t get to be where I am by going after mediocre opportunities.”

“Understanding both the power of compound interest and the difficulty of getting it is the heart and soul of understanding a lot of things.”

"It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid instead of trying to be very intelligent."

“If you’re going to 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. And I think you just have to learn to live through them.”

“You don’t have to be brilliant, only a little bit wiser than the other guys, on average, for a long, long time.”

..... ▷ MUNGER ON CRYPTO

"I am not proud of my country for allowing this crap — well, I call it crypto shit. It's worthless, it's crazy, it's not good, it'll do nothing but harm, it's antisocial to allow it… I think the people that oppose my position are idiots. And so I don’t think there is a rational argument against my position."

"I'm proud of the fact that I avoided it. It's like some venereal disease. I just regard it as beneath contempt. Some people think it's modernity, and they welcome a currency that's so useful in extortions and kidnappings [and] tax evasion." 

..... ▷ MUNGER ON INCENTIVES

“Never, ever, think about something else when you should be thinking about the power of incentives.”

“The iron rule of nature is: you get what you reward for. If you want ants to come, you put sugar on the floor.”

ERRATUM: In an editing error, the Tuesday MFM referred to Germany being on the “verge of bankruptcy” rather than the intended “verge of recession.” We apologise for the error.

🇸🇬 Singapore: Let’s Get MoneyFitt!

📊 In the Markets

Asia-Pacific markets traded mixed, and European markets did the same but closed a bit lower on Tuesday on lacklustre sentiment.

The major US indexes traded mixed on Tuesday but slightly positive on upbeat consumer data. Stocks made modest gains amidst conflicting Federal Reserve remarks ahead of the Federal Open Market Committee (FOMC) meeting in 2 weeks. Fed officials presented diverse views: Governor Christopher Waller hinted at potential rate cuts if inflation trends lower, while head of the Chicago Fed, Austan Goolsbee (a voting member in 2023), noted progress in reducing inflation akin to the 1950s. On the other side, Governor Michelle Bowman sees a need for another rate hike to control inflation. (Governors always have a vote.) Markets almost universally expect the Fed to maintain rates next month. 

In the retail sector, as we absorb Thanksgiving weekend shopping data (below), Temu owner PDD Holdings surged 18.1% after beating revenue estimates, while BNPL player Affirm Holdings rose 11.5% post-Cyber Monday.

And on still-high perceived inflation, President Joe Biden referred to corporations as price gougers for charging prices that he said were artificially high. The White House has struggled to bridge the gap between data that shows a strong economic recovery from pandemic lows and voters who still feel the pain from stubborn inflation in their budgets.

Cyber Weekend Records

Despite lingering economic concerns, US shoppers enthusiastically reached into their wallets (and beyond) during the Thanksgiving weekend, driving online spending to an impressive $38 billion, up 7.6% and blowing past industry forecasts as well as a cautious tone from retailers like Walmart and Macy’s and possibly signalling a vibrant holiday shopping season ahead.

Over 200 million customers shopped in both brick-and-mortar stores and online over the five-day holiday weekend from Thanksgiving Day through Cyber Monday, according to the National Retail Federation (NRF), squeaking past last year's record 197 million. Lured in by very deep discounts across product categories, they spent an average of $321, over 1% lower than the $325 spent last year. Adjusted for CPI inflation of 3.2%, it is down in the mid-single digits.

Buy-now, pay-later (BNPL) spending on Cyber Monday was expected to be 18.8% but, in fact, skyrocketed 42.5%, reaching a staggering $940 million.