Thoughts on Charlie Munger's recent comments?

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Vision
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Thoughts on Charlie Munger's recent comments?

Post by Vision » Thu Feb 13, 2020 1:45 pm

https://www.cnbc.com/amp/2020/02/12/cha ... xcess.html
"I think there are lots of troubles coming," he said at the Los Angeles-based Daily Journal annual shareholders meeting. "There's too much wretched excess."
"In China, … they love to gamble in stocks. This is really stupid," Munger said. "It's hard to imagine anything dumber than the way the Chinese hold stocks."
"It's ridiculous," Munger said, noting EBITDA — which is short for earnings before interest, taxes, depreciation and amortization — does not accurately reflect how much money a company makes, unlike traditional earnings. "Think of the basic intellectual dishonesty that comes when you start talking about adjusted EBITDA. You're almost announcing you're a flake."
Basically he comes as closes as possible to saying "this is a bubble" without saying it.

rockstar
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Re: Thoughts on Charlie Munger's recent comments?

Post by rockstar » Thu Feb 13, 2020 1:49 pm

Vision wrote:
Thu Feb 13, 2020 1:45 pm
https://www.cnbc.com/amp/2020/02/12/cha ... xcess.html
"I think there are lots of troubles coming," he said at the Los Angeles-based Daily Journal annual shareholders meeting. "There's too much wretched excess."
"In China, … they love to gamble in stocks. This is really stupid," Munger said. "It's hard to imagine anything dumber than the way the Chinese hold stocks."
"It's ridiculous," Munger said, noting EBITDA — which is short for earnings before interest, taxes, depreciation and amortization — does not accurately reflect how much money a company makes, unlike traditional earnings. "Think of the basic intellectual dishonesty that comes when you start talking about adjusted EBITDA. You're almost announcing you're a flake."
Basically he comes as closes as possible to saying "this is a bubble" without saying it.
My take away from those is: frothy market, don’t invest in China, and don’t trust ridiculous earning calculations. The first and the last remind me of the financial engineering before Enron blew up. But now they’re directly trying to deceive you.

Presintense
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Re: Thoughts on Charlie Munger's recent comments?

Post by Presintense » Thu Feb 13, 2020 2:12 pm

Vision wrote:
Thu Feb 13, 2020 1:45 pm
https://www.cnbc.com/amp/2020/02/12/cha ... xcess.html
"I think there are lots of troubles coming," he said at the Los Angeles-based Daily Journal annual shareholders meeting. "There's too much wretched excess."
"In China, … they love to gamble in stocks. This is really stupid," Munger said. "It's hard to imagine anything dumber than the way the Chinese hold stocks."
"It's ridiculous," Munger said, noting EBITDA — which is short for earnings before interest, taxes, depreciation and amortization — does not accurately reflect how much money a company makes, unlike traditional earnings. "Think of the basic intellectual dishonesty that comes when you start talking about adjusted EBITDA. You're almost announcing you're a flake."
Basically he comes as closes as possible to saying "this is a bubble" without saying it.
Do you think he’s right?
Performance = Potential - Distraction

Pierre Delecto
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Re: Thoughts on Charlie Munger's recent comments?

Post by Pierre Delecto » Thu Feb 13, 2020 2:18 pm

I say just ignore all of this talk. Keep buying per your plan. It all averages out in end over the long haul.

YearTrader
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Re: Thoughts on Charlie Munger's recent comments?

Post by YearTrader » Thu Feb 13, 2020 2:35 pm

If we view the points together -- China would have been a great candidate to diversify away some of the worrisome that the US is at a mid-late stage of the economic cycle. But passive indexing doesn't work well in China (active funds may be worse). Hopefully this will get better when more international institutional players join the Chinese stock market and more people realize indexing is a better idea.

wolf359
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Re: Thoughts on Charlie Munger's recent comments?

Post by wolf359 » Thu Feb 13, 2020 2:36 pm

Presintense wrote:
Thu Feb 13, 2020 2:12 pm
Vision wrote:
Thu Feb 13, 2020 1:45 pm
https://www.cnbc.com/amp/2020/02/12/cha ... xcess.html
"I think there are lots of troubles coming," he said at the Los Angeles-based Daily Journal annual shareholders meeting. "There's too much wretched excess."
"In China, … they love to gamble in stocks. This is really stupid," Munger said. "It's hard to imagine anything dumber than the way the Chinese hold stocks."
"It's ridiculous," Munger said, noting EBITDA — which is short for earnings before interest, taxes, depreciation and amortization — does not accurately reflect how much money a company makes, unlike traditional earnings. "Think of the basic intellectual dishonesty that comes when you start talking about adjusted EBITDA. You're almost announcing you're a flake."
Basically he comes as closes as possible to saying "this is a bubble" without saying it.
Do you think he’s right?
I wouldn't second-guess Charlie Munger any more than I'd second-guess his business partner Warren Buffett. However, I interpret his comments to mean that we're going through an extended bull market, and there's a lot of excessive optimism going on. When the downturn comes, there's a lot of room to fall. I agree with that.

It doesn't speak to when or how it all might end.

Make sure you're prepared for the market to turn. Winter is coming. Eventually.

Teague
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Re: Thoughts on Charlie Munger's recent comments?

Post by Teague » Thu Feb 13, 2020 2:38 pm

Buffett and Munger have despised using EBITDA, and have said as much, for as long as I can remember. 20 years or more.

Buying and selling stocks as gambling/speculation is indeed a dumb idea, and I think we all agree about that. That's not new.

The bit about "lots of troubles coming" is completely without context. All a quick search turns up is repeated parroting of that snippet by the likes of MarketWatch, Business Insider, and other such purveyors of financial tripe. Worthless at best.

Click bait. Noise. The usual.
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senex
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Re: Thoughts on Charlie Munger's recent comments?

Post by senex » Thu Feb 13, 2020 3:07 pm

Charlie is quite forthright, but that doesn't mean he suggests "doing something" like going to cash. He consistently says things along the lines of this quote from the 2017 Daily Journal, when someone asked about a time his old investment fund dropped 50%:
That’s a good lesson, that’s a good question. What happened is the value of my partnership, that I was running, went down by 50% in one year. Now the market went down 40% or something. It was a once in 30 year recession; monopoly newspapers were selling at 3-4x earnings. And at the bottom tick I was down from the peak 50%, or right about that.

And that has happened to me 3 times with my Berkshire stock. So I regard it as a part of manhood: that if you’re going to be in this game for the long haul, which is the way to do it, you better be able to handle a 50% decline without fussing too much about it. So my lesson to all of you is to conduct your life so that you can handle a 50% decline with aplomb and grace. Don’t try to avoid it. It will come. In fact, if it doesn’t come, I would say you aren’t being aggressive enough.

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TheTimeLord
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Re: Thoughts on Charlie Munger's recent comments?

Post by TheTimeLord » Thu Feb 13, 2020 3:20 pm

rockstar wrote:
Thu Feb 13, 2020 1:49 pm
Vision wrote:
Thu Feb 13, 2020 1:45 pm
https://www.cnbc.com/amp/2020/02/12/cha ... xcess.html
"I think there are lots of troubles coming," he said at the Los Angeles-based Daily Journal annual shareholders meeting. "There's too much wretched excess."
"In China, … they love to gamble in stocks. This is really stupid," Munger said. "It's hard to imagine anything dumber than the way the Chinese hold stocks."
"It's ridiculous," Munger said, noting EBITDA — which is short for earnings before interest, taxes, depreciation and amortization — does not accurately reflect how much money a company makes, unlike traditional earnings. "Think of the basic intellectual dishonesty that comes when you start talking about adjusted EBITDA. You're almost announcing you're a flake."
Basically he comes as closes as possible to saying "this is a bubble" without saying it.
My take away from those is: frothy market, don’t invest in China, and don’t trust ridiculous earning calculations. The first and the last remind me of the financial engineering before Enron blew up. But now they’re directly trying to deceive you.
Are you sure?

https://www.forbes.com/sites/sergeikleb ... 44562683b5
While the U.S. has the largest economy, “the strongest companies in the world are not in America,” Munger, 96, said at the annual meeting of Daily Journal Corp.—the Los Angeles newspaper company where he serves as chairman. “I think Chinese companies are stronger than ours and are growing faster.”
https://www.cnbc.com/2018/05/08/charlie ... ities.html
Warren Buffett’s longtime investing partner Charlie Munger thinks Americans should look for opportunities in China, where Berkshire Hathaway has invested in electric automaker BYD.

“American investors are missing China,” Munger said Saturday in response to a question at Berkshire’s annual shareholder meeting. “It just looks too hard, sitting in Omaha, to outsmart the Chinese market. But I think you’re absolutely right. It’s where they should be looking.”
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]

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Teriyaki
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Re: Thoughts on Charlie Munger's recent comments?

Post by Teriyaki » Thu Feb 13, 2020 3:52 pm

If you listen to the actual session, Munger actually thinks that Chinese companies will do better than American ones in the future. It was just the Chinese attitude towards gambling that he didn't like. Munger has been bullish on China for a long time now.

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bligh
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Re: Thoughts on Charlie Munger's recent comments?

Post by bligh » Thu Feb 13, 2020 4:02 pm

He Thinks Chinese investors should buy and hold the companies that look like promising investments. Considering how Berkshire Hathaway is run, I dont find his opinion on frequent trading in China surprising in the least.

Perhaps it is just that Chinese investors are relatively new to this type of investing and are behaving much as investors in the west (and in Japan) did not too long ago. They will settle down over the next few years (or decades) as they look back at their holdings and realize they would have been far better off just buying and holding the stocks instead of trading them frequently.

In fact, that is how it was for me as well. I did a bunch of trading early on in my investing career, and then changed my behavior after I looked back and realized I would have been far better of just buying and holding.

bck63
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Re: Thoughts on Charlie Munger's recent comments?

Post by bck63 » Thu Feb 13, 2020 4:49 pm

I know nothing about the issue of investing in China, but I have a thought, or a question, if you will indulge me. Does the fact that there are amazing companies in China mean that it will be reflected in the Chinese stock market? Can we trust the Communist government to be transparent enough to let people participate in an honest way and is the real value reflected in their stock prices?

I just don't trust the Chinese government.
Last edited by bck63 on Thu Feb 13, 2020 5:05 pm, edited 1 time in total.

JBTX
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Re: Thoughts on Charlie Munger's recent comments?

Post by JBTX » Thu Feb 13, 2020 4:50 pm

I think he is probably right on the amount of excess. I absolutely agree on EBITDA. It is actually worse, now it is adjusted EBITDA, basically where you add back various non recurring items (non recurring as in monthly, but in reality you will always have these).

TBillT
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Re: Thoughts on Charlie Munger's recent comments?

Post by TBillT » Thu Feb 13, 2020 5:35 pm

When he was talking about China companies being stronger, I was thinking about Boeing and other USA companies seemingly losing their mojo

I am hoping those crazy investors are investing in USA markets though., perhaps they are not exposed to the fads of USA investors

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Re: Thoughts on Charlie Munger's recent comments?

Post by bondsr4me » Thu Feb 13, 2020 5:42 pm

wolf359 wrote:
Thu Feb 13, 2020 2:36 pm
Presintense wrote:
Thu Feb 13, 2020 2:12 pm
Vision wrote:
Thu Feb 13, 2020 1:45 pm
https://www.cnbc.com/amp/2020/02/12/cha ... xcess.html
"I think there are lots of troubles coming," he said at the Los Angeles-based Daily Journal annual shareholders meeting. "There's too much wretched excess."
"In China, … they love to gamble in stocks. This is really stupid," Munger said. "It's hard to imagine anything dumber than the way the Chinese hold stocks."
"It's ridiculous," Munger said, noting EBITDA — which is short for earnings before interest, taxes, depreciation and amortization — does not accurately reflect how much money a company makes, unlike traditional earnings. "Think of the basic intellectual dishonesty that comes when you start talking about adjusted EBITDA. You're almost announcing you're a flake."
Basically he comes as closes as possible to saying "this is a bubble" without saying it.
Do you think he’s right?
I wouldn't second-guess Charlie Munger any more than I'd second-guess his business partner Warren Buffett. However, I interpret his comments to mean that we're going through an extended bull market, and there's a lot of excessive optimism going on. When the downturn comes, there's a lot of room to fall. I agree with that.

It doesn't speak to when or how it all might end.

Make sure you're prepared for the market to turn. Winter is coming. Eventually.
+10

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btq96r
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Re: Thoughts on Charlie Munger's recent comments?

Post by btq96r » Thu Feb 13, 2020 6:09 pm

I agree with what Mr. Munger said. But he's also not giving any grand and wise thoughts beyond the axiomatic in this recent engagement.

We all know a recession is coming, we can only think we know when. I'm not given to the prediction game beyond thinking the last ten years have been too good not to have a hard fall when that event comes. Not 2007-2008 hard, but well worse than 2018 I think.

Vis a vis China, I don't trust their government. The woes with their banks gives me enough pause to doubt the entire country has stability even close to what they try to project.

I've seen EBITDA used as spin way too much in my day job. Too many people put blind faith in it over actually trying understand a company and it's operating model to help guide decisions...probably because the latter is hard.
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Sconie
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Re: Thoughts on Charlie Munger's recent comments?

Post by Sconie » Thu Feb 13, 2020 6:24 pm

All the commentary relative to EBITDA makes me think back to the days of Enron......"Earnings Before I Tricked the Damn Auditor." :wink:
I know you think you understand what you thought I said but I'm not sure you realize that what you heard is not what I meant. - Alan Greenspan

DesertGator
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Re: Thoughts on Charlie Munger's recent comments?

Post by DesertGator » Thu Feb 13, 2020 7:04 pm

I prefer John Bogle's advice over Charlie Mungers, and I don't like his politics either.

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Re: Thoughts on Charlie Munger's recent comments?

Post by Oakwood42 » Thu Feb 13, 2020 7:06 pm

Pierre Delecto wrote:
Thu Feb 13, 2020 2:18 pm
I say just ignore all of this talk. Keep buying per your plan. It all averages out in end over the long haul.
Wow - just wanted to say that is an excellent user name!

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Re: Thoughts on Charlie Munger's recent comments?

Post by Triple digit golfer » Thu Feb 13, 2020 7:15 pm

I am a Controller and I agree with him about EBITDA. I hate it.

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Re: Thoughts on Charlie Munger's recent comments?

Post by rockstar » Thu Feb 13, 2020 7:17 pm

Sconie wrote:
Thu Feb 13, 2020 6:24 pm
All the commentary relative to EBITDA makes me think back to the days of Enron......"Earnings Before I Tricked the Damn Auditor." :wink:
That’s awesome.

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btq96r
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Re: Thoughts on Charlie Munger's recent comments?

Post by btq96r » Thu Feb 13, 2020 7:24 pm

Sconie wrote:
Thu Feb 13, 2020 6:24 pm
"Earnings Before I Tricked the Damn Auditor."
Much obliged. I'll be incorporating this into my kit bag of witty retorts.
Moderation is for Canadians.

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IlikeJackB
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Re: Thoughts on Charlie Munger's recent comments?

Post by IlikeJackB » Thu Feb 13, 2020 8:38 pm

DesertGator wrote:
Thu Feb 13, 2020 7:04 pm
I prefer John Bogle's advice over Charlie Mungers, and I don't like his politics either.
Who cares whether you like his politics?
"Do what you will, the capital is at hazard." Justice Samuel Putnam, Harvard College vs Amory, 1830. The "Prudent Man Rule."

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JoMoney
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Re: Thoughts on Charlie Munger's recent comments?

Post by JoMoney » Thu Feb 13, 2020 8:46 pm

Oakwood42 wrote:
Thu Feb 13, 2020 7:06 pm
Pierre Delecto wrote:
Thu Feb 13, 2020 2:18 pm
I say just ignore all of this talk. Keep buying per your plan. It all averages out in end over the long haul.
Wow - just wanted to say that is an excellent user name!
It's certainly funny. Even funnier if it actually was the notable person who that online handle was attributed to (but that guy certainly isn't a Boglehead).

Regarding the Munger comments, I didn't see anything in what was quoted as being unusual or unlike comments Charlie Munger has been saying about accounting/reporting practices for decades. Certainly don't see any reason to read into it as talking around saying things are in a "bubble". Speaking bluntly is more Charlie's way.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

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Re: Thoughts on Charlie Munger's recent comments?

Post by Presintense » Thu Feb 13, 2020 9:03 pm

wolf359 wrote:
Thu Feb 13, 2020 2:36 pm
Presintense wrote:
Thu Feb 13, 2020 2:12 pm
Vision wrote:
Thu Feb 13, 2020 1:45 pm
https://www.cnbc.com/amp/2020/02/12/cha ... xcess.html
"I think there are lots of troubles coming," he said at the Los Angeles-based Daily Journal annual shareholders meeting. "There's too much wretched excess."
"In China, … they love to gamble in stocks. This is really stupid," Munger said. "It's hard to imagine anything dumber than the way the Chinese hold stocks."
"It's ridiculous," Munger said, noting EBITDA — which is short for earnings before interest, taxes, depreciation and amortization — does not accurately reflect how much money a company makes, unlike traditional earnings. "Think of the basic intellectual dishonesty that comes when you start talking about adjusted EBITDA. You're almost announcing you're a flake."
Basically he comes as closes as possible to saying "this is a bubble" without saying it.
Do you think he’s right?
I wouldn't second-guess Charlie Munger any more than I'd second-guess his business partner Warren Buffett. However, I interpret his comments to mean that we're going through an extended bull market, and there's a lot of excessive optimism going on. When the downturn comes, there's a lot of room to fall. I agree with that.

It doesn't speak to when or how it all might end.

Make sure you're prepared for the market to turn. Winter is coming. Eventually.
It’s not as much second guessing either of them as it is confusion over their conflicting statements.

When or how what all might end? The bull market? Will the end of this bull market be the end of bull markets? Because THAT would scare the you know what out of me.

Isn’t asset allocation explicitly for changing market conditions or is there something extra that I am overlooking?

Winter is coming in Australia. But for those of us in the Midwest US it’s been here for months and spring had better be what’s coming... followed by winter again eventually.

As individual investors I believe you and I share the same concerns. With each other, not with Charlie Munger and Warren Buffet.
Performance = Potential - Distraction

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TheTimeLord
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Re: Thoughts on Charlie Munger's recent comments?

Post by TheTimeLord » Thu Feb 13, 2020 9:05 pm

This thread is very illuminating about everything but Mr. Munger.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]

wolf359
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Re: Thoughts on Charlie Munger's recent comments?

Post by wolf359 » Fri Feb 14, 2020 8:21 am

Presintense wrote:
Thu Feb 13, 2020 9:03 pm

Winter is coming in Australia. But for those of us in the Midwest US it’s been here for months and spring had better be what’s coming... followed by winter again eventually.
My handle is based on Star Trek, so please forgive me if I occasionally make a TV pop culture reference.

"Winter is coming" is the motto of the Stark family on the HBO series "Game of Thrones." In that world, seasons last for an unknown period of time. Even when times are good in the summer, the patriarch was trying to ensure his family was ready for the bad times he knew would eventually come.

Most of that series is about the winter (both metaphorical and the actual season) that hits that family.

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Re: Thoughts on Charlie Munger's recent comments?

Post by flaccidsteele » Fri Feb 14, 2020 8:54 am

wolf359 wrote:
Fri Feb 14, 2020 8:21 am
Presintense wrote:
Thu Feb 13, 2020 9:03 pm

Winter is coming in Australia. But for those of us in the Midwest US it’s been here for months and spring had better be what’s coming... followed by winter again eventually.
My handle is based on Star Trek, so please forgive me if I occasionally make a TV pop culture reference.

"Winter is coming" is the motto of the Stark family on the HBO series "Game of Thrones." In that world, seasons last for an unknown period of time. Even when times are good in the summer, the patriarch was trying to ensure his family was ready for the bad times he knew would eventually come.

Most of that series is about the winter (both metaphorical and the actual season) that hits that family.
Nothing goes over my head. My reflexes are too fast. I would catch it
The US market always recovers. It’s never different this time. Retired in my 40s. Investing is a simple game of rinse and repeat

wolf359
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Re: Thoughts on Charlie Munger's recent comments?

Post by wolf359 » Fri Feb 14, 2020 9:01 am

flaccidsteele wrote:
Fri Feb 14, 2020 8:54 am
wolf359 wrote:
Fri Feb 14, 2020 8:21 am
Presintense wrote:
Thu Feb 13, 2020 9:03 pm

Winter is coming in Australia. But for those of us in the Midwest US it’s been here for months and spring had better be what’s coming... followed by winter again eventually.
My handle is based on Star Trek, so please forgive me if I occasionally make a TV pop culture reference.

"Winter is coming" is the motto of the Stark family on the HBO series "Game of Thrones." In that world, seasons last for an unknown period of time. Even when times are good in the summer, the patriarch was trying to ensure his family was ready for the bad times he knew would eventually come.

Most of that series is about the winter (both metaphorical and the actual season) that hits that family.
Nothing goes over my head. My reflexes are too fast. I would catch it
:sharebeer

wolf359
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Re: Thoughts on Charlie Munger's recent comments?

Post by wolf359 » Fri Feb 14, 2020 9:43 am

Presintense wrote:
Thu Feb 13, 2020 9:03 pm

It’s not as much second guessing either of them as it is confusion over their conflicting statements.

When or how what all might end? The bull market? Will the end of this bull market be the end of bull markets? Because THAT would scare the you know what out of me.

Isn’t asset allocation explicitly for changing market conditions or is there something extra that I am overlooking?

Winter is coming in Australia. But for those of us in the Midwest US it’s been here for months and spring had better be what’s coming... followed by winter again eventually.

As individual investors I believe you and I share the same concerns. With each other, not with Charlie Munger and Warren Buffet.
You also asked the question about what else you can do if market conditions change.

You are correct in that asset allocations should be selected so that you can stick with it in good times and bad (because when you're going through them, you don't know which one is coming around the corner.)

However, when times are good, you can do the following:

1) Stress test your finances. Project how things would look if:
a. The market dropped by 20%
b. The market dropped by 50%
c. You lose your job
d. Everyone in your household lost their job
e. b and d simultaneously

2) Set up contingency plans. If the events in 1) happen, how would you react? What's your "hang time"? (Football reference to the amount of time the ball hangs in the air without any support) How long can you sustain your family with no outside support? Can you structurally change your expenses to extend your hang time? Are you close enough to financial independence that you can sustain yourself indefinitely? Is your emergency fund fully funded? If you're planning on using loans in an emergency, would that work in the worst case scenarios (in 2008, HELOCs got cancelled.)

3) Review your Investor Policy Statement. Does it need to be updated?

4) Stress test your finances with positive and negative life events. What would you do if:
a. The market increased by 30% again this year.
b. You got an unexpected inflow of cash. What would you do with it?
c. Your car dies and must be replaced. How do you raise the money?

I am also concerned that the Fed actions last year to boost the economy and the stock market have restricted their ability to respond when the next recession hits. They can't lower interest rates much before going negative, they've been buying on the market (but not calling it QE), and the deficit limits the ability to increase federal spending. If the next recession gets really bad, I'm not sure what's going to happen. And if the economy as a whole gets that bad, I'm not sure what individual actions could be taken to shelter from that. Stocks, bonds, real estate, cash, international investing -- all might be ineffective.

BSBHead
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Re: Thoughts on Charlie Munger's recent comments?

Post by BSBHead » Fri Feb 14, 2020 9:44 am

Love Charlie and think he's right on. Still, whether he's 100% right or 100% wrong my portfolio allocation remains focused on the long-term and will not change.

jacoavlu
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Re: Thoughts on Charlie Munger's recent comments?

Post by jacoavlu » Fri Feb 14, 2020 9:56 am

you can listen to the whole thing here instead of reading someone else's characterizations of his comments

https://www.youtube.com/watch?v=HS8neXkNnhw

Charlie is always interesting.

his comments about EBIDTA were about "adjusted EBIDTA"

listening to the whole thing I did not get the sense at all that he thinks current markets are a bubble

a questioner brought up the nifty fifty and he said today's markets are nothing like that

he also had many more good things to say about China than bad things

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Re: Thoughts on Charlie Munger's recent comments?

Post by Caduceus » Fri Feb 14, 2020 11:17 am

jacoavlu wrote:
Fri Feb 14, 2020 9:56 am
you can listen to the whole thing here instead of reading someone else's characterizations of his comments

https://www.youtube.com/watch?v=HS8neXkNnhw

Charlie is always interesting.

his comments about EBIDTA were about "adjusted EBIDTA"

listening to the whole thing I did not get the sense at all that he thinks current markets are a bubble

a questioner brought up the nifty fifty and he said today's markets are nothing like that

he also had many more good things to say about China than bad things
Take a look at the financial statements of the Daily Journal Corp, which Munger controls. I find it more telling to look at what people are doing than what they are saying. He's actually way more bullish on the market that Warren Buffett right now. I can't remember the exact numbers, but if you pull the latest 10-Q, he has like 200 million of marketable securities to maybe 10 million or less in cash. In the run up to the Great Crash a decade ago, Charlie Munger was keeping an insane amount of cash that he suddenly deployed when the markets dropped. He actually got much luckier than Buffett too. He entered most of his positions later than Buffett did at a lower cost basis.

The Daily Journal Corp's cash balance was so staggering Buffett was joking that he was sad Munger would not allow him to invest in it. He wanted a piece of that so badly, lol

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Ramjet
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Re: Thoughts on Charlie Munger's recent comments?

Post by Ramjet » Fri Feb 14, 2020 11:22 am

Charlie Munger is 96, I'm not basing any actions off this

Caduceus
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Re: Thoughts on Charlie Munger's recent comments?

Post by Caduceus » Fri Feb 14, 2020 11:22 am

Ramjet wrote:
Fri Feb 14, 2020 11:22 am
Charlie Munger is 96, I'm not basing any actions off this
Have you read the latest WSJ interview of Charlie Munger? He's sharper at 96 than 99.9% of 25-year olds out there. Really.

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Ramjet
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Re: Thoughts on Charlie Munger's recent comments?

Post by Ramjet » Fri Feb 14, 2020 11:28 am

Caduceus wrote:
Fri Feb 14, 2020 11:22 am
Ramjet wrote:
Fri Feb 14, 2020 11:22 am
Charlie Munger is 96, I'm not basing any actions off this
Have you read the latest WSJ interview of Charlie Munger? He's sharper at 96 than 99.9% of 25-year olds out there. Really.
I haven't, i'll check it out. Let's not kid ourselves though, at 96 it's a full time job just to stay alive let alone predict economic events.

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Re: Thoughts on Charlie Munger's recent comments?

Post by Caduceus » Fri Feb 14, 2020 11:31 am

Ramjet wrote:
Fri Feb 14, 2020 11:28 am
Caduceus wrote:
Fri Feb 14, 2020 11:22 am
Ramjet wrote:
Fri Feb 14, 2020 11:22 am
Charlie Munger is 96, I'm not basing any actions off this
Have you read the latest WSJ interview of Charlie Munger? He's sharper at 96 than 99.9% of 25-year olds out there. Really.
I haven't, i'll check it out. Let's not kid ourselves though, at 96 it's a full time job just to stay alive let alone predict economic events.
OK. You can invest your spare cash with the best 25 year old you can find. I'll put my money with Charlie Munger.

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Ramjet
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Re: Thoughts on Charlie Munger's recent comments?

Post by Ramjet » Fri Feb 14, 2020 11:34 am

Caduceus wrote:
Fri Feb 14, 2020 11:31 am
Ramjet wrote:
Fri Feb 14, 2020 11:28 am
Caduceus wrote:
Fri Feb 14, 2020 11:22 am
Ramjet wrote:
Fri Feb 14, 2020 11:22 am
Charlie Munger is 96, I'm not basing any actions off this
Have you read the latest WSJ interview of Charlie Munger? He's sharper at 96 than 99.9% of 25-year olds out there. Really.
I haven't, i'll check it out. Let's not kid ourselves though, at 96 it's a full time job just to stay alive let alone predict economic events.
OK. You can invest your spare cash with the best 25 year old you can find. I'll put my money with Charlie Munger.
I will put it in an index fund myself

Dandy
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Re: Thoughts on Charlie Munger's recent comments?

Post by Dandy » Fri Feb 14, 2020 11:36 am

I think we are in a bubble. Bubbles often take some time to grow to their bursting point. Very low interest rates seem to be a reason to be concerned .. people, banks and businesses tend to do unwise things too often when credit is cheap.

If I were into making market moves I'd have my equities at the lower end of my target range.

When/if the bubble bursts and if that causes a lot of economic pain lots of jobs may be on the hit list. I remember thinking how can a mortgage crisis cause me to lose my job in mutual fund management? Oh, my services are no longer needed? Remember, there is someone besides you that often determines your actual retirement date.

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Re: Thoughts on Charlie Munger's recent comments?

Post by Presintense » Fri Feb 14, 2020 11:51 am

wolf359 wrote:
Fri Feb 14, 2020 9:43 am

...all might be ineffective.
Thanks wolf359!

I couldn't agree more!

Especially since I retired a couple years ago at age 49. That's not bragging. It's me having experienced exactly scenarios you mention. No jobs for either of us. New car. Etc. Just not the 50% drop yet but it's likely coming someday.

I guess I have an emergency fund for a reason. I have an allocation based upon risk tolerance for a reason. And I just don't understand how Charlie Munger's comments, which are more like sound bytes (the cnbc article doesn't provide the context in which the statements were made so it's difficult to really draw any conclusion from them) are relevant to individual investors in any way. Most of the angst Charlie Munger and Warren Buffet have increasingly expressed as of late has to do with them not being able to get discounts in purchasing companies because competitive bidders are willing to pay more closely what the company is said to be worth. Now, anyone could argue that valuations have become less realistic. In fact, this is what Mr Munger and Mr Buffet tell their shareholders is part of the puzzle that is preventing them from getting the kinds of deals they are used to. But as a guy who is trying to (generally speaking) take what the market gives (and that has been plenty overall when good and bad are combined) I think I disregard Charlie Munger's comments, not because they don't matter, but because they don't matter to me. No disrespect to anyone here, Charlie Munger or Warren Buffet. I'm just trying to learn the reasons that it might be prudent to change my thinking.
Performance = Potential - Distraction

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Re: Thoughts on Charlie Munger's recent comments?

Post by TheTimeLord » Fri Feb 14, 2020 11:53 am

Caduceus wrote:
Fri Feb 14, 2020 11:22 am
Ramjet wrote:
Fri Feb 14, 2020 11:22 am
Charlie Munger is 96, I'm not basing any actions off this
Have you read the latest WSJ interview of Charlie Munger? He's sharper at 96 than 99.9% of 25-year olds out there. Really.
Charlie is a treasury and quite funny. Love listening to him and will always consider what he says but I make my own decisions.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]

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Re: Thoughts on Charlie Munger's recent comments?

Post by Presintense » Fri Feb 14, 2020 11:55 am

jacoavlu wrote:
Fri Feb 14, 2020 9:56 am
you can listen to the whole thing here instead of reading someone else's characterizations of his comments

https://www.youtube.com/watch?v=HS8neXkNnhw

Charlie is always interesting.

his comments about EBIDTA were about "adjusted EBIDTA"

listening to the whole thing I did not get the sense at all that he thinks current markets are a bubble

a questioner brought up the nifty fifty and he said today's markets are nothing like that

he also had many more good things to say about China than bad things
Thank you for the link! Context is critical.
Performance = Potential - Distraction

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Re: Thoughts on Charlie Munger's recent comments?

Post by TheTimeLord » Fri Feb 14, 2020 11:58 am

Dandy wrote:
Fri Feb 14, 2020 11:36 am
I think we are in a bubble. Bubbles often take some time to grow to their bursting point. Very low interest rates seem to be a reason to be concerned .. people, banks and businesses tend to do unwise things too often when credit is cheap.

If I were into making market moves I'd have my equities at the lower end of my target range.

When/if the bubble bursts and if that causes a lot of economic pain lots of jobs may be on the hit list. I remember thinking how can a mortgage crisis cause me to lose my job in mutual fund management? Oh, my services are no longer needed? Remember, there is someone besides you that often determines your actual retirement date.
We are in a bubble like we are headed for a recession. We are always headed for a recession and we are always somewhere in the formation of a bubble. The question is what event will trigger the recession and/or burst the bubble and when will it happen. How can you know if prices are high or low without prescient knowledge of future economic conditions? All humans do is guess based on economic patterns of the past.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]

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Re: Thoughts on Charlie Munger's recent comments?

Post by Dandy » Fri Feb 14, 2020 12:42 pm

We are in a bubble like we are headed for a recession. We are always headed for a recession and we are always somewhere in the formation of a bubble. The question is what event will trigger the recession and/or burst the bubble and when will it happen. How can you know if prices are high or low without prescient knowledge of future economic conditions? All humans do is guess based on economic patterns of the past.
Life requires us to make lots of decisions without knowing all the information we want to know. Who we marry, what college we go to, what house or car we buy, what job to apply for or accept, in the 70's stay in school, join the army, join the National Guard, wait to be drafted, etc.

Managing your money often has similar decisions. Stay the course? Is my allocation right from my risk tolerance? If my withdrawal percentage is low should I take more risk? etc.

I am totally responsible for my money decisions (and so is everyone else - you pick an adviser and follow their advice -- that is on you). I usually stay the course and so did Mr. Bogle. I can credit Mr. Bogle with the concept but I'm responsible if I stay the course and things turn out badly--not Mr. Bogle. If I mismanage my assets no one is going to bail me out not an adviser, not Mr. Bogle, not the Bogleheads etc. No bail out if I stay the course and things turn out bad either.

I am fortunate to be retired and be in very good income and asset shape. So, even though I sense we are in a bubble after a 10 year bull market, I don't have a pressing need to take any action. I, my wife and heirs should be fine. If I was near retirement age and had barely enough retirement assets I might take some defense action by lowering my equity exposure. Mr. Bogle drastically cut his equity allocation just before the 2000 equity plunge. I don't have the math/investment expertise of Mr. Bogle but I am responsible for managing my money -- not him.

Sorry if this sounds like a rant - not intended to be that - just exploring approaches.

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Re: Thoughts on Charlie Munger's recent comments?

Post by garlandwhizzer » Fri Feb 14, 2020 1:30 pm

I don't believe that Charlie said or believes we're currently in a bubble. Nor do I believe that he feels the current market situation is actionable as in shifting large percentages of equity assets into bonds. I do believe that he thinks that the market is vulnerable to a signifiant downturn which it always is and continues to be. I believe he is concerned that much of our bull market gains are based on and dependent ongoing financial and accounting manipulations (EBITDA to make profits look higher, corporate buybacks to make PE more attractive, the lowest interest rates in history to drive investment assets from bonds to stocks, massive debt all all levels (government, household, corporate) poured on to stimulate the relatively stagnant economy. These measures, rather than what drove bull markets in most of past history--robustly growing economy, robust labor productivity growth, lower debt burdens, less aging demography challenges, moderate inflation--are what have in part created, maintained, and even increased the generous valuations on all investment assets that we see at the present time IMO. I think Charlie is simply saying what many other experienced investment analysts have been saying for quite some time even as stocks have continued to go up in value while economic growth has been considerably less. Don't expect the same robust returns over the next 11 years that we've had over the last 11. Investors have to an increasing extent focused on the generous rewards the markets have offered, expecting them to continue, without paying much attention to potential future risks. This is what usually happens in the later stages of a long bull market, but it doesn't mean that the bottom is going to fall out soon or you should shift big time from risk to safe assets.

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Re: Thoughts on Charlie Munger's recent comments?

Post by 1789 » Fri Feb 14, 2020 1:41 pm

Folks

Experience talks. Whether you believe or not, its up to you. I value his opinions.
"My conscience wants vegetarianism to win over the world. And my subconscious is yearning for a piece of juicy meat. But what do i want?" (Andrei Tarkovsky)

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Re: Thoughts on Charlie Munger's recent comments?

Post by grettman » Fri Feb 14, 2020 1:45 pm

1789 wrote:
Fri Feb 14, 2020 1:41 pm
Folks

Experience talks. Whether you believe or not, its up to you. I value his opinions.
So what changes will you make based on this information?

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1789
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Re: Thoughts on Charlie Munger's recent comments?

Post by 1789 » Fri Feb 14, 2020 1:50 pm

grettman wrote:
Fri Feb 14, 2020 1:45 pm
1789 wrote:
Fri Feb 14, 2020 1:41 pm
Folks

Experience talks. Whether you believe or not, its up to you. I value his opinions.
So what changes will you make based on this information?
We will stay the course with our current AA on the retirement funds. If there would be any change to do that would be always increase the cash.... We will do as much as possible.
"My conscience wants vegetarianism to win over the world. And my subconscious is yearning for a piece of juicy meat. But what do i want?" (Andrei Tarkovsky)

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Re: Thoughts on Charlie Munger's recent comments?

Post by hightower » Fri Feb 14, 2020 2:47 pm

Vision wrote:
Thu Feb 13, 2020 1:45 pm
https://www.cnbc.com/amp/2020/02/12/cha ... xcess.html
"I think there are lots of troubles coming," he said at the Los Angeles-based Daily Journal annual shareholders meeting. "There's too much wretched excess."
"In China, … they love to gamble in stocks. This is really stupid," Munger said. "It's hard to imagine anything dumber than the way the Chinese hold stocks."
"It's ridiculous," Munger said, noting EBITDA — which is short for earnings before interest, taxes, depreciation and amortization — does not accurately reflect how much money a company makes, unlike traditional earnings. "Think of the basic intellectual dishonesty that comes when you start talking about adjusted EBITDA. You're almost announcing you're a flake."
Basically he comes as closes as possible to saying "this is a bubble" without saying it.
I think it's easy to misinterpret what he's saying as "this is a bubble" But, I don't think that's what he means. I think he's just stating that there's foolish behavior going on related to the whole EBITDA thing and the way people are buying up individual shares of unproven companies. Remember though that his best bud Warren Buffett believes strongly that the average Joe investor would be best off investing broadly in the market using low cost index funds like VTSAX or an S&P 500 fund. I'm sure Mr Munger would agree that if you're invested diversely, you'll be able to weather the storm just fine as long as you hold on tight for long enough.

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Re: Thoughts on Charlie Munger's recent comments?

Post by nocebo » Fri Feb 14, 2020 4:53 pm

Sounds like he's being fearful.... so you should be greedy when people are fearful... so invest in the market!

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