Jason Zweig has a great article (as usual) on Charlie Munger in his weekly Saturday column. Charlie Munger bought some securities for the Daily Journal, a newspaper where he serves as the director, and made a boatload of money. The original story is on Bloomberg (check it out) with a focus on the SEC’s questioning why the paper should not be considered an investment firm. However, the question remains what did Munger buy?
I was honored to help Jason Zweig with research on this topic, and only a small quote appears in the WSJ (not unexpected especially as editors cannot post 10 minutes of my rambling), but here is some more research I did on the topic. I would like to thank some anonymous people who helped me with my questions.
First a quote from Bloomberg article:
Charles Munger’s Daily Journal Corp. (DJCO) told regulators that selling Treasuries and jumping into stocks was the safe move for the publisher in the financial crisis.
“The board recognized that this decision would be contrary to the conventional (but questionable) notion that the least risky way to preserve corporate capital for the long-term benefit of stockholders is to invest it in government bonds at interest rates approximating zero,” an attorney for Los Angeles-based Daily Journal wrote in a March 18 letter made public today.
Also from a reported transcript at a DJCO investor meeting (note I cannot confirm this transcript is correct, but believe it to be, full one embedded below).
Shareholder: Two questions, if you don’t mind. From 2000 to 2008, Daily Journal seemed to reinvest nearly all of its profits into US Treasury notes and bills. In the last two years, after February 2009, Daily Journal has invested over $30 million into common stock of three companies. Can you discuss the difference between the investment landscape over the last few years versus 2000 to 2008?
Munger: Well, when we’re engaged in something difficult, as we were with our declining main business, we tended to want extra reserves of strength. As we got so much extra money and the opportunities in marketable securities got more extreme, we changed our point of view as the facts change.
Keynes used to say, “When the facts change, do you change your opinion?” (Keynes actual quote was: “When the facts change, I change my mind. What do you do, sir?”) Well, of course you do. That’s what we did. Our circumstances were different and our opportunities were different, so we behaved differently. What would you do?
Shareholder: Is it any reflection of the investment climate, or purely…
Munger: Yes, of course, that was part of it. The price you pay for some of those securities was ridiculously low. In fact some of that stuff was something that happens once in 40 years or something. Who in the hell keeps money sitting around waiting for one of those opportunities? (A) It might come and go and you may not recognize it, and (B) what do you do during the 40 years you’re waiting?
So I don’t think you should be terribly encouraged by what has happened. It doesn’t indicate that suddenly a recurring stream of money going from people in their 90s. It just means that for one reason or another, we behaved pretty sensibly, and reacted pretty intelligently to opportunities. Other people didn’t do it.
Now from Jason Zweig’s article:
Mr. Munger and Daily Journal haven’t disclosed which stocks he bought during the crisis, but Jacob Wolinsky of ValueWalk, an investing website, believes the largest position was in Wells Fargo, followed by U.S. Bancorp.