Daily Journal AGM 20170215 stream by CNBC.com

[gfp]

Yeah, they (Warren & Charlie) will both contradict themselves in different contexts to different audiences from time to time.  The context at the meeting was him discussing if he was 'securely wealthy' with only three large block investments (one dominates the others obviously).  He was answering the question for himself - "yes, you are damn right I am securely wealthy with three."

 

Somebody else, with a different skill set and a different three investments would likely not be "safe" with that level of concentration.  I do it with Berkshire all the time, though.  Berkshire is uniquely well suited to becoming a large stable core of a portfolio.  It is easy to value and unlikely to decline by more than 50% or so.  It tends not to be sold to preserve the tax deferral, so the positions get large over time.

 

 

What do you mean by "Also Schloss was highly diversified and seems to have created even more wealth"?  Yes he was very diversified, as was Graham-Newman, but created more wealth than who?  Charlie's approach?  Warren's approach?  Or are you just saying Schloss created more even more wealth than Schloss had earlier

 

 

I love Munger and his wisdom, however, I'm not sold on his lack of diversification viewpoint. It makes sense that a few big ideas creates the majority of wealth but like others pointed out BRK is significantly diversified as is Liu Li.

 

Also Schloss was highly diversified and seems to have created even more wealth. Many of the other super investors seem to be more diversified as well.

[wescobrk]

I was baffled by the post Schloss had even greater wealth.

Wasn't Schloss' long term record around 100 basis points greater than S&P? Not bad but far below Warren's 1000 basis points, plus, Warren did it with several more zeros of money to allocate.

Schloss is a stooge compared to Warren and Charlie.

[LR1400]

Very true. They do tailor to different audiences and question specifics. I should've noted that as well. I wouldn't even call in contradicting themselves as much as speaking to the speaking question/scenario/audience.

 

It's similar to the debt thing with Warren. He always says not to use it but he will. People have to be smart and think through all aspects. When he says no or little debt he means for the consumer or highly/over leveraged business that can't support that model. Really common sense.

 

Regarding Schloss, my understanding is Walter died with more net worth than Munger will. Not a dick measuring contest, but I wanted to point out that variations of the same strategy can make you just as rich.

[John Hjorth]

Off topic:

 

Welcome on the CoBF board, rolling!

 

Now back to topic.

[Guest longinvestor]

There are many on this board who are quick to point out that investing in BRK is diversification also. And that Munger / Buffett somehow follow twisted logic, saying something other that what they do or believe themselves!

 

That's bullshit. The disingenuity belongs here, not with Munger.

 

Munger has owned BRK since inception and from that standing start, BRK got big and owns so many businesses by redeploying excess cash- one can spin that as diversification all you want; they absolutely have a record of owning whole. The gusher of cash makes them buy more and more. And buy whole, like 100%. That ain't diversification. But that's not the reason why Munger holds BRK today or when he bought it or why he's suggesting to the Munger family to hold on for the next 50 years. He absolutely wants to concentrate; Exactly like owning Uncle Horace's business.

 

What's really up for debate is what names to concentrate on for that kind of time frame. Implicit in Munger's message is that he invests in the jockey or the "system" the jockey puts in place; One that produces a durable competitive advantage. Costco.

 

Re: Li Lu, I've not studied his approach but believe it is a bet based on Munger's optimistic views about China and trust in Li's value investing approach. Again, the jockey.

 

Anything but diversification as is practiced by the crowd. Or for that matter, money managers.That approach has a very high probability of mediocrity.

 

 

[gfp]

We don't know Schloss's net worth at it's high, but I don't think he was close to Charlie.  Charlie had billions of dollars - plural - Schloss had millions of dollars.  Maybe several hundred million, but nothing close to Charlie to my knowledge.

 

http://www.forbes.com/forbes/2008/0211/048.html

 

Very true. They do tailor to different audiences and question specifics. I should've noted that as well. I wouldn't even call in contradicting themselves as much as speaking to the speaking question/scenario/audience.

 

It's similar to the debt thing with Warren. He always says not to use it but he will. People have to be smart and think through all aspects. When he says no or little debt he means for the consumer or highly/over leveraged business that can't support that model. Really common sense.

 

Regarding Schloss, my understanding is Walter died with more net worth than Munger will. Not a dick measuring contest, but I wanted to point out that variations of the same strategy can make you just as rich.

[LR1400]

We don't know Schloss's net worth at it's high, but I don't think he was close to Charlie.  Charlie had billions of dollars - plural - Schloss had millions of dollars.  Maybe several hundred million, but nothing close to Charlie to my knowledge.

 

http://www.forbes.com/forbes/2008/0211/048.html

 

Very true. They do tailor to different audiences and question specifics. I should've noted that as well. I wouldn't even call in contradicting themselves as much as speaking to the speaking question/scenario/audience.

 

It's similar to the debt thing with Warren. He always says not to use it but he will. People have to be smart and think through all aspects. When he says no or little debt he means for the consumer or highly/over leveraged business that can't support that model. Really common sense.

 

Regarding Schloss, my understanding is Walter died with more net worth than Munger will. Not a dick measuring contest, but I wanted to point out that variations of the same strategy can make you just as rich.

 

I stand corrected. I cannot find where Walter had reached a billion and despite his amazing compound returns, I don't think he could get there. I don't know what his initial personal investment into his partnership was.

 

So, it looks like you can get to the 100's of millions net worth range with substantial diversification, like a Christopher Browne. 

 

I personally prefer less diversification, but when most on here talk about diversification we aren't even close to discussing what the average "know nothing investor" thinks is diversification. The average investor is going to be in stocks, bonds, gold, all sorts of bullshit and they won't even know why.

 

Everyone on here is usually trying to decide whether 10 or 50 is diversified enough. Most of that is personality driven I believe.

[gfp]

One thing I enjoyed in Charlie's extra comments following the Daily Journal meeting was his description of reading barron's for 50 years and getting one investment idea from it.  Asked for details he mentions that he made $80 million dollars on the idea - a tiny auto parts company - whoever owned the monroe shocks brand at the time [Tenneco, TEN].  He bought the 11 3/8% junk bonds at 35% of par and they were called at 107 or thereabouts.  And he bought the stock at $1 and it went to $40 (he sold at $15 in about 2 years time).  Asked by the crowd what the article in Barron's said, he replied "that it was a cheap stock".

 

He then slips in that he gave that $80 million dollars to Li Liu who turned it into "4 or 5 hundred million dollars"...

 

 

 

Also in this clip, he reminisces about the opportunity that used to exist "for 60 years" in "jewish treasury bonds" - event arbitrage / merger arbitrage.  He said for 60 years he, warren, graham-newman and goldman sachs would make 20% per annum in event arbitrage, primarily because there was a lot less capital / competition in the space, and because stock brokers worked on commission and would call their clients up to suggest selling the stock after the 'pop'.  Dumb selling as Charlie called it - selling at 95 on a cash $100 deal, etc...

[farnamstreet]

The videos are free and there are notes online, so this is not for everyone, but if you're interested you can get a transcript of the meeting and the 1.5 after meeting here: https://gumroad.com/l/DMetD for $19

[CorpRaider]

Really enjoyed all the videos especially the after party.

[mbreject]

Not sure, but it may be because of all the energy he puts into avoiding taxes.

[LC]

Munger's response to a question on the rise of index funds;

 

- For those who realize that they are unlikely to outperform, mental anguish is huge; Most cope by simple denial. Of course, I don't want to think of death either

I disagree with Charlie here! Thinking of death (how he puts it) can be liberating. I'll probably never outperform, and if I ever do, it will probably be the result of pure luck. Nothing wrong with that! I enjoy making investment/allocation decisions, and even if I don't beat the index, I don't care!

[netnet]

Has anyone seen any "after" party notes on the internet? (Other than Shane's?)

[CorpRaider]

No, but you can watch the entire thing on youtube.

[CorpRaider]

Not sure, but it may be because of all the energy he puts into avoiding taxes.

 

Yeah, mainly doesn't like the origins of the businesses because it was/is kind of scummy based on getting the cable franchises, feels he's a tax zealot, and (me talking here) let's be honest he's probably one of the biggest proponents of alternative metrics (like ebitda) which is partly used to enable his use of massive leverage and obfuscate the nature of the huge capital investments.  Also, in my humble opinion, one should not be surprised that the would not automatically like/admire the largest private landowner in the U.S. or whatever, or someone who engages in all these corporate transactions and tracking stocks to "highlight the value". 

[maybe4less]

Not sure, but it may be because of all the energy he puts into avoiding taxes.

 

Yeah, mainly doesn't like the origins of the businesses because it was/is kind of scummy based on getting the cable franchises, feels he's a tax zealot, and (me talking here) let's be honest he's probably one of the biggest proponents of alternative metrics (like ebitda) which is partly used to enable his use of massive leverage and obfuscate the nature of the huge capital investments.  Also, in my humble opinion, one should not be surprised that the would not automatically like/admire the largest private landowner in the U.S. or whatever, or someone who engages in all these corporate transactions and tracking stocks to "highlight the value".

 

IIRC, he basically said that, because of the scummy way the initial franchises were acquired, he's ignored the industry and therefore Malone. I believe he did say that Malone is obviously a genius or something to that effect.

[winjitsu]

Not sure, but it may be because of all the energy he puts into avoiding taxes.

 

Yeah, mainly doesn't like the origins of the businesses because it was/is kind of scummy based on getting the cable franchises, feels he's a tax zealot, and (me talking here) let's be honest he's probably one of the biggest proponents of alternative metrics (like ebitda) which is partly used to enable his use of massive leverage and obfuscate the nature of the huge capital investments.  Also, in my humble opinion, one should not be surprised that the would not automatically like/admire the largest private landowner in the U.S. or whatever, or someone who engages in all these corporate transactions and tracking stocks to "highlight the value".

 

IIRC, he basically said that, because of the scummy way the initial franchises were acquired, he's ignored the industry and therefore Malone. I believe he did say that Malone is obviously a genius or something to that effect.

Yeah, thanks for explaining.... Could you elaborate this one, does this just mean that he's not huge fan of Malone's roll-up strategy?

 

Don't have the source handy buts it because of the self-dealing that goes on with Malone's entities. These guys pay themselves a exorbitant amount... (though shareholders have done pretty good following them). 

[CorpRaider]

Yeah, hopefully I made it pretty clear most of that was my inference.  I mean can you see WEB or CTM admiring a guy who launched multiple "tracking stocks"?  LOL.  That would be like them spending a weekend with the guy who was going to create the trusts to hold Berkshire stock before they issued class B.

[SlowAppreciation]

http://minesafetydisclosures.com/blog/2017/7/11/2017-daily-journal-annual-meeting-qa-with-charlie-munger-part-2

[Poor Charlie]

http://minesafetydisclosures.com/blog/2017/7/11/2017-daily-journal-annual-meeting-qa-with-charlie-munger-part-2

 

Thanks a lot for taking the time to put this transcript together!

[SlowAppreciation]

My pleasure, hope you enjoy.

 

I'll post part 1 when it's done in a few weeks

[vikx01]

My pleasure, hope you enjoy.

 

I'll post part 1 when it's done in a few weeks

 

 

Thanks for sharing. Eagerly awaiting part 1.

[SlowAppreciation]

My pleasure, hope you enjoy.

 

I'll post part 1 when it's done in a few weeks

 

 

Thanks for sharing. Eagerly awaiting part 1.

 

I'll post it here once it's completed. Also, there were a few parts where I couldn't understand what Charlie said or may have misheard him, so if you find any mistakes please let me know.

[CharlesMunger]

One thing I enjoyed in Charlie's extra comments following the Daily Journal meeting was his description of reading barron's for 50 years and getting one investment idea from it.  Asked for details he mentions that he made $80 million dollars on the idea - a tiny auto parts company - whoever owned the monroe shocks brand at the time [Tenneco, TEN].  He bought the 11 3/8% junk bonds at 35% of par and they were called at 107 or thereabouts.  And he bought the stock at $1 and it went to $40 (he sold at $15 in about 2 years time).  Asked by the crowd what the article in Barron's said, he replied "that it was a cheap stock".

 

He then slips in that he gave that $80 million dollars to Li Liu who turned it into "4 or 5 hundred million dollars"...

 

 

 

Also in this clip, he reminisces about the opportunity that used to exist "for 60 years" in "jewish treasury bonds" - event arbitrage / merger arbitrage.  He said for 60 years he, warren, graham-newman and goldman sachs would make 20% per annum in event arbitrage, primarily because there was a lot less capital / competition in the space, and because stock brokers worked on commission and would call their clients up to suggest selling the stock after the 'pop'.  Dumb selling as Charlie called it - selling at 95 on a cash $100 deal, etc...

 

 

Tenneco close to Munger's purchase price. Anyone looking at it?

[Voodooking]

Tenneco close to Munger's purchase price. Anyone looking at it?

 

Interesting idea. I just pulled up the long term stock chart on Tenneco and over the decades it probably traded at an average of $30 per share, give or take. However in 2001 it dropped to $1, and then rose back up to $30, then in 2009 it fell to $1 again, before rising to $60 at points, then over the last two or three years it has fallen to around $2 again.

 

Have you looked at the valuation or fundamentals yet? I haven't had time to dig into it. Are the reasons that it's cheap this time different from the past couple of drops?