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Charlie Munger at CalTech


OracleofCarolina
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Yes the computer generated transcript was not particularly accurate.

 

No real revelations and I might add given the (presumed) IQ of the audience, Cal Tech afterall, the questions where not particularly good. I suspect most of the people on this board would have had better questions. (Obviously there could be sampling bias by the person who selected the questions.) But this just goes to show that effective horsepower is the key not potential horsepower, i.e. people on this board know a lot more about Munger than the questioners!

 

At some point the talk should be on Cal Tech's Youtube channel.

 

Highlights:

  • Know your circle of competence.
  • Go where the competition is weak, (I was not going to be brilliant in Thermodynamics, at least by Cal Tech standards)
  • Find something you enjoy and can work hard on
  • Try and benefit from a tail wind. People from Harvard and Stanford don't go to work at Costco, they should think about it, it's a rising tide (or at least it was) and your competition is not going to be that strong (inside of Costco).
  • My department, Meteorology, was properly tossed, it was purely empirical field (not upto Cal Tech standards).
  • I did not make my money on macro forecasting, but these are quite interesting times...I can't believe the rise of China and the level of debt of developed countries.
  • He said he did not learn anything (academically) at Cal Tech that he used later in life, but he did say he learned he was not going to be studying Thermodynamics professionally (Circle of competence?).
  • The competition in investing business was weak in his day.
  • Sequoia's record in investing has been phenomenal.
  • His (early venture) record on the other hand: he nearly killed himself in an oscilloscope business, total sales 3.  They did not anticipate magnetic tape, as a recording medium. He stayed away from venture after that!
  • He got in his usual dig on liberal arts professors.

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Guys,

 

I have watched the Munger Caltec interview from yesterday.  And, I know we keep saying this, but it bears repeating in this situation.

 

Munger is 96.  AND, he is sharp, so sharp with his responses and memory, and opinion.  He is still a monolithic FORCE!

 

I didn't learn a lot of new ideas from him this time, but.....

 

I am amazed when I watch/listen to him!  Well done CHARLIE!

 

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^One has to decide if it's worthwhile to listen and watch also.

One has to wonder what Mr. Munger thought of the interviewer. He was unusually warm (for a few short seconds) at the conclusion. These days, one has to wonder also if this is/was his last interview. He is truly a fascinating person.

What did he mean by: "I think we’re very near the edge of playing with fire."?

 

10152012_WileECoyote1_article.jpg

?

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^One has to decide if it's worthwhile to listen and watch also.

One has to wonder what Mr. Munger thought of the interviewer. He was unusually warm (for a few short seconds) at the conclusion. These days, one has to wonder also if this is/was his last interview. He is truly a fascinating person.

What did he mean by: "I think we’re very near the edge of playing with fire."?

 

10152012_WileECoyote1_article.jpg

?

I think we are near the edge in terms of the market being overvalued. All the indicators of the s&p 500 are in the all times high (schiller pe, buffet indicator) and that while the real economy is nowhere near to recover. Most of Europe is in a second lockdown of some sort, and even the US now sees steady growth of cases.  I feel like the market is way ahead of itself and a lot of people will get burnt in the downturn.

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^One has to decide if it's worthwhile to listen and watch also.

One has to wonder what Mr. Munger thought of the interviewer. He was unusually warm (for a few short seconds) at the conclusion. These days, one has to wonder also if this is/was his last interview. He is truly a fascinating person.

What did he mean by: "I think we’re very near the edge of playing with fire."?

 

10152012_WileECoyote1_article.jpg

?

I think we are near the edge in terms of the market being overvalued. All the indicators of the s&p 500 are in the all times high (schiller pe, buffet indicator) and that while the real economy is nowhere near to recover. Most of Europe is in a second lockdown of some sort, and even the US now sees steady growth of cases.  I feel like the market is way ahead of itself and a lot of people will get burnt in the downturn.

 

Here's a fun site that I think shows what Chuck is talking about:

 

https://www.usdebtclock.org/index.html

 

US Federal Debt to GDP Ratio 1980: 34%

US Federal Debt to GDP Ratio now: 128%

 

I think he's saying there's a point of no return on the grand, worldwide, central banking experiment of debt issuance and interest rate manipulation.

 

There's a point where any government, including the US, simply cannot raise more debt to meet financial obligations, and is forced to either cut expenditures, default, or print money/inflate.

 

Nobody knows what that point is for the US. Maybe it's $40 trillion. Maybe it's $100 trillion. But, the point Chuck and Buffett have long made is it makes absolutely no sense to get anywhere close to learning where the limit is on that one. Our government representatives seem to have zero notion of this anymore. They literally think debt can be issued without consequence. What happened to all the hawks??

 

Buffett recently quipped if governments could actually issue endless debt without consequence, then why did it take governments thousands of years to figure that one out??

 

Buffett assumes a government able to print its own currency will opt to inflate its way out of trouble. But, that's the killer. Inflation and/or risk of default push interest rates higher. If the US government were to push the debt to $40 trillion, and if inflation/risk pushed interest rates back closer to a long term average around 5%, all of a sudden the interest expense alone is eating up half the government's tax revenue (impossible to pay that kind of interest while also paying for all that social security, Medicare, defense, education, etc). Ergo, more cost cutting, more taxation, more inflation, less productivity, less taxable income, more vicious cycle. Definitely playing with fire on this one. Could be a long headwind to work through.

 

 

 

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