Berkshire Hathaway has its annual shareholder meeting this weekend. Ahead of that Berkshire’s Charlie Munger sat down with CNBC’s Betty Quick for an interview. Here are some of the highlights:
- On Buffett’s cancer diagnosis – “I regarded it as a total non-event. I would bet a lot of money that I have more than he does, I don’t event allow them to check for it. …So when my doctor puts down PSA test I just cross it out.”
- On Berkshire’s succession plans – “I’ve never been more comfortable about succession or duration of culture than I am right now. Our new investment people show enormous promise and it’s good that we were provoked into doing that by Lu’s retirement. I have enormous confidence in the continuation of the culture.”
- On investment Deja Vu’s – “Well it’s always a little different. People are always quoting Mark Twain perhaps the comment was apocryphal that history doesn’t repeat itself but it rhymes. So sure a lot is the same. The panic that came as a predecessor to the Great Recession had common themes that are always the same – the crazy greed, the crazy leverage, the crazy delusions and I think we were very lucky that the outcome wasn’t worse.”
- On easy central bank policy – “What was wrong was not the central bank reaction, which I think was correct. They don’t have an unlimited number of weapons we’d be in way worse shape if both political parties hadn’t backed huge central bank intervention. The big mistake was made by allowing the boom to go so crazy and allowing the evil and folly to run so rampant. Greenspan to his credit and since recognised that he was wrong. He’s the only one who’s done that.
- “An economy with a certain amount of basic virtue like a bunch of Germans or Japanese or something can resort to a lot of extreme Keynesian intervention and help things. But if your whole cultural system disintegrates, say the way it did in Greece where everybody wants an easy living with no work and a lot make believe and fraud and what have you, then the Keynesian stuff won’t work. So what happens is all this intervention helps if you have a lot of merit, a lot of credit in the bank so to speak which you’ve earned by deserve it. And of course we’ve used up some of our store of credit. So we’re more dangerous that we used to be.”
- The U.S. still has a lot of virtue left.
- Munger said he had no quarrels with the Fed though it was blind not to step on the boom. Greenspan and everyone else in the Fed “overdosed” on Ayn Rand.
- Responding to a question on Einhorn saying he’s buying gold because he doesn’t trust the Fed, Munger said: “I think gold is a great thing to sew in to your garments if you’re a Jewish family in Vienna in 1939 but I think civilized people don’t buy gold.”
- On Berkshire’s IBM holding and investment portfolio: “It’s a very Buffett style play… The investment portfolio, when we used to have these meetings decades ago, there would be more in common stock value in the portfolios of Berkshire than the market capitalisation of the whole company and that went on year after year after year. That has radically changed. Now most of the value is in controlled businesses and the investment portfolio is something that looks like the normal portfolio of an insurance company.”
- Munger doesn’t tweet and doesn’t use a mobile phone.
- He gave insights on some of Berkshire’s investment strategies, like: “We always said that what he liked best was owning a wonderful business outright and second best we liked good ideas and securities, that has never changed.”
- Berkshire culture always operates as though we’re already in a recession.
- On the decline of American manufacturing: “It’s just amazing what’s happened to American manufacturing… I think that kind of creative destruction happens in capitalism with free trade and it’s very painful for the people that get by it. But its painful for Kodak when the technology changes and i don’t think you should look for a villain. What happened to Kodak is a natural outcome of competitive capitalism.”
- General Motors should not have wiped out its shareholders. “It was a huge failure of management.”
- There’s plenty to regret in the Republican party but there’s a lot to regret in the Democratic party. Munger said “the nutcases in each party have come to power and hate each other, and I remember a more bi-partisan world with affection.” He isn’t enthusiastic about America politics at the moment and thinks Mitt Romney is by far the best Republican candidate.
- If investors don’t know very much they should buy an index.
- The U.S. has no alternative but to be friendly with China and China has no alternative but to be friendly with the U.S. Munger thinks China continues to do well with its policies. “They have some of the merit of Singapore in modern China. They copied it on purpose and I regard what happened in Singapore as the best example of successful in governance in the history of the world. To take a handful of people in a malarial swamp and turn them into a meritocratic civilisation that works as well as Singapore does is a huge stunt and I think China to some extent has copied Singapore. And I think they deserve some admiration.”
- His favourite thing about the Berkshire Hathaway annual meetings is going back to the city where he was raised, driving by his high school and seeing friends of his youth that are still alive.
- “Ask Warren how he wants to be remembered, he wants to be remembered as a teacher. Who in the hell is saying that from the top of a company?”
- Munger said Wall Street would have functioned better if it had emulated his great grandfather Ingham.
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