Charlie Munger on Communism, Botox, and Goldbug Jerks

Berkshire Hathaway (NYSE: BRK-A  ) (NYSE: BRK-B  ) co-chairman and Warren Buffett's sidekick Charlie Munger gave a fantastic two-hour speech at the University of Michigan last week. Here are a few excerpts, lightly edited for clarity.

On employment: I will be surprised if employment bounces back with the wonderful speed that it did after previous economic disappointments like the one we've been through. I just see business after business after business which has just rationalized so that it can do credibly in terms of protecting its balance sheet and its earning power while utilizing fewer people.

On dealing with the pains of recession: I think you should all just say "so what?" There are good times and there are bad times. And we know from the example of other people that if you constantly stand well by your generation, and cope with competency and grace with whatever life deals you and just keep doing it, your share of the honors and emoluments of the civilization in due time are very likely to come.

On success: The best way to get what you want in life is to deserve what you want. How can it be otherwise? It's not crazy enough so that the world is looking for a lot of undeserving people to reward.

On opportunity: Some of the people that have the best careers in my age cohort, and the age cohort just before mine, are the ones that had the worst clobbering in the '30s. Because they were there when the great boom came if you just kept plugging while the favorable tide came in due course.

On the Great Depression vs. today: It's nowhere near as bad as it was in the '30s. This is hog heaven compared to the '30s. That was unbelievable. I lived in the '30s. We didn't have this social safety net. You know what people did in the '30s? They moved into one another's houses. That's what families were for. My grandfather cut his house in half and moved one of my uncles in. My other grandfather saved his son-in-law's bank using a third of the only good assets he had on earth. It was just pain and trouble. And without the family system it was difficult. But the people who plugged well and just kept going eventually did fine.

On Wall Street: If you're in a miasma of competition -- and to use the word that is so popular, greed -- and you attract very competitive people and they're thrown into this miasma, of course there's going to be more regrettable behavior than you might find in a monastery. Or at least than we thought we'd find in monasteries before we understood them better.

Lord Acton had this law that you all taught: that power corrupts, and absolute power tends to corrupt absolutely. The Munger version of that is "easy money corrupts, and really easy money tends to corrupt absolutely." And I don't think it was good for Wall Street that they had this absolute torrent of really easy money when idiots and naives were making a fortune selling shoddy mortgages with ridiculous theories. It was very regrettable behavior. And it was the easy money that allowed it.

On accountants: The accountants utterly failed us. And by the way, there's practically no sign of any intelligent reversal of the failure of that profession. I have yet to meet many accountants who are the least bit ashamed for their contribution to our recent troubles. But it was immense. Imagine when Enron comes down to the SEC and says "we want to write a little contract with A, and a little contract with B, and take all the profit we're going to make from these complicated contracts over the next 20 years into earnings immediately, and put an asset on our balance sheet of $28 billion from signing two pieces of paper." And the SEC, led by wonderful accountants who studied at great places, [says] "Why, of course you should have that kind of accounting!" What the hell were they thinking? How can anybody have any respectable understanding of human nature without realizing that the kind of people who were going to be tempted by that accounting were not going to be able to resist the temptations? It was disgusting.

On why accountants got it so wrong: Partly the establishment accountants want to please the people who are writing the checks. And partly the academic accountants get full of people who overdosed on mathematics. They want everything to be in balance. And they don't think that that really isn't rational when creating rules for a human behavioral system. They're too mathematical and not rational enough when dealing with their fellow humans. You can't give the average Wall Street CEO really lenient standards of accounting and expect the figures to be good.

On politicians: I think all politicians tend to behave badly under the peculiar pressures of their trade. So I think they've chosen a profession where it's hard to behave well. And if it's hard to behave well and you're in a miasma of wrong incentives, then you get a lot of bad behavior. I think we're lucky the system has worked as well as it has. In my state, we have a thoroughly gerrymandered legislature, so you have to be an extreme nut on the right or an extreme nut on the left, or you're not allowed in the legislature. And there are ten sane people who creep in every decade, and at the end of the decade the right and the left agree and throw them out. How well are you going to behave in that kind of a system? You can't say you hate the other people in your chamber. You need this ever-growing tide of money. You can't really tell the truth as it is because you'll offend various people that are important to you. It's a miracle it ever worked as well as it did. I suppose it's better than absolute despotism. But sometimes it's a little close.

On communism: Two things work beautifully to ruin an aggregation of people. All the best people leave; that's a sure source of huge failure. Then you have the remainder under a total crazy bunch of people -- like say the nutcase that runs North Korea -- and of course that will ruin anybody. Do you see all those pictures of North Korea at night? It's dark! They have starvation in the Year of Our Lord 2010! They have people starving in the dark! That's what communism will do for you if you work at it hard enough.

On the need for tax reform: I'm sort of against my own party. I think my taxes are a little too low. And I don't think we needed the last round of tax cuts, nor do I think that hedge fund operators deserve to pay lower taxes than taxi drivers as a percentage of income. I think when you're that crazy, it's serious.

On what he'd to fix the economy: If you asked what I would do if I were the benevolent despot of the United States, I would have the biggest infrastructure program you ever saw. Go to power from renewable sources. And by that I don't mean corn. That was one of the most asinine ideas in the history of the world -- to use corn for motor fuel. I mean, you can argue that the people that come up with that kind of stuff don't deserve hardly to be at the table at all. But the idea of rapidly going to the sun and creating a vast infrastructure that will do it is a thoroughly sound idea. And we now know how to do everything that we need to know how to do. And I think the country would get behind it if people had the sense to concentrate on something large and important and sensible.

On new forms of energy: I think we'll end up with more of practically everything you can think of. But in the end, you have to go solar. There's not an endless supply of uranium, nor is it totally desirable to let every little crazy hamlet have its own nuclear capability. There's a lot to be said for going directly to the sun. And thank God it's as copious and as reliable as it is as a source. I mean, think of how lucky we are. People on Easter Island didn't have any sun to solve their problems. They basically perished when they used up their resources. This is one where our profligacy leaves us with a wonderful option that's never going to run out on us. This is a huge benefit, and the young people in the room ought to be rejoicing that the main technical problem of their civilization is basically solved.

Asked whether stocks should be bought at these levels: Long term I'd rather own common stocks I pick than good government bonds at the present rates. So that's an easy question for me. What you should do with your own life depends on your own opportunity costs; how likely it is that you're going to need the money suddenly at an inconvenient time, and a lot of other subjects.

Look what happened in the last 100 years. The net increases in living standards and in human options between 1900 and 2000 were simply awesome when you take the big picture view instead of the short picture view. Think what came: widely distributed electric power; television and radio; the ability to get in your own car and move around wherever you wanted; cheap travel by jet all over the world; air conditioning in places that were unendurable in the summer; widely distributed information. It's just unbelievable what happened. In no previous 100 years did anything remotely comparable happen. Are all those forces gone? I don't think the next 100 years is going to do as much, because those are such huge achievements given human needs. But do I think there will be more improvements and more options? Yes.

On investing in gold: I don't have the slightest interest in gold. I like understanding what works and what doesn't in human systems. To me that's not optional; that's a moral obligation. If you're capable of understanding the world, you have a moral obligation to become rational. And I don't see how you become rational hoarding gold. Even if it works, you're a jerk.

On whether we could end up like Japan's lost decade: Of course we could. It's like the man said about baptism: I believe in it because I've seen it done. Japan has proved that an advanced nation can have a long period of utter stasis following a bust. Now, are we going to be like Japan? Or are we going to do better? I think we're going to do better. But I think if we have trouble, I don't think we'll handle it as well as Japan. Japan is a very courteous, submissive, amazing place. If they were going to have a long period of stasis, you could hardly find people who could handle it better if you selected over the whole earth. They have the right behavioral ethos. Here I think we'd have a lot more tension if we had a long period of no growth at all. And so I hope we aren't in for that. But if we did have it, in the big scheme of things, is that a tragedy? At the current living standards of the United States, would it be a tragedy if we held level for a considerable period? On the big-time scale of human tragedy, that is not the worst of threats.

On overhauling entitlements: I personally would not cut Social Security in terms of its present promises. I think net that's been a credit to our civilization. It's worked with low administrative costs and low fraud and it's given a lot of people their main dignity in old age. And I think as long as we're as rich as we are we should find a way to afford it. I don't think the world comes to an end if we end up supporting Social Security promises with a value added tax. Personally, I don't expect to live to see a value added tax because I'm so old. But I think it's a very desirable tax.

On philanthropy: Generally speaking, I believe Costco (Nasdaq: COST  ) does more for civilization than the Rockefeller Foundation. I think it's a better place. You get a bunch of very intelligent people sitting around trying to do good, and I immediately get kind of suspicious and squirm in my seat. That may be a prejudice of mine which isn't quite fair. But I've seen so much good in the world by people who really created better systems, and I've seen so much folly and stupidity on the part of our major philanthropic groups, including the World Bank, that I really have more confidence in building up the more capitalistic ventures like Costco.

On future bubbles: I think you can count on more booms and busts over your remaining lifetime. How big and with what cyclicality, I can't tell you. I can tell you the best way of coping, which is just to put your head down and behave credibly every day.

On TARP: I think those bailouts were absolutely required to save civilization, and to give you the best chances of solving housing and student loans and other problems. I think that was absolutely required and we are lucky that both administrations were as wise and bold as they were. You shouldn't resent that. You should thank God they did it. And I think if you understand the system and the dangers it was in, you would recognize that that was your blessing.

On life without bailouts: I don't even want to think about how awful it could have been [without bailouts].

I always point out that Albert Einstein got a highly subsidized primary school education in Germany from the Catholic church ... Little Albert Einstein was subsidized by the Catholic church. That is a pretty civilized place. And then Adolf Hitler hits the economy with enough misery and enough disruption, destroyed the currency. God knows what happens. So I think when you have troubles like that you shouldn't be bitching about a little bailout. You should be thinking it should have been bigger. I mean, those people were working for you. And they were in both parties.

On why we bailed out banks but not people: There comes a place where if you just start bailing out all the individuals instead of telling them to adapt, the culture dies. I don't know where it is. But at a certain place, you gotta say to people, "suck it in and cope buddy. Suck it in and cope."

And in the '30s with my family, these families would move into the same house, and they wore the same clothes for a while. They coped. And that was part of how the civilization got through. We do not want a civilization where every hardship we go to the government and say "give me some money. The world is not what I expected." So I think there's danger in just shoveling out money too much to people who say, "my life is a little harder than it used to be." Of course it's a little harder than it used to be! This is normal worldly life. And I think it is very dangerous to assume that what people did to save the whole banking system was wrong, and that it is clearly right to shovel out a lot of money to people who are now short of money. I think we come to a place where everybody has to suck it in and cope.

On health-care spending: In an aging affluent civilization where GDP rises at two or three percent per year per capita, I don't think it matters at all if we spent 20% of GDP on health care. I don't think it matters that much if 20% of the health care is no damn good. You know, like Botox for women for whom intervention is hopeless. I don't think it's our main problem at all. And I think it's quite natural in our particular civilization to have a fair amount spent on health care. If you live to be as old as I am, I'm surrounded by people who their joints hurt so much the pain is unendurable. They're like the Tin Woodman: one hip, one hip, one knee, one knee. Got an infection? 30 days in the hospital. This is expensive. But if that's the way the civilization wants to spend the money, I don't consider that a crazy choice.

On accumulating wealth: They'll say when I die, "How much did Charlie leave?" And the answer will be, "I believe he left it all." Piling it up is not such a big deal when you have to part with it in the end.

To watch the entire interview, click here. Thoughts? Comments? Share 'em below.

Fool contributor Morgan Housel owns shares of Berkshire Hathaway. Berkshire Hathaway and Costco Wholesale are Motley Fool Inside Value picks. Berkshire Hathaway and Costco Wholesale are Motley Fool Stock Advisor selections. The Fool owns shares of Berkshire Hathaway and Costco Wholesale. True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community. The Motley Fool has a disclosure policy.


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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 24, 2010, at 1:41 PM, TMFHousel wrote:

    Note: I'm pretty sure Munger meant that Germany's economy misery and currency destruction is what brought Hitler to power, not the other way around.

  • Report this Comment On September 24, 2010, at 2:54 PM, texirish wrote:

    I understood Charlie to say that the economy misery brought Hitler to power as well.

    A friend of mine has troubles with Silverlight. If anyone finds a transcript of the interview, please post a link on the Fool BRK board.

  • Report this Comment On September 24, 2010, at 3:26 PM, whereaminow wrote:

    A lot of interesting thoughts here. On his strange take that people are "hoarding" gold, where does this fantastic idea come from? What is "hoarding" gold? Does the Federal Reserve count as a gold "hoarder" since it has almost all of the gold held in America (or so it says) under armed guard? An armed guard that is paid for by Charlie Munger's taxes. Wait..... is Charlie Munger a gold hoarder!?? Ah, I guess he was being self-deprecating then!

    Anyway, Charlie Munger, this is for you

    http://caps.fool.com/Blogs/quien-es-mas-machos-gold-bugs/450...

    David in Qatar

  • Report this Comment On September 24, 2010, at 3:34 PM, rationalwalk wrote:

    It was indeed a great appearance and it's awful that Mr. Munger's comments were totally distorted by so many who should have known better.

    Further comments:

    http://www.rationalwalk.com/?p=9789

  • Report this Comment On September 24, 2010, at 4:06 PM, TheDumbMoney wrote:

    Munger's catching tons of flack for the "suck it up" comment. People are morons.

    He's right about the bailouts, too (see above).

  • Report this Comment On September 24, 2010, at 4:27 PM, CPACAPitalist wrote:

    This is an awesome read, got to love straight forward pearls of wisdom from a prolific businessman like this.

    His comments about gold investing are awesome. I love how he doesn't argue that you can make money at it, just that the concept is moronic. Good stuff.

  • Report this Comment On September 24, 2010, at 4:29 PM, CharDAt wrote:

    Mr. Munger is one of the smartest men I've ever been in the presence of and a lot of these are expansions of stuff he's been saying for years. If you just lift one line and take it out of context, you're missing his point in almost any of the answers he gave.

  • Report this Comment On September 24, 2010, at 4:58 PM, MisterRogers wrote:

    Hmm. Reading these edited excerpts, I'm left with the impression that Charlie Munger is a grumpy old man with a touch of dementia. I agree with what he says about how people should tough it out and take a long-term view. Certainly, what we are facing today is not as bad as the Great Depression in the '30s. He's right about politicians and accountants. As far as taxation, though, I don't think anyone's taxes are too low. Some people's taxes are too high, yes, but no one's taxes are too low. Also, why is he so opposed to investing in gold? Any smart person hoards a certain amount of cash to survive unemployment, illness, or other unforseen catastrophes. However, in a world of fiat currency, inflation can eat away at the real value of that reserve. Investing in gold is not a substitute for investing in the markets, but it is a substitute for keeping cash in a low interest savings account or CD. His opinion on Social Security seems contradictory. He says that people survived just fine without entitlements in the '30s, yet claims that entitlements today are wonderful and should be maintained. He seems woefully out of touch with the burden that Social Security places on young workers today, especially the self-employed. I strongly disagree with him on the necessity of the bailouts to save civilization. He trashes politicians and then tells us that they were working for us and that we should thank them for being wise and bold. I just don't get it. He recognizes that centralized decision making in the form of Communism is bad, but he thinks that centralized decision making in the form of government-run entitlements and the vesting of power in the hands of a few government backed mega-banks is good. I guess he just comes from a different generation. Maybe I missed something.

  • Report this Comment On September 24, 2010, at 5:12 PM, dcorley wrote:

    I'm with Charlie. Hoarding gold is being a jerk. And if things got really bad, I'd just come over to your house.

    I really like his closing. How much did Charlie leave?

    Well, I believed he left it all...

  • Report this Comment On September 24, 2010, at 5:37 PM, Truth2Power wrote:

    @MisterRogers: Funny how differently two people can feel about the same piece of text! I personally found his comments to be awesome, insightful, and bordering on profound. I'll agree with you that he's a crotchety old man...I think HE'D agree with you that he's a crotchety old man...but there is much wisdom to be learned from crotchety old men. I don't have space to address all the points in your post, but I find him to be pretty consistent. Maybe it's just the fact that these are excerpts and seem to come from all different directions that is the source of the confusion.

  • Report this Comment On September 24, 2010, at 7:05 PM, BillyTG wrote:

    Munger's take on gold is ridiculous.

    Reminds of politicians and pundits I've seen on TV recently saying things like how it's our "patriotic" duty to pay more taxes.

    If the US is stupid enough to elect stupid politicians who are stupid enough to put stupid legislation and stupid appointees in place, then why am I jerk for recognizing their stupidity? I have a "moral obligation" to keep dollars even if I know they are being devalued by the very institutions that are lying to me? Sorry, that argument doesn't fly with me Mr. Munger. You keep your dollars. I'll keep my gold.

    Other than that, I agree with most of his views, though he totally comes off as a liberal...maybe he has been spending too much time with Warren.

  • Report this Comment On September 24, 2010, at 8:09 PM, profittkr wrote:

    I always appreciate when people are candid even if the opinions they give may not be well received. It also proves that being rich does not mean that you are smarter then everyone else... On gold, maybe valuing a little chunk of metal so highly is silly but if its making you money, I don't see why that makes you a jerk...especially if its a hedge against @#$%^ politicians just printing money to satify the incompetent. And its a lot better then the insurance business where they rape you annually for coverage you hope never to use. On health care, we have to find a rational way out of spending huge $'s to give everyone every last breath that science can provide. Maybe in exchange for those SS benefits, the old folks need to suck it up and climb in the box when they get Alzheimers or something. Not preaching Soylent Green or anything...

  • Report this Comment On September 24, 2010, at 8:48 PM, clydejazz wrote:

    Munger is brilliant, and he's dead on about an infrastructure program, and about taxes, and about social security. He's been there, done it all, and is at an age where he can see what's valuable, and what isn't.

  • Report this Comment On September 24, 2010, at 10:09 PM, brizzlekizzle wrote:

    I have always loved reading on what Munger had to say. Now, after reading this I no longer will be going out of my way to listen to him. Say what you want about it as a whole, but some of the individual statements are, for my generation, dead wrong. He lost touch with people like me, I am more of a fan of Jim Rogers. I do need my role models, and one that tells me its wrong to own gold is not going to inspire me with the problems we have now. Double standard idiots, I can see right through it.

  • Report this Comment On September 24, 2010, at 10:34 PM, Alwayzwrong wrote:

    I'm going to give Mr. Munger the benefit of the doubt, and believe that he was directing "hoarding" to large, institutional investors, not the average citizen.

  • Report this Comment On September 24, 2010, at 11:19 PM, BillyTG wrote:

    @brizzlekizzle,

    I agree. He should look at Berkshire's investments before saying that gold investors are jerks.

    Are gold investors jerks because we are betting that gold will rise in value in relation to the US dollar? If that's why he thinks we are jerks, then he and Buffett are jerks for betting BILLIONS that foreign currencies will rise in value in relation to the US dollar.

    If he has no interest in gold, or thinks it is of little practical value (true), then why does he have an opinion one way or another on those who wish to own gold? Clearly gold hits a nerve with him, but I'm not sure why. The guy made a fortune off of one of the most asinine systems ever (federal reserve and all that it entails), a system that he stated would have failed without bailouts. And he thinks gold investors are jerks for not continuing to buy into our federal paper money press?

    Oh yeah, guess who else is buying gold? China and India and other countries who realize that relying on the US dollar is not a good idea http://caps.fool.com/Blogs/here-comes-the-printing-press/451...

    Munger lost credibility with these comments.

  • Report this Comment On September 24, 2010, at 11:36 PM, at802 wrote:

    Warren Buffet, Charlie Munger, briliant investors and speculators, thats right speculators; but that does not make then genisuses on everything.

    I am tired of hearing these two genisuses run off at the mouth about things they know nothing about.

    The federal government is broke and helicopter Bernake is going to run the printing presses in hyper drive; damn right I am going to keep my gold and silver.

    I am just a working stiff and I would be significantly better off if I did not pay taxes; Warren and Charlie if you do not think you are paying enough taxes then whip out the check book and start writing, and leave the rest of us working stiffs alone.

  • Report this Comment On September 24, 2010, at 11:55 PM, Estrogen wrote:

    In regards to gold, Munger is only trying to point out that gold has no real practical purpose, so to invest is an ego centric approach. At least when one invests in Costco, perhaps one is investing in the standard of living increasing 7x in the last centrury, as Buffet has pointed out. Having said that I bet Munger would have invested in gold himself as a younger man if he thought it would have benefited himself. So, yes a bit hypocritical perhaps, but as a younger man I would have stolen gold to help myself, and now I wouldn't invest in it for that purpose. Yes, people can change and evolve.

  • Report this Comment On September 25, 2010, at 12:30 AM, knighttof3 wrote:

    Munger forgets that nobody responsible for the mess got punished, and that the people bailing the banks out are using the taxpayers' money, not their own. TINSTAAFL.

    This otherwise rational, intelligent and wise man seems to have a huge blind spot when it comes to holding Wall Street responsible for anything. He has lived with those lizards for so long that he has embraced their "lizardry" without question.

  • Report this Comment On September 25, 2010, at 2:09 AM, douglee8 wrote:

    Charlie is the Vice Chairman of the Board of Directors of Berkshire Hathaway, not the Co-Chairman.

  • Report this Comment On September 25, 2010, at 2:49 AM, PoundMutt wrote:

    EVERYONE who make MILLIONS can afford to pay MORE than they do now. Their earning (STEALING?) those millions is NOT a result of THEIR abilities ONLY.

    Social Security, Medicare, medicaid, welfare, unemployment pay, etc. should be abandoned? You lucky ducks (well off SOBs?) think everyone NOT as lucky as you should LIVE IN MISERY AND DIE? AND the elderly eat s#*t and die?

    I am beginning to think that the markets are nothing but PONZI SCHEMES with the last ones out LOSERS!

    Gold has a place in a portfolio but do you goldbugs REALLY think you will get the value of what you spent on it back if THE BOTTOM DROPS OUT and IT'S EVERY MAN FOR HIMSELF?

  • Report this Comment On September 25, 2010, at 3:09 AM, BillyTG wrote:

    @PoundMutt,

    that's kinda the point---if the global economy implodes and every man is fending for himself, gold will be extremely valuable.

    I totally agree with you about the markets being schemes: http://caps.fool.com/player/tmfstockspam.aspx

  • Report this Comment On September 25, 2010, at 5:34 AM, lazytype wrote:

    Yes, he gave a speech, but it wasn't fantastic.

    Lot's of naive, elementary school stuff.

  • Report this Comment On September 25, 2010, at 6:12 AM, mtracy9 wrote:

    Of course Charlie is selective in his examples of Communism. He ignores two of the fastest growing Communist countries in the world -- China and Vietnam. Moreover the poorest country in the Western Hemisphere -- Haiti -- is a capitalist country. There is something to be said for not over simplifying.

  • Report this Comment On September 25, 2010, at 10:14 AM, BillyTG wrote:

    @mtracy9, good point. I've been to China, Vietnam, India, Singapore, and other countries. There is no perfect system, and some systems work better for different cultures and different periods. Even calling Vietnam and China Communist countries is oversimplified in my opinion---their governments are run by the Communist party, but their populations and legislation are far from easily definable as Communist. Munger way oversimplified.

    @varsovia, exactly. He needs to step outside his little bubble to get a little perspective. Jim Rogers's well-traveled, professorial, global-trend-spotting macro insights make Munger's "Costco-is-saving-the-world-and-goldbugs-are-jerks" thoughts look like elementary school nonsense.

  • Report this Comment On September 25, 2010, at 10:28 AM, wealthychef wrote:

    LOL -- only a wealthy man would have as his Great Depression story the time when his grandfather had to give up 1/3 of his savings to save his son-in-law's bank. I can only imagine how hard that must have been. They probably had to fire half their servants too! Shudder...

  • Report this Comment On September 25, 2010, at 11:09 AM, jamo101 wrote:

    Berkshire benefited from TARP. Of course he liked it. So did his buddies at Goldman Sachs. This guy's a creepy old man.

  • Report this Comment On September 25, 2010, at 11:45 AM, none0such wrote:

    Agreed with many posters - not a fantastic speech and much rehashed elementary stuff. One can almost see the sources he reads.

  • Report this Comment On September 25, 2010, at 11:57 AM, Don354 wrote:

    Not being taxed enough? I don't see Charley giving back any of this millions to the government....maybe he doesn't quite trust it. As far as TARP, he can use his billions, not mine!!

  • Report this Comment On September 25, 2010, at 3:30 PM, at802 wrote:

    This Time It's Different

    I remember in the 1970s, there were the nut jobs writing books, newsletters etc. on the coming economic colapse. They, the nut jobs, made a cottage industry into predicting one calamity after another.

    This time it's different, it is not the nut jobs predicting disaster but legitimate mainstream personalties such as Jim Rogers, Peter Schiff, Ron Paul, Lew Rockwell, Mark Faber to name just a few. Anyone not seeing an economic sunami coming is just not paying attention.

    You do not have to be a genius to know with certanity that higher taxes, higher inflation and higher interest rates are coming. How bad is it going to get? I have no idea; anything from prolonged recesion stag-flation of the 70s to hyper inflation and economic colapse is possible. The point being that not being prepared for the coming economic storm would be very foolish.

    Gold and silver should be a part of every portfolio, not as an investment but as a hedge to inflation and dollar devaluation. Munger and Buffet just don't get! Get rid of bonds especially US Tfreasuries. Lighten up on equities keep only the highest quality stocks. Prepare for the worst and hope for the best and don't pay any attention to Warren Buffet or Charlie Munger!

  • Report this Comment On September 25, 2010, at 3:46 PM, conservetrader1 wrote:

    VAT tax is a HORRIBLE idea IMHO.

  • Report this Comment On September 26, 2010, at 8:16 AM, Sum111 wrote:

    Two things come to mind in reading this article.

    The first is if Charlie doesn't think he pays enough taxes, why does he not voluntarily pay more? There is certainly nothing to stop him. Personally I believe I do a far better job of giving to charitable institutions who efficiently use the money in forwarding their mission than the Federal Government does in their inept role of running social programs.

    The second is why is Charlie waiting until he dies to impart his wealth? It seems to me he isn't making much of a sacrifice when he could be doing good things with it in the here and now.

    If thoughts were food I think Charlie gave us a whole banquet to feast on. But keep the antacids handy as this repast is sure to cause a bit of indigestion.

  • Report this Comment On September 26, 2010, at 8:54 AM, bartedsall wrote:

    The problem with "Ex Cathedra" talks like Charlie's is we never get to plumb the depths where the contradictions lie.

    This is not so much a comment on Charlie whom I appreciate but I am getting tired of hearing millionaires -- Obama, Clinton, Pelosi (how did they earn their money), Buffet, Obama tell us we need to pay more taxes. The reduction in taxes were accompanied by a reduction in tax deductions; will those be reinstated? Fundamentally the government has no right to tax beyond that needed for necessity.

    Washington D.C. was built with tax dollars, while many good, diligent people work for the Government (us citizens) they are doing work that is inefficient and need not be done. Congressional staffs are bloated with the "need" of "experts" to frame, and deliver legislation that congresspersons do not understand. Taxes allow congress to buy votes by practicing redistribution of wealth. Obama and Pelosi believe this is a fundamental purpose of government -- Munger appears to agree -- he speaks to "deserve" but at the same time believes SS, Medicare are fundamental rights -- but he is a Capital allocator, he would invest in Costco but not "Rockefeller Foundation"; therefore he must choose a National budget and live within it. Fund SS but give up a large chunk of DOT, DOE, DOD, DOA - save so that the next crises can be controlled at less debt. If "easy money" and bad accounting led to the most recent crisis what crisis looms from current policies?

  • Report this Comment On September 26, 2010, at 12:04 PM, 1365doc wrote:

    He lost my support at his Value added tax comment. What a joke. That is the quickest way to ensure we are no longer a rich nation. I just don't understand these "brilliant" Americans in love with European socialism.

  • Report this Comment On September 26, 2010, at 4:57 PM, lowmaple wrote:

    mtracy9 China WAS communist. It's economic behavior now is as capitalistic as any country and now are beniffiting. Just because they can now dictate policy to the USA instead of the otherway around does not change that fact.

  • Report this Comment On September 26, 2010, at 6:07 PM, ETFsRule wrote:

    "at802 wrote:

    Warren Buffet, Charlie Munger, briliant investors and speculators, thats right speculators; but that does not make then genisuses on everything.

    I am tired of hearing these two genisuses run off at the mouth about things they know nothing about.

    The federal government is broke and helicopter Bernake is going to run the printing presses in hyper drive; damn right I am going to keep my gold and silver."

    You're right, he obviously knows nothing about the economy. Thank god we have you here, to enlighten us with such brilliant and unique insights.

  • Report this Comment On September 26, 2010, at 7:35 PM, rickdal wrote:

    I dont agree with Munger's comments about the bailout of the banks being so universally good. Maybe I am naive, but letting banks and other financial institutions fail is preferable to letting them retain bad loans on their books indefinitely. Isnt this exactly what happened to Japan? Which led to the so called "zombie banks" syndrome? It seems like, in essence, there was a gigantic transfer of wealth from the taxpayers to the banks and presumably to many of the rich. Add to it the Quantitative Easing scam of allowing the FED to buy government bonds from banks (with money they created out of nothing) which the banks in turn, take that money and borrow from the fed at essentially zero percent interest and what? buy back long term government debt? or get interest on reserves that they put back into the FED? They sure as hell are not lending that money that they are getting when they can essentially get free money with no risk.

    It seems like the rationale of the potential financial Armageddon was that I guess "commercial paper" would have completely dried up and that, in turn, would have had a lot of companies that were not financials in nature potentially get in big trouble. Instead of the Treasury and the fed essentially giving money to failed banks and financial institutions why couldnt the fed basically act as "market makers" or guarantee the commercial paper market? It seems then that the financial institutions that should have failed could have failed and most of the rest of america would have been relatively unaffected by all this. Hell, we probably would have by now a more robust lending environment by now, but instead all the big banks are still trying to fix up their balance sheets, all the while, not lending...

    Its interesting how Berkshire being Wells Fargo's biggest investor and their relatively large investment with Goldman Sachs seems to have done pretty well with the bailouts happening. Luck for Munger, I guess...

    Am I missing something?

  • Report this Comment On September 26, 2010, at 8:38 PM, footchester wrote:

    once again, my fellow silly americans, kicking and screaming against their own econmic self-interest. people who will never earn $250K in a decade, railing against taxes that they will never pay. while the people who actually earn much more than that realize that a nominally higher tax rate on upper incomes is not only fair, but will go essentially unnoticed in their income bracket. fascinating.

  • Report this Comment On September 26, 2010, at 8:40 PM, johwell wrote:

    I truly appreciated this interview, as I've appreciated many of Mr. Munger's comments and opinions over the years. However, I think he falls victim to a similar condition of many of his companions. When they look back on the past 50-100 years, they see how far we've come and ask, how could we possibly go an equal distant over the next 50-100 years. While I appreciate the advancement we have experienced over the past decades, I believe we will accomplish as much if not more over the next 100 years. After all, we didn't have cars to move us around faster, computers and the internet to communicate and process information faster etc etc. So, if we are as driven as we've been, we have better tools for cultural advancement. I look forward to seeing what is next.

  • Report this Comment On September 26, 2010, at 8:42 PM, TMFHousel wrote:

    johwell -- best comment I've seen in a while. Bravo!

  • Report this Comment On September 27, 2010, at 12:22 AM, jfrankh57 wrote:

    Alright...Here is my rant about the bailout issues. I have to disagree with him on those. Right now, every CEO with a "too big to fail" industry takes comfort in the face of that mantra now in our lexicon. The structures of the "banks" could have been left intact by placing them in receivership and instituting new governmental bodies...no I am not talking federal government types...I am talking new boards and new executives. How can you say the new people can't run the business when the old people ran them into the ground through their greed and stupidity? There was a little thing called the FDIC which was supposed to protect depositors in these institutions. Personally, I think we would have been better off if the money had been given to John Q Taxpayer. Divvy it up and let Mr. and Ms. Taxpayer use it to pay off home mortgages, credit cards, installment loans, etc. and along the way, the stupid bankers still get bailed out. Call it a one time deal and make sure the regulatory people open their eyes and do the jobs they should have done in the first place to prevent this kind of thing from happening in the future. Fire incompent people and charge backroom dealers for treason when they work out deals to turn a blind eye to maoney making chicanery.

  • Report this Comment On September 27, 2010, at 3:41 AM, 1crow2 wrote:

    (paraphrased) "even if you're right, hoarding gold makes you a jerk." Hey Charlie, you're a billionaireand I'm not. The system can tank and you and Warren and Bill will be A-friggin-OK and the rest of us will be wondering how to come up with that $20 for a loaf of bread. I think gold is overhyped and silver is the way to go; but I'm NOT a jerk for believing that the politicians are busy wrecking the currency and you G-Dd#$ned people who will NEVER worry about eating or getting gas into the car have ZERO business giving us morality lectures. Unless, of course, you'd like to send some of that money you won't be buying gold with to me.

    What a conceited clueless as$ho1e!

  • Report this Comment On September 27, 2010, at 5:11 AM, rmiers wrote:

    For those who think Charlie and Warren are senile, I feel sorry for you.

    I do see a correlation with Buffet and company and other terribly blessed financiers and their end times. Age open's smart men's eyes

    It has a bit of Orsen Wells and his 1939 blockbuster.

    Carnegie scrimped and saved and forced many to work for beggar's pay. As a smart man, he figured it out. He had accumulated the wrong stuff. He went on a spending spree almost unequaled to this day. He tried to make up.

    To form a trust or charity only to control the money and the employees and sparingly dole is evil, very evil. Many do not know that.

    Methinks Charlie and Buffet are far from evil, but they love the game, the important and rewarding game of success, competition, and completion.

    In the game (serious stuff) of life, many say "it will all go to God" or when I'm gone it will be given to the poor.

    What they have missed is the misery that they could have relieved if they had participated DURING their life and success.

    How many? How many?

    It's fine that Warren and Charlie thinks all should pay more but I have never heard of a clear trail or their personal benevolence during their lives.

    I know folks who know them and think highly of them...Good

    I just still don't think jillions of dollars should be sitting in billionaire's philanthropic bank accounts without transparency. I do not wish the panic of Carnegie and Well's character on anyone.

    Don't preach Charlie and Warren! Teach....by example

  • Report this Comment On September 27, 2010, at 11:15 AM, lazytype wrote:

    As for a preacher he speaks good things. Good for everybody.

    What do you call someone with a thick gold chain around his neck. A jerk!

    But someone who invests in the right business and helps it develop, he much more deserves respect.

    Gold does preserve value, but it's doesn't grow... it's a dollar that looses value.

    http://www.finfacts.ie/Private/curency/goldmarketprice.htm

    Gold already seems way too expensive

    Check, 30's, 70's and now (a peak). When a crisis comes gold price takes a dip because you can't eat gold!

    I wouldn't buy it now when everybody is greedy for gold....

  • Report this Comment On September 27, 2010, at 12:55 PM, ziq wrote:

    It's hard to say what his party is, that he's going against. Saying that taxes aren't high enough is definitely going against the Republicans, but everything he says is spoken like a true Democrat.

    To me the only thing he got dead wrong was the progress in the last 100 years versus the next 100 years. I was born in 1953, and the changes I've seen in just the last 25 years have fundamentally changed society much more than anything I saw in the previous 25. Being able to type this comment and have it read instantly (or within 15 minutes) by hundreds of people is just one example. I think it's going to continue to exponentiate.

  • Report this Comment On September 27, 2010, at 1:02 PM, ziq wrote:

    Re the bailouts: I think most pragmatic economists agree that they were morally repugnant, but had to be done. His opinion that while preventing the collapse of the entire world financial system was necessary, saving millions of people from foreclosure wasn't, loses him the sympathy of many Democrats and Tea-partiers alike, for different reasons, but I think it's at least arguable.

  • Report this Comment On September 27, 2010, at 1:57 PM, leohaas wrote:

    Munger is a Republican: http://www.nndb.com/people/599/000161116/, http://en.wikipedia.org/wiki/Charlie_Munger. C'mon Fools, this is not info that is difficult to obtain, unless Google is too difficult to use for you...

    Some great quotes here. Definitely worth bookmarking!

  • Report this Comment On September 28, 2010, at 11:24 AM, mtf00l wrote:

    I just can't shake the strange feeling that after AIG Berkshire Hathaway was the next largest insurer of derivatives.

  • Report this Comment On September 28, 2010, at 11:35 AM, Anysimplefool wrote:

    For those too young, or who never listened to stories of the depression, Munger reflects a basic American philosophy that is slowly dying. Help each other, deal with adversity, be a survivior, and share what you have. It goes directly against the mindless me, me, me, mentality has become so prevalent. Don't raise taxes, just keep selling gov't bonds to push the cost down the road to another generation. Always looking for the quick and easy fix instead of the solution.

    Simple

  • Report this Comment On September 28, 2010, at 11:40 AM, theHedgehog wrote:

    From the article:

    On why we bailed out banks but not people: There comes a place where if you just start bailing out all the individuals instead of telling them to adapt, the culture dies. I don't know where it is. But at a certain place, you gotta say to people, "suck it in and cope buddy. Suck it in and cope."

    I have to disagree to Mr. Munger on this one. Yes, he's right that the culture is at risk of dying when bailing out the people, but is that just an admission that the culture is already dead in the banking industry, or an oversight on his part? Yes, yes, I know that people signed contracts; but people generally don't understand the paper put before them, and the lower class (especially) defer to the well-educated guys in nice suits to understand what's going on well enough to advise them. The flaw, of course, is not having the education to understand that the guy on the other side of the desk is not their advisor; and that's a failure of the predatory banking system, not a failure of their victims.

  • Report this Comment On September 28, 2010, at 1:16 PM, PeyDaFool wrote:

    Charlie's thoughts on solar are very inspiring, but, ultimately he's wrong about the sun. It will eventually burn out. Just wait. In about 4.5 billion years, that sucker will run out of juice and us unlucky ones still left on the planet will have to deal with that.

    Disclosures: Will be shorting solar in about 4.5 billion years.

  • Report this Comment On September 28, 2010, at 1:32 PM, theHedgehog wrote:

    "Charlie's thoughts on solar are very inspiring, but, ultimately he's wrong about the sun. It will eventually burn out."

    Solar is fine if you live near the equator where you have a lot of sun 365 days a year. For those of us in the North: not so much. The problem with *all* of these alternative energy schemes is scalability. Wind works if you have it, but only when you have it. Sun works on part of the planet, but never more than about half the day. Plus, with both wind and sun there are periods when there is sun/wind but there's not enough to get any usable power from it.

    Munger's already addressed the corn-ethanol fiasco. What's left? Coal, oil, and nuclear. When the rest of the energy sources have been squeezed for all they're worth and still come up short, it still comes down to coal, oil, and nuclear - and fewer people, of course, but that will happen as a matter of course when the various population centers outgrow their energy and water supplies. Or, we could all live in squalor like they've elected to do in Delhi and other places.

  • Report this Comment On September 28, 2010, at 7:55 PM, stan8331 wrote:

    It strikes me that there are very, very few people of ANY political persuasion who have first-hand experience of the Great Depression who are ranting against the recent bailouts. Those folks know what an economic system in free-fall really looks like.

    Charlie Munger is a very smart guy. At this point in his life, he clearly feels disinclined to bother filtering reality. As a society, we need more Charlie Mungers.

  • Report this Comment On September 29, 2010, at 1:47 PM, XMFSinchiruna wrote:
  • Report this Comment On September 30, 2010, at 10:31 AM, pedorrero wrote:

    Just remember when they come to take you to the "camp", that they are from the government and they know what's best for you!

  • Report this Comment On October 01, 2010, at 11:49 AM, ikkyu2 wrote:

    Whenever Charlie Munger or Warren Buffett say something, I think, "Easy for him to say." The rest of you ought to get in the same habit - until you make your first billion, at least.

  • Report this Comment On October 01, 2010, at 12:38 PM, eldetorre wrote:

    "Warren and Charlie if you do not think you are paying enough taxes then whip out the check book and start writing, and leave the rest of us working stiffs alone. "

    That is precisely what they are saying. They aren't talking about higher taxes on working stiffs, just the richest of the rich like themselves.

  • Report this Comment On October 01, 2010, at 2:00 PM, gringo35 wrote:

    Hey Uncle Charlie, you might want to re-think some of your elitist rhetoric. Yes in the end we all leave it all behind, but enormously wealthy people sit in a different position in relation to the common man. The common man does not have a tax code that rewards saving and investing real debt free capital, but rather a tax code and money creation system that rewards people in DEBT. It punishes their attempt at building something with a real foundation with ownership from the beginning instead of debt based money. The common man does not have the means to invest money like people with many means who can afford to make bigger bets and achieve bigger returns on where the next bubble will pop up and if they lose oh well it's only money right? No big deal for a Billionaire because inflation of prices over the course of his life does not affect him with the same magnitude that it would affect someone with fewer means when it comes to the basic necessities of life. In the meantime, the common man while sitting and trying to figure out how economies truly work so that he can make wise investments, has his money and potential capital stolen from him through an inherently inflationary money system that rewards only the people who are closest to the spigot on Wall Street and in the halls of Government so they can re-finance their shenanigans in perpetuity. Am I taking my wealth with me in death, no but I am going to make certain the thieves of every generation don't get it either. I don’t know how long I am going to live, but one thing is certain….a dollar 20 years from now (if it still exists) will not buy what it once did. How is that not theft? Gee and he wonders why Gold is $1310 / oz, un freakin believable….. What a Jerk!!!

  • Report this Comment On October 01, 2010, at 8:06 PM, BobbieM91 wrote:

    I read the quips and the rants about the talk by Munger. Americans really need to wake up. I don't agree with the bailouts, but we really didn't have a choice at the time. We can take steps to see that it doesn't happen again, but the 500+ in Washington DC do not want to do anything that might lose them a vote or 2 even if it is in the best interest of the country. We need to get rid of the government excesses and balance the budget! I am a firm believer in cutting the government to a minimum, no pension, minimal pay for elected officials and cutting all programs that are not essential and allowing the states to collect the extra saving to help themselves. Socialism has never worked. We need to get out of the idea of welfare for everyone and back to work, even if it is that minimum wage. I worked for $1/hr to support 2 kids. I didn't have much but it kept a roof over our head and beans/potatoes and peanut butter on the table.

    We can hoard gold (buy and keep) but hoarding will serve no purpose at this time as the price is so high and is doomed to fall. Also, even us little guys can invest in stocks if we do our homework. I lost some in the "bust" but was back to + within 6 months (thanks to the MF and their teachings) and I am definately not rich! As a matter of fact, I have been unemployed for 4 months now, and have been living on my savings while trying to find a job. I have "sucked it in" to get by for the time being. We all, including the government, need to get rid of the excesses. It is called back to basics.

    As to health care, we are going to have to rein in the excess. if you can't pay for the extras, you will have to do without. Basic care is needed along with prevention, but all the semi-elective stuff needs to be self pay. I am "old" and know that I will not be able to afford to have anything done unless it is necessary. Medicare paying for experimental treatments or treatments that prolong the life of an 85 y/o for 1 month at a cost of $100,000 or more is a waste of tax payers dollars. What ever happened to a dignified death? Where is Kavorkian when you need him?

    There were many pearls of wisdom in the comments by Munger. One of them was easy money is corrupting, just look at all who have won the lottery, where are they today?

    My big disagreement with him is on charity. If you don't give back from the gains, what good are the gains and what good are you doing for your fellow man. Charity is supposed to be done by those who can. I am a firm believer in charity, but not where it costs more to give than the amount given as a lot of organized charitable groups do. I actually give money to those in need but on my own so that I know where it went and to whom and why. There are many families out there that need help, and $100 may be the difference of eating or not for some who don't qualitfy for state programs.

  • Report this Comment On October 29, 2010, at 4:12 PM, TopAustrianFool wrote:

    "That is precisely what they are saying. They aren't talking about higher taxes on working stiffs, just the richest of the rich like themselves."

    Yes... that is what Fidel Castro started saying. Then he ran out of rich people.

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