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Charlie Munger on US Economy: Pain Not Over


Parsad
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I'd like to hear exactly what Charlie had to say.  That seems to be excerpts, and I can't find any video of the whole interview.  I think Buffett is saying we won't see a double-dip, but Munger is saying that certain sectors are still going to get hammered.  I agree with both.  Cheers!

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I told you that if you wake up a grumpy, very smart, viciously competitive, eighty eight year old lawyer with BAD NEWS about a pending case just before BREAKFAST according to his time zone, there will be ramifications due to "agida." 

 

Charlie just let out a big belch!  ;D 

 

 

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This is reminiscent of the fund managers that setup two LP's with different strategies.. Then one is right and they collect the carry on the one thats right while the other is in the red... Just kidding of course but it probably proves one of them is being quoted out of context...

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These two have always reminded me of a married couple that knows how to stay married (minus the domestic fights and make up sex - please dont visualize this).  They likely disagree frequently but have enough respect for the other that when decisions need to be made one backs off if the other is really keen.

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It was a great 2 hours in Ann Arbor yesterday with Charlie.  I recorded the whole interview, but unfortunately I have to jump on a plane to Boston today and won't have time to type it up. 

 

He definitely is not as optimistic as Warren.  He thinks there are still lots of problems to come/stay: Real estate, jobs, etc...

 

Li Lu was in the audience sitting in the front row.  It's interesting to me that he would make the trip with Charlie.

 

It was a great treat. Fortunately, it was sponsered by the U of M Law School, so there weren't nearly as many people as I thought there would be, so I was able to sit in the front row and ask a question.  Becky Quick did a nice job moderating the discussion.  It was funny trying to watch her ask questions, as Charlie would pause, she would start to ask a question, then he would just keep talking about his previous point. 

 

Hopefully we will find a video of the conversation, but if not I will work on my notes.

 

 

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"Munger also warned that the pain is not over in many sectors, citing timber and commercial real estate as two sectors where there is 'more pain to come.'"

 

Grantham from GMO is high on timber and Klarman from Baupost is high on commerical real estate. Ugh! It would be so much easier to be a lemming if these people would think the same way!  :-\ ???

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Charlie, GMO and Seth are saying the same thing, existing holders are going to experience pain which may be somebody gain if bought at the right price. Anecdotally, I am hearing of great deals in commercial real estate at sometimes half to a 1/4 of the construction price + land.

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Commercial real estate as a result of America's job conundrum in addition to the advent of the internet, will never be the same! Vacancy rates as a result of reduced demand and changing business models will cause insufficient margins of safety by hot shot managers believing base model rents will be sufficient for their "investments."

 

Men including NY's real estate mogul, Zuckerman, will be surprised before this is over.  :-X

 

 

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Great interview.  A truly great and wise man.

 

He is very clear -- plenty of pain ahead. 

 

I would add that if you invest with sufficient margin of safety, you will still do fine.  In the meantime, be sure to be prepared to survive the storm and capitalize on the wonderful margin of safety that will Mr. Market will offer us.

 

For the disciples of Prem -- his view seems pretty clear to me:

 

Paul Rivett, Fairfax Financial’s chief legal officer, declined to comment on the counterparties to the contracts.

 

“We are very concerned about deflation and have put this trade on to hedge some of what we see as a not insignificant risk,” Rivett said in an e-mail. “Unfortunately, we have not publicly disclosed the inner mechanics of the trade.”

 

NEVER WAIVER -- DEMAND A HIGH MARGIN OF SAFETY, ALWAYS.

 

Best.

 

 

 

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Thanks for posting this. Engrossing interview.

 

It is useful for me to note that Charlie Munger spends all of 30 seconds talking about the macro economy and most of that to explain that he and Warren are in agreement that an opinion on the macro economy is not a suitable foundation for any investment decision. That, in my mind, is the real gem in each of these men's opinions, that the macro situation is forever changing and too variable to predict to any useful end, so *forget it* and focus on business fundamentals - or *don't forget it* at your own peril! 

 

 

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Guy's my role model all over again.  His words and long-term view are like soothing balm to my tension-filled head.  Despite admitting that our generation has huge problems to solve. . .

 

Interesting that he is for a Value Added Tax and would not reform Social Security, but admits that unfunded entitlements are a huge problem. 

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Can anyone even think of anybody else on earth who is similar to Charlie?

 

No one like Charlie, but for those that have attended our annual Fairfax dinners, most would agree that Sam Mitchell is alway fun to listen to and probably livens up the conversations at Hamblin-Watsa!  Cheers!

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Fear not, you drug pushing, pimps of INFLATION who are intent on trivializing those remaining "wages" of those who are fortunate enough to work! The full truck loads of big ticket items, are being transported on the 50 percent empty RAIL CARS I saw traversing the DESERT this past weekend with the heat of the SUN pouring down on it!  ;D

 

http://finance.yahoo.com/news/FedEx-1Q-profit-doubles-will-apf-2079216896.html?x=0&sec=topStories&pos=main&asset=&ccode=

 

It said strength in international shipments are driving profits, but said it will cut 1,700 jobs in an attempt to fix its money-losing U.S. trucking business.

 

The world's second-largest package delivery company did raise its financial outlook after its first-quarter net income doubled. But the projections for the second quarter and full year fell shy of Wall Street expectations, and the stock dropped almost 3 percent in premarket trading.

 

Growth in international air shipments has been driving FedEx's results lately. That continued in the first quarter. But the FedEx Freight segment lost money again as demand for large items like refrigerators and other appliances continues to be weak. As it competes with other trucking companies to ship a limited amount of freight, FedEx has been forced to forgo the rate increases that are helping its other segments grow.

 

FedEx will combine its FedEx Freight and FedEx National less-than-truckload operations on Jan. 30, closing 100 facilities and cutting 1,700 workers. FedEx says the move, along with other cost cuts, will ensure the trucking business is profitable next year.

 

Less-than-truckload shippers take goods from many different manufacturers and consolidate them into a single truck for delivery.

 

The move suggests that big companies like FedEx, which is a bellwether for broader economic health, are feeling that the global economy still has a way to go for a full recovery. 

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Fear not, you drug pushing, pimps of INFLATION who are intent on trivializing those remaining "wages" of those who are fortunate enough to work! The full truck loads of big ticket items, are being transported on the 50 percent empty RAIL CARS I saw traversing the DESERT this past weekend with the heat of the SUN pouring down on it!  ;D

 

http://finance.yahoo.com/news/FedEx-1Q-profit-doubles-will-apf-2079216896.html?x=0&sec=topStories&pos=main&asset=&ccode=

 

It said strength in international shipments are driving profits, but said it will cut 1,700 jobs in an attempt to fix its money-losing U.S. trucking business.

 

The world's second-largest package delivery company did raise its financial outlook after its first-quarter net income doubled. But the projections for the second quarter and full year fell shy of Wall Street expectations, and the stock dropped almost 3 percent in premarket trading.

 

Growth in international air shipments has been driving FedEx's results lately. That continued in the first quarter. But the FedEx Freight segment lost money again as demand for large items like refrigerators and other appliances continues to be weak. As it competes with other trucking companies to ship a limited amount of freight, FedEx has been forced to forgo the rate increases that are helping its other segments grow.

 

FedEx will combine its FedEx Freight and FedEx National less-than-truckload operations on Jan. 30, closing 100 facilities and cutting 1,700 workers. FedEx says the move, along with other cost cuts, will ensure the trucking business is profitable next year.

 

Less-than-truckload shippers take goods from many different manufacturers and consolidate them into a single truck for delivery.

 

The move suggests that big companies like FedEx, which is a bellwether for broader economic health, are feeling that the global economy still has a way to go for a full recovery. 

 

Yes, but at least they haven't dropped the most important part of their business...financing the FedEx Cup of golf....FORE!!!

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I know that Charlie is a very smart, very shrewd man while I'm just a plain ole dummy.

 

A couple of thoughts on his sit down with QUICK BECKY in Michigan, however.

 

When he quit claimed for all to hear that, "Politicians are never so bad you don't live to want them back," all while amusing himself in the chair with that fine Charlie smirk, the whole audience including Becky went silent, not fully understanding if he was having a senior moment or they were dummies like me!  ???

 

As for the real Munger's analogies being in support of the fake Munger's "DEFLATION" argument, I will offer this based upon him referencing his once rich uncle. That architect was making 8K per year during the roaring twenties-quite a nice sum!-and then got denigrated to a little more than 1K per year by uprooting himself to Los Angeles.

 

As Charlie so eloquently pointed out though, that wasn't so bad because he could still live so cheap compared to his paltry wage base. He had some damn disposable income to be "creative" with. Those savings were a partial "margin of safety" from a psychological stand point after and during the country's financial devastation. 

 

Well, as if Charlie didn't know it when telling those poor Youngins who he was so eager to teach, to TOUGH IT OUT while their educational costs in excess of 50K per year before INTEREST, and few job prospects because of capitalists like him and his Chinese partner, LI, rolling up opportunities far away from them where DIRT CHEAP LABOR PREVAILS, even while the same "INFLATION BEAST" tied to their educational liabilities, which he has told his shareholders in their private settings were so damn good to them over the years, won't give them BREATHING ROOM or excess savings beyond paying their food and rent costs partially tied to criminal banks preventing a 70 year old PONZI SCHEME in the housing market to POP so that they could be given the "LIBERTY" for their creative, entrepreneurial juices to flow again.

 

When you're a FAT cat, sitting high on your TREE ready to pounce down on the little canaries all around you for LUNCH, it's fairly easy to tell people to "tough it out," don't worry and don't have "ENVY" in your hearts.

 

Charlie talks about a party, as though he's Republican or something. Truth is, I heard Charlie say that if the Chinese rule the world because they're wired to do so, he's fine with that. If the Li's usurp the Munger's, so be it, according to him. 

 

Did his hero, Benjamin Franklin, care about the long term welfare of his own country and citizen base unlike Charlie?

 

I know Ben liked the printing press, and even had one in his basement. Charlie and Warren, on the other hand, have figured out how to exploit the stupidity behind the "SCOUNDRELS" running those presses on behalf of their own GOVERNMENT IDIOTS, however.       

 

Charlie, Charlie, Charlie! What was the story with "ILLEGAL NAKED SHORT SELLING" again?  >:(     

 

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