Charlie Munger on CNBC (Full Interview)

Notes from the Final Conversation with Charlie Munger

Ben Claremon of Inoculated Investor has kindly shared his notes.

Link

Charlie Munger's Parody from a "Morning With Charlie"

Handed out at Munger's meeting. Download it here: pdf

“A Morning with Charlie”

Charlie Munger cordially invites you to attend a Morning with Charlie on Friday, July 1, 2011, at 10:00 a.m., in the Exhibit Hall & Ballroom Building of The Pasadena Convention Center in Pasadena, California. Charlie will make some opening remarks, and then he will take questions from the audience about business, economics and life.

The Morning with Charlie will be held regardless of whether the merger between Wesco and Berkshire Hathaway is approved at the special meeting of Wesco’s shareholders, which is currently scheduled for June 24, 2011. Please note that Charlie will not be speaking at the special meeting.

The Pasadena Convention Center is located at 300 East Green Street, Pasadena, California. The Convention Center’s parking structure may be accessed from Euclid Avenue, which runs north-south, to the east of the Convention Center. Additional parking can be found nearby, in the shopping center across Green Street to the north, and at the corner of Green Street and Los Robles Avenue, one block to the east of the Convention Center.

Billionaires' Trip: BYD

Charlie Munger's Interview at the University of Michigan

Link

Munger on the Economy & Reform

Visit msnbc.com for breaking news, world news, and news about the economy

Happy Birthday Mr. Munger!

A very Happy 86th Birthday to you, Mr. Charlie Munger!

May your knowledge and wisdom increase exponentially.

May you have a good health & abundant of happiness!

Warmest regards,

David & Grace from London

Live from the Berkshire Shareholders meeting 2009

8:41	The Berkshire Hathaway annual movie has begun. It started with a cartoon of Warren Buffett, Charlie Munger and other executives acknowledging a difficult year in 2008 and pledging to work hard in 2009. Not even Berkshire escaped the global recession unscathed.

8:45

The Qwest Center Omaha is packed to the rafters. The arena seats more than 18,000 people. About 35,000 shareholders are in Omaha this year, many of them spilling out into the exhibition hall at the adjoining convention center. The annual meeting is piped into the hall and other rooms so people can watch and hear it.

8:52

Late night television and other comedians were highlighted in one snippet of the annual movie, joking about the recession and government efforts to revive the economy. One was David Letterman proclaiming it was a good time to buy stocks, playing off Buffett's advice at one point in the crisis. Letterman suggested that instead of that latte you are accustomed to buying, folks should pick up a few shares of GM.

9:03

Another segment has Buffett in Berkshire-owned Nebraska Furniture Mart taking a nap on a mattress, checking "product quality." A manager steps up and tells him the days of sleeping until the phone rings are over, given the stock plunge for Berkshire in 2008. Buffett agrees and tries to sell a mattress to a customer, saying the board of directors suggested he find something else to do. Buffett told the customer it had something to do with a downgrade in Berkshire's credit rating. He gets her to buy a mattress called the "Nervous Nellie," a big seller since the Dow Jones industrials dropped. The mattress features pockets into which can be placed cash and other valuables. The woman goes off to buy the mattress and Buffett takes out all the cash displayed in the mattress, along with a Nebraska Cornhuskers football, magazines and other items. He calls Charlie Munger to set up delivery.

9:17

Viewers of the annual movie learned the history of Geico auto insurance company's advertising icon Gecko. The lizard was not like other gecko's, the story goes, and hung out with a family cutting out coupons to help save people money. Then the Gecko left a note with the family, saying he wanted to strike out on his own, to bigger and better things. His lonely life changed when he received calls from people confusing him with Geico. He visited Geico's offices and the chief of marketing realized the Gecko wanted to help save people money, just like Geico tries to do with auto insurance. Geico sounds like Gecko, and the advertising legend was born.

9:21

Like last year, a comedy sketch is featured this year, with an investment banker interviewed about the complex financial instruments that backed bad home mortgages. Asked what caused the setup to unravel, the investment banker said people started to ask what the mortgages were actually worth. "Oh for the good old days," the banker sighs.

9:24	The annual movie is over.

9:27	Warren Buffett and Charlie Munger have taken their seats. Buffett says questions and answers will be different this year, with journalists alternating questions e-mailed by shareholders with those posed by shareholders in the audience.

9:33	Buffett notes that U.S. Treasury bonds recently have had negative yields. He said people might not see that phenomenon again in their lifetimes.

9:33	Journalist Carol Loomis says more than 5,000 questions were relayed to three journalists involved.

9:40

Journalist Carol Loomis said more than 5,000 questions were submitted via e-mail. The first question relates to derivatives and whether those financial deals are good for Berkshire. Buffett says over time, Berkshire expects to make money on the current deals. Buffett says the only money that crossed hands in the stock market deals so far has been $4.9 billion given to Berkshire in premiums. Buffett says the company can use that money for the next 15 to 20 years. And the stock markets on which the deals are made are expected to be higher than when the deals were struck.

9:47

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9:52	Buffett and Munger said the government's response to the financial crisis has not been perfect but it has been reacting the best it can. Munger said given the emegency the government should be judged with some leniency.

10:08

Journalist Andrew Ross Sorkin of the New York Times says about 300 shareholders had a similar question: Why does Berkshire keep a high investment in Moody's at a time that credit agencies are being criticized for conflict of interest and using flawed history based models? And why not use Berkshire's clout to change the behavior of the credit agencies. Buffett says the big mistake ratings agencies, Congress, bankers and buyers of homes made was thinking housing prices would continue to rise _ and then they collapsed. Buffett says ratings agencies continue to be a good business because there are not many of them and they deal with a large part of the capital markets. Buffett said Berkshire also does not buy stocks in companies to change their behavior. Buffett says in fact he has tried to influence behavior in the past, and never has been very successful.

10:17

Buffett is asked how the four investment managers chosen as possible successors to him did in 2008, a very difficult year. Buffett says there are three candidates as CEO, all are internal candidates. There are four possible investment successors, and one or more could be chosen. They are from inside and outside Berkshire. The four investment managers did no better than match the S&P 500. In 2008 they did not cover themselves with glory, Buffett says, but neither did he, so he is tolerant. Munger says any investment manager he knows who is regarded as intelligent and the rest, they all got creamed last year. Buffett says the investment managers over 10 years have done better. Buffett says he has not changed the list of four possible investment managers, either. Buffett says the CEO job is different, that person needs to step right in if something happens to Buffett. But Buffett says one or more investment managers do not have to actions right away. Buffett says an announcement should not be expected right away on investment managers if something happens to him. But within a month or so, an announcement might be made.

10:24

Becky Quick of CNBC says a question about three candidates for CEO successor: What are benefits of bringing in CEO early to give that person a chance to get used to the job? Buffett says he has heard that question before. Buffett says if there was a good way to inject someone into a role that would that person a better CEO for Berkshire, they would do that. But he says the three CEOs are running major businesses right now, and to sit in the office while Buffett is reading or on the telephone -- there is really nothing to do. He says "it would be a waste of talent." Buffett says the three candidates are 100 percent ready for the job right now. He says the biggest job they will have is developing relationships with potential buyers of businesss, with the world at large, with the shareholders. He says that will take time, though not a great deal of time. He says they know how to run businesses, and they probably would do some things better than he would. Munger says a lot of models that have worked well in the world, like Johnson and Johnson, work something like Berkshire and these talents pop up in the subsidiaries.

10:32

A shareholder asks Buffett to explain his investment strategies, like value investing, and how teach young people. Buffett says he brings in college students to talk with them each year. Buffett says he tells them it is important to know how to value a business and to know how to judge the markets. He says there would be nothing about modern portfolio theory or anything like that. He says it is important to know your circle of competence, start small and learn as you go along. Buffett says some accounting principles also are important. And then learn about market fluctuations and learn that the market is there to serve you. And that is not an issue of a high IQ, but rather an emotional stability and inner peace about the decisions you have made. Munger says there is the basic problem of always having half the future investors in the world in the bottom 50 percent. Munger says largely people should reduce the nonsense. Buffett and Munger agree that emotional makeup is more important than a high IQ. Buffett says he is asked by college students, "what are we being taught that is wrong?" Munger asks how Buffett can handle that question in just one session.

10:36

Buffett is asked how he would replace someone like Ajit Jain in the insurance division. Buffett says you don't, that Jain is unique. But authority does not go to the position -- it goes to the person.

10:46

A shareholder asks how Buffett views the markets' valuation of Berkshire shares. The market has it down 30 percent, while earnings were not down that far. Buffett says the shareholder put his finger on something there. Buffett says the investments are what they are in the stock market, so he does not have a problem with that side of the equation. Buffett says the earning power of businesses were down last year and will not do as well this year. But they are by and large good businesses. He says a few of them have problems, others will do very well. Buffett says Berkshire was cheaper in the stock market last year than its intrinsic value would indicate, but most companies were in the same boat. Buffett says over time, both stock price and intrinsic value will increase. And he hopes the operating companies over time will do better. Munger says last year was a bad year for a float business, making the owner of the float (insurance premiums held by Berkshire that can be invested) appear to be worth less than the owner will be worth over time. Munger says Berkshire's casualty insurance business is probably the best in the world. He says other companies in Berkshire's holdings also rank high in the world. Munger says if you think it is easy to get in the position that Berkshire occupies, you are living in a different world than the one that I occupy. Buffett says Berkshire's insurance business is remarkable, with remarkable managers. Buffett says with the economic meltdown, like the China Syndrome or something, it hurt jewerly and NetJets and other businesses, American Express, etc. But the meltdown also caused the phones to ring more at Geico. Buffett says all of a sudden saving money became very important. Buffett says that builds a lot of value over time. Buffett says Geico is now the third largest auto insurer in the country this year and the fundamentals are in place to take Geico much higher. Full Transcript

Charlie Munger: How We Can Restore Confidence

Our situation is dire. Moderate booms and busts are inevitable in free-market capitalism. But a boom-bust cycle as gross as the one that caused our present misery is dangerous, and recurrences should be prevented. The country is understandably depressed -- mired in issues involving fiscal stimulus, which is needed, and improvements in bank strength. A key question: Should we opt for even more pain now to gain a better future? For instance, should we create new controls to stamp out much sin and folly and thus dampen future booms? The answer is yes.

Sensible reform cannot avoid causing significant pain, which is worth enduring to gain extra safety and more exemplary conduct. And only when there is strong public revulsion, such as exists today, can legislators minimize the influence of powerful special interests enough to bring about needed revisions in law.

Full Article

AIG Bailout: Buffett's Advice

Please read my comments, Buffett's, Munger's and Grantham's advice at:

Lollapalooza Investing

MUST-WATCH: A Conversation with Charlie Munger

Charles Munger presented the Institute's 2008 DuBridge Distinguished Lecture in Beckman Auditorium on March 11. Munger, the vice chairman of Berkshire Hathaway Inc., a business partner of Warren Buffett, and one of the richest people in the United States, was joined in conversation by Caltech's Tom Tombrello, chair of the Division of Physics, Mathematics and Astronomy, and Kenan Professor and professor of physics.

Video Link

2008 Wesco Shareholder Meeting: Detailed Notes

Notes courtesy of Peter Boodell; thank you!

(As is standard, no recording equipment was used to reproduce these notes. My high school typing teacher gets all the credit. As a result, these notes are recollections only – not quotes, and should not be relied upon. –PB)

CM: Testing, can you hear in back? Mr Denham has an announcement.

Denham: We ask you not to use your video recorders, thanks.

CM: Welcome to the 49th annual meeting of shareholders of Wesco Corp. Please register to vote at entrance. Anyone wishing to speak, state name, wait for microphone. List of shareholders, 96% of outstanding proxies received. Election of directors? All in favor? [Aye]. Motion is carried.

Six nominees are elected. There will be a long Q&A preceded by Socratic solitaire conducted by the Chairman. Meeting is adjourned.

We now begin Q&A, starting with a long game of Socratic solitaire. During questions, do not ask what we are buying or selling. Any other question is fair game, but we don't agree to answer them.

Because many of you have come from such a long distance, I will talk before I take your questions. I will address two topics, general investment climate [and learnings from Berkshire Hathaway]. We normally avoid [discussing the general investment climate] like the plague. Most assets are priced to a level where it is hard to get excited. It is hard to get 4% yield on a nice apartment, and it doesn't include replacing the carpets. Bonds of strong corporations are 4% yield. Corporate equities are paying 2% pa, growing 4% per year. Such a world isn't the one that made all of you able to come to the meeting. Last generation has been in hog heaven – some bumps, but it had easiest time getting ahead. In the eighteen years that preceded hog heaven, the purchasing power of Yale's endowment went down 60%. They were getting real investment return of 0%, negative. It is not at all impossible that brilliant investors like Yale get bad results in the future.

People are used to laying money aside and investing in standard fashion, and become quite comfortable. It is easy to forget that this isn't guaranteed. Many have recognized this, but for those running pensions it is difficult [to adjust down assumptions] —like the agony of raising taxes or not looking good as CEO of a company. Some of them wonder if they have signed up for something too hard when running a defined pension plan. That crowd doesn't want to go to a 4-5% assumption, because the pain of the money needed to correct the plan is large. Bonds pay 4%, so they go to alternative investments with profit sharing. They solve the problem by giving 'reasonable return' and sell hedge funds and venture capital fund, mid-stage, late stage, private equity, etc etc etc. They do complex trading strategies, private equity in Africa. They buy timber. [audio system malfunctions] Evidently that machine didn't like the remark. People go into alternatives, and this has worked very well so far. A lot of university endowments have done it – and that is game we are in. If natural return is 5%, getting it to 9% is very unlikely to work well long term. It's going to be difficult for people to have high real returns from deferring consumption. The reason my generation did so well was kind of a fluke, and won't necessarily continue. There will be lots of chicanery in future. Many claim alpha – but really they are just taking earthquake risk. At end of year, when there is no earthquake, they take the money. This is a dishonorable way to invest. It is always easier to get felicity by reducing expectations instead of seeking extreme results.

We have plenty of scandals coming. Lots of rot has gotten into system. It has caused unpleasantness. What is next? I suggest the derivative trading books of the world are next. The accounting allowed in derivative books has been god awful. The morals and intelligence has been god awful. 'I'll be gone and you'll be gone' is phrase they use. What is buried in those books is dangerous, with clearance risks with optimistic assumptions that the accountants allowed. I was at Salomon when interest rate swap accounting was changed. They had a matched book. They were making $7mil, 25m over 18m. Both sides wanted to mark trades profitably. They couldn't retain derivative traders if they didn't have bad accounting. There is a lot of Gresham's law here, where the bad practice drives out the good.

If you run a good bank, and testosterone bank around corner pressures you, there are tremendous pressures to conform. Everyone starts replicating. If every university puts 2% into timber, that can go on a long time. But it is self-fulfilling. When it comes to the unwind, when they all want to get out. A lot of things rely on momentum. Valuations make everyone look good for a while.

Full Article

Justin Fuller: Woodstock for Capitalists 2008 Blog

Saturday, May 3rd, 2008

3:05 p.m. An Insightful Day
I hope that you enjoyed today's discussion as much as I did, and I encourage you to contact me with any additional questions or insights you may have.

3:00 p.m. Hopes for Berkshire
A shareholder asked Mr. Buffett what he hopes for Berkshire is that the culture stays strong and that it remains a home for businesses that were built by families over time. He also hopes that the company will continue on as it is now by being a home for great businesses. I'll note that culture is one of the most valuable parts of any business, but the most difficult to quantify. In Berkshire's case, Mr. Buffett views sharpening the Berkshire culture as his chief objective, and in my view this culture will give his successor(s) an advantage in continuing to build the company for decades to come.

2:55 p.m. Pharma Stocks
Mr. Buffett said that he thinks pharma stocks as a group will do well, but given that it is very difficult to value what is in the pipelines of these companies, he thinks investors would be best served by buying a basket of pharma stocks. I'll note that Berkshire's equity portfolio has positions in J&J, Sanofi-Aventis, as well as GlaxoSmithKline.

2:50 p.m. Envy vs. Gluttony
Mr. Buffett said that envy is the worst of the sins because if you become envious you feel worse, while the other person is the same--or even feels better. He said, tongue-in-cheek, that gluttony on the other hand has upside.

2:35 p.m. Dividends for Berkshire?
A shareholder asked Mr. Buffett about the potential for dividends at Berkshire, and he said that as long as he can continue to create more than $1 of value with every $1 of retained earnings, Berkshire will not pay dividends. Given that Mr. Buffet has been putting a lot of capital to work lately with the Marmon Group, Mars/Wrigley, additional equity investments, and, more recently, new fixed-income investments, I think there are heaps of potential for Berkshire to still create wealth by retaining all of its earnings.

Full Article

Wesco Meeting 2008

Q: Amount of derivatives now, something like $30 trillion?
A: When BRK unwound Gen Re's derivatives book, it was shown as positive but the money disappeared when we tried to reach for it. Net result was a loss. Accounts on both sides of transaction show profit, but that can't be. Will end badly. Repeated point of not being able to buy insurance on someone unless you have an insurable interest.

Q: Clarify comment about BRK earning more in an inflationary environment?
A: If a business has a competitive advantage, constant margins imply that increasing prices will translate to more profits. CM would much prefer no inflation to earning more in this fashion, however.

Q (from Tilson): No questions about the Q1 earnings drop at the BRK meeting?
A: Yes, significant - like Sherlock Holmes pointing out the dog didn't bark when it should have. Maybe it's all part of the "seamless web of trust" we've been talking about.

Full Article

LIVE BLOG ARCHIVE: Warren Buffett's Q&A With Shareholders (Afternoon Session)

This is the afternoon session of the Warren Buffett/Charlie Munger question-and-answer session with shareholders at the Berkshire Hathaway Annual Meeting at the Qwest Arena in Omaha, Nebraska on Saturday, May 3, 2008 as live-blogged on CNBC.com's Warren Buffett Watch. All times are Central.

1:12 pm: Warren Buffett and Charlie Munger are back on stage taking more questions from shareholders. There are a few more empty seats than in the morning session, but the arena is still mostly full.

1:14 pm: Buffett says he's made a lot of mistakes over the years, but none of them could have been prevented by "conventional due diligence."

1:15 pm: Buffett says that when Berkshire says financing is going to be available, it's available no matter what, "even if Ben Bernanke runs away to South America with Paris Hilton." Big laugh line.

1:16 pm: In response to a question on his religious beliefs, Buffett says he's an agnostic. He just doesn't know if there is a God and he doesn't know if he'll ever find out.

1:20 pm: Asked about Kraft, Buffett says that he thinks most of the big food companies have good assets. He uses Coca-Cola as a good example. Hard to take it on because of the power of its brand built over decades. "We feel good about branded products when they're runaway leaders in their field."

1:30 pm: Buffett says we run Berkshire in a way that is not dependant on anybody else. We want the company to keep working even if the rest of the world stops working the way it did the day before.

Full Coverage

LIVE BLOG ARCHIVE: Warren Buffett's Q&A With Shareholders (Morning Session)

This is the morning session of the Warren Buffett/Charlie Munger question-and-answer session with shareholders at the Berkshire Hathaway Annual Meeting at the Qwest Arena in Omaha, Nebraska on Saturday, May 3, 2008 as live-blogged on CNBC.com's Warren Buffett Watch. All times are Central.

8:31 am The lights have gone down in the arena. Buffett, on video tape, is introducing this year's movie. We asks that no one do any video recording, and all cameras are banned from the arena.

8:39 am: The film is a humorous cartoon that has Charlie Munger running for President. How will you fight global warming, he's asked. Everyone gets Dairy Queen ice cream!

8:41am: The cartoon is mentioning just about every Berkshire Hathaway property. Munger campaigns on NetJets, of course.

8:44 am: As the credits roll, every name is Charlie Munger. Produced by, directed by .. the entire technical crew ..

Full Coverage

Berkshire Hathaway Annual Meeting, Omaha NE 2008

Typewritten notes courtesy of Peter Boodell

(As is standard, no recording equipment was used to reproduce these notes. As a result, these notes are recollections only – not quotes, and should not be relied upon. –PB)

A short introductory skit – Susan Lucci from All My Children walks on stage:

CM: Where could he be?

Susan Lucci: Detained at the TV studio. Hi Charlie, I'm Susan Lucci. He's going to be a big star.
CM: You have some important qualities that Warren lacks.

SL: There are some changes we need to make. We need to change our dividend policy. We are so cheap to our shareholders.

CM: Sounds good to me.

SL: And I want guidance on earnings, weekly. And we need to pay our directors more than $900/yr. [directors stand up and applaud]

[WB walks in]

WB: What's that talk about dividends? My show is Berkshire Hathaway – All My Children can't do without you, and I can't do without Berkshire.

SL: The deal is off?

WB: You've brought me back to my senses. Pick out anything you would like at Borsheim's, and charge it to Charlie.

WB: We are going to follow usual procedure. We are going to answer questions between now and then, based on who gets lined up at microphone first. Our best estimate is 31k people are here to today.

We have Charlie Munger - he can hear and I can see - we work together for that reason. Hold your applause until the end. Howard Buffett, Bill Gates, Don Keogh, Tom Murphy, Walter Scott, Don Olson. The best directors in America.

We'll take a break at noon.
Q1: Rajesh Vora, Bombay India. I salute your 100% honesty. What key states to correct crowd mindset?

CM: He wants to know how to become less like a lemming.

WB: Since you repeated the question, I'll let you give first answer.

CM: He wants to invest less like a lemming.

WB: I started investing when I was 11. I believe in reading everything in sight. I wandered for 8 yrs with technical analysis. I read Intelligent Investor, chapters 8 and 20 I recommend, and if you absorb it you won't be a lemming. I read it early in 1950, and I think as good a book now as then. You can't get a bad result if you follow it. There is another book out there, Food You Will Enjoy about the Buffett family grocery store. Neither of us were any good at groceries. You don't want to pay attention to my Grandfather's advice on stocks. It has three big lessons, a) stock is a part of a business b) market serves you doesn't instruct, and c) margin of safety. Berkshire holders are better than most at understanding that they own a part of a business.

Full Article

Street Dogs: It’s a matter of reading and asking questions

A QUESTION Warren Buffett and Charlie Munger are often asked is: how do you learn to be a great investor?

"First of all," says Charlie Munger, "you have to understand your own nature. Each person has to play the game given his own marginal utility considerations and in a way that takes into account his own psychology. If losses are going to make you miserable — and some losses are inevitable — you might be wise to utilise a very conservative pattern of investment and saving all your life. So you have to adapt your strategy to your own nature and your own talents. I don't think there's a one-size-fits-all investment strategy that I can give you."

"Next", says Munger, "you have to gather information. I think both Warren and I learn more from the great business magazines than we do anywhere else. It's such an easy, shorthand way of getting a vast variety of business experience just to rifle through issue after issue covering a great variety of businesses. And if you get into the mental habit of relating what you're reading to the basic structure of the underlying ideas being demonstrated, you gradually accumulate some wisdom about investing. I don't think you can get to be a really good broad-range investor without doing a massive amount of reading. I don't think any one book will do it for you."

Full Article

Happy New Year & Happy Birthday!

Happy New Year everyone!

Happy 84th Birthday Mr. Charlie Munger!

Warmest regards,
David Lau