E Munger Musings

The 97-year-old Vice Chairman of Berkshire Hathaway (BRK-A, BRK-B), Charlie Munger, provided these recent musings about the markets, investing and life.


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In responding to a question about special purpose acquisition companies (SPACs), Charlie Munger stated SPACs are a way for early-stage investors to cash out of speculative companies using less sophisticated retail investors. He further explained in his blunt style, “It’s just that the investment banking profession will sell sh** as long as sh** can be sold.” He stated, "I think this kind of crazy speculation in enterprises not even found or picked out yet is a sign of an irritating bubble. I think it must end badly, but I don't know when."


When asked about the frenzy around GameStop (GME) and other heavily shorted stocks, this is what Munger had to say: “That's the kind of thing that can happen when you get a whole lot of people who are using liquid stock markets to gamble the way they would in betting on race horses. And the frenzy is fed by people who are getting commissions and other revenues out of this new bunch of gamblers. And of course, when things get extreme, you have things like that short squeeze." He added, "It's not generally noticed by the public, but clearinghouses clear all these trades. And when things get as crazy as they were in the event you're talking about, there are threats of clearinghouse failure. So it gets very dangerous."


Asked about wretched excesses in the market today, Munger retorted, "It's most egregious in the momentum trading by novice investors lured in by new types of brokerage operations like Robinhood. And I think all of this activity is regrettable. I think civilization would do better without it." He added, “It's really stupid to have a culture which encourages as much gambling in stocks by people who have the mindset of racetrack bettors. And of course it's going to create trouble, as it did.” He continued, “If you're selling them gambling services where you rake profits off the top like many of these new brokers who specialize in luring the gamblers in, I think it's a dirty way to make money. And I think that we're crazy to allow it." Munger concluded, “Human greed and the brokerage community create bubbles from time to time and wise people stay out of them.

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William K. 1 month ago Member's comment

A very lively set of comments, both useful considerations and interesting insights and all of it making sense. Profound advice that is durable and not just pointed at something current in the last 2 minutes.

Craig Newman 1 month ago Member's comment

Why is this useful anywhere but $GME-page?