Charles Thomas Munger On Investing, The Buyback Debate

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CNBC Transcript: Berkshire Hathaway Vice Chairman Charles Thomas Munger Speaks with CNBC’s Becky Quick

See the full Charlie Munger 2019 Daily Journal (DJCO) Meeting Transcript right here

WHEN: Interview aired today, Friday, February 15, 2019

WHERE: Throughout CNBC’s “Squawk Box” from The Daily Journal annual meeting in Los Angeles, CA

The following is the unofficial transcript of a CNBC interview with Berkshire Hathaway Vice Chairman Charles Thomas Munger and CNBC’s Becky Quick following The Daily Journal annual meeting in Los Angeles, CA. The interview aired on CNBC’s “Squawk Box” (M-F 6AM – 9AM) today, Friday, February 15th.The following is a link to video of the interview on

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Investing legend Charles Thomas Munger on investing, the buyback debate and much more

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BECKY QUICK: Charlie, thank you very much for taking the time to sit down with us today.


BECKY QUICK: You spent a lot of time today talking about how people who think that they can beat the market averages are probably fooling themselves, how much tougher it's gotten to be a value investor, or even just an investor in general. And I was just wondering, do you think the golden era of investing is over?

CHARLES THOMAS MUNGER: Well, not forever.


CHARLES THOMAS MUNGER: Well, because I think, it isn't like the last recession or the last big opportunity that the world is ever going to get is past. There'll be opportunities in the future. There are times where they're easier, and there are times when it-- which are harder.

BECKY QUICK: So is right now tougher just because--


BECKY QUICK: --valuation--


BECKY QUICK: --just because valuations have come up so much?


BECKY QUICK: So you think--

CHARLES THOMAS MUNGER: A) the valuations have come up. And B) the competition sorting through those opportunities is more intelligent and more aggressive and more numerous. Of course it's harder.

BECKY QUICK: Do you think that the--

CHARLES THOMAS MUNGER: The net result is people are going to get worse results.

BECKY QUICK: Do you think that the number of people who are smarter, who have better information than they used to, that that will go down, or it will just be a question of valuations coming down at some point?

CHARLES THOMAS MUNGER: Well, I think valuations will come-- will go up and down because they always have. And I think we'll have smart people in this game forever. Lots of them.

BECKY QUICK: You've compared it to--

CHARLES THOMAS MUNGER: The opportunities that we all remember came from a demoralized period when about 90% of the natural stock buyers got very discouraged with stocks. That's what created the opportunity for these fabulous records that my generation had. And that was a rare opportunity that came to a rare group of people of whom I was one. And Warren was another.

BECKY QUICK: So you're talking--

CHARLES THOMAS MUNGER: And people who start now have a much less-- they have lower opportunity.

BECKY QUICK: Do you think we saw a generational low after 2008, beginning of 2009?

CHARLES THOMAS MUNGER: Generational? Maybe.


CHARLES THOMAS MUNGER: Yeah, I don't think the market is going to be cheaper.

BECKY QUICK: Do you think--

CHARLES THOMAS MUNGER: Than it was then. Yes, it was low. There were huge opportunities then.

BECKY QUICK: What about just back around December, Christmas Eve? Prices were down 20% and further for a lot of stocks.

CHARLES THOMAS MUNGER: Well, I don't follow the details and don't remember the exact days that are-- I know that when The Daily Journal bought those bank stocks, it was basically the low tick.


CHARLES THOMAS MUNGER: That was an accident. I deserve no credit for that.

BECKY QUICK: Well, you deserve some credit.

CHARLES THOMAS MUNGER: No. Well-- but-- but the exact perfect timing was an accident.

BECKY QUICK: What about the lack of volatility that we've seen in the markets? That-- that's also kind of, as central banks got into the game and increased liquidity—

CHARLES THOMAS MUNGER: Well, of course it's-- with all this massive central bank interference, I think that was necessary to do. I admire the politicians who did it and the technocrats, including the Federal Reserve people. And I think it was absolutely required, and that the danger they were avoiding was worth some of the troubles they caused. So-- but it was very peculiar. And it did have the accidental effect of bailing out the rich in order to help the poor. And nobody was doing that because they love the rich. They just didn't have any other tool in the kit, and they had to do something.

BECKY QUICK: So the inequality that came from that--

CHARLES THOMAS MUNGER: It wasn't malevolent. And it was an accident. And it probably won't happen again. And it's not a permanent conspiracy against the poor. It was a-- it was an accident that we had the huge recession caused partly by massive stupidity in finance and venality. And then when we ran out of tools and had to do something really peculiar that we'd never done before, that was the wisest thing to do, given the amount of trouble we were in. You've got to remember that if the trouble has been allowed to run, we might have had a re-visitation of the kind of troubles that brought Hitler into power. So we were facing real difficulties. And both parties and our technocrats got together for the last time, I think, and worked us out of it. It was a very admirable thing, and that you can all be proud. I've been proud of nothing in politics since.

BECKY QUICK: This leads me down so many roads.

CHARLES THOMAS MUNGER: But it was-- but that was a-- that was a high moment.

BECKY QUICK: There are all sorts of political proposals out there right now to try and solve that inequality that was created. Everything from a 70% tax on the highest brackets to a wealth tax to taxing stock buybacks or even preventing them. Do you think any of them work?

CHARLES THOMAS MUNGER: I don't think we have to destroy-- some inequality is probably going to go by itself.


CHARLES THOMAS MUNGER: Well, I think there was a-- I think we hit a peak of inequality because the authorities had no alternative but to print a lot of money. And of course that bailed out asset values. And-- but that was a fluke. And they can't-- they can't really do more of it. They've played that game once, as much as they really can. And so I don't people who were worried about inequality should worry too much about a lot more of it from a lot more interest rate lowering.

BECKY QUICK: We are still stuck with this populist fervor, though. And--

CHARLES THOMAS MUNGER: Yeah, sure. But that's as natural as breathing.

BECKY QUICK: How do you think that plays out?

CHARLES THOMAS MUNGER: Well, I don't know. So far, it's played out in waves. Sometimes the Democrats are in, sometimes the Republicans. In my lifetime, the country has run better, net, because we had two parties, each of which was partly in control. If either party had been totally in control of all branches of the government, I think we would be way worse off today.

BECKY QUICK: You think there's room for a third political party?

CHARLES THOMAS MUNGER: I think we, by going back and forth with a lot of political tension, I think we got about the right amount of social safety net. It would have been evil not to have as much. And we probably couldn't afford a lot more.

BECKY QUICK: Do you think there's room for a third political party, the way Howard Schultz is kind of stepping in, potentially?

CHARLES THOMAS MUNGER: Well, we got one the time of-- Abraham Lincoln. It took a civil war to create it. But-- I think it's unlikely that we have-- the last time we got a third party movement, they just elected one of the two parties who otherwise would not have been elected.

BECKY QUICK: You mean Ross Perot. Or are you going back--

CHARLES THOMAS MUNGER: Yes, I mean Ross Perot.


CHARLES THOMAS MUNGER: Ross Perot elected the Republicans that year.

BECKY QUICK: Right. Are there any politicians you look at and admire?

CHARLES THOMAS MUNGER: Sure. But generally speaking, it's not a genre that is my favorite.

BECKY QUICK: What are-- who are the politicians you do admire? Who do you think has good ideas right now?

CHARLES THOMAS MUNGER: Well, I'm not ecstatic about anybody. If you ask me who performed pretty well recently, I'd say Mike Bloomberg.

BECKY QUICK: You think he has a shot at winning the Democratic?

CHARLES THOMAS MUNGER: I don't know about that. But I think he was-- a pretty reasonable, able kind of a guy, who was trying to do right.

BECKY QUICK: You mean in his job-- in his term as Mayor of New York City?


BECKY QUICK: What do you think-- if you have not been thoroughly impressed by the political process since they came together to try and combat the Great Recession-- what do you think about our political fortunes going from here? Do you worry? Or is it something that you think will be--

CHARLES THOMAS MUNGER: Well, I would prefer they-- that the two parties hated each other less, and that everyone was more rational. You don't like vast political excess and shouted epithets and so forth. I really do-- but what can I do about it? I'm just-- I can be cheerful.

BECKY QUICK: You touched a little on the national debt, which has just hit $22 trillion. You touched a little on that.

CHARLES THOMAS MUNGER: Yeah, we're in new territory. But that doesn't mean that it's crystal clear, we can't by with what we've done. We just know we're in uncharted territory.

BECKY QUICK: You worry about the eventualities of a growing national debt?

CHARLES THOMAS MUNGER: Well, I don't worry much, because every era, it is a cinch that a great nation will, in due time, be ruined. So I--

CHARLES THOMAS MUNGER: So I -- time and-- whether it's Rome, where is-- Britain in its heyday, they all pass. And so our turn is bound to come someday. But I don't like thinking about it too much. It's like my own death. Why should I enjoy thinking about it? But is it coming some day? Sure. Of course it is.

BECKY QUICK: But you-- you have no guess as to when?


BECKY QUICK: Sooner or later. You-- you've been a huge- booster of China's economies and some of the Chinese companies, and the entrepreneurs who run them. We've gotten, obviously, into a little sticker situation with China with the trade talks that are going back and forth. And maybe a different relationship than we've been dealing with for the last 20 or 30 years. What do you think about China right now and its future?

CHARLES THOMAS MUNGER: Well, I think it's natural to have some tension over-- the truth of the matter is that Ricardo, when he invented the law of comparative advantage, did not predict that some day the law of comparative advantage would make-- would grasp-- would greatly accelerate the growth of some poor nation which had a particularly able populace, like China. That free trade would enable them to come up rapidly and take a lot of power away from companies that had been on top and like being on top. He just hadn't think about it. Once we realized it could happen, I don't think it's crazy to think there may be some limit to the amount of destruction we want to occur in our aerospace industry or something.


CHARLES THOMAS MUNGER: So I don't regard free trade as such a pure thing that we could never, under any circumstances, intervene. And I think that the advantages to United States and China, to getting along, are so great on both sides, that I anticipate that they will reach some tolerable adjustment.

BECKY QUICK: Do you think the president's right to raise the questions about whether free trade is really trade and open trade and fair to both sides?

CHARLES THOMAS MUNGER: I don't consider it wrong to have some limits on free trade that matter to the United States. I don't want many, and I don't want them to be huge. But some limits on the operation of free trade are quite acceptable.

BECKY QUICK: Have you changed your perspective on Chinese investments, to this point, based on this trade talks, or based on the new relationship we may have going forward?

CHARLES THOMAS MUNGER: I basically believe in a lot of trade. Because I want two companies-- two countries with a lot of hydrogen bombs to be trading happily with one another instead of posturing the way we are with Russia. So I vastly prefer our relations with China to our relations with Russia. And I think China thinks likewise. And I anticipate that we will get along. It will be crazy on both sides if United States and China don't-- does any one country, both sides should want to keep friendly, it's the other.

BECKY QUICK: You know, you bring up nuclear power or nuclear bombs. And I just wonder, what worries you the most in the arsenal of things that could go wrong? Is it nuclear bombs? Is it--


BECKY QUICK: --artificial intelligence? Is it--

CHARLES THOMAS MUNGER: No, it's-- it's-- it's a nuclear war. A nuclear war would be a real, real disaster. Global warming is something we could cope with if we had to. But a nuclear war is-- that's-- that is really serious.

BECKY QUICK: You point to our relationship with Russia. Obviously, we have the situation with North Korea, with Iran.

CHARLES THOMAS MUNGER: I'm all for making the Russian relationship better, too.


CHARLES THOMAS MUNGER: Well, that's difficult. But you've got to work at it. I don't think the right way to handle every tough guy that's fighting against you is with unlimited hostility. There are times I think when they ought to be killed with kindness. Even-- even if they're wrong.

BECKY QUICK: Is that emphasis on killed or emphasis on kindness?

CHARLES THOMAS MUNGER: I think kindness. There are worse things in the world when you're rich and powerful than giving a little for the peace of the world.

BECKY QUICK: Your concerns about that, where would you rate it? Because obviously, this is something you've thought about for a long time and watched for a long time. Are you less worried or more worried than you were ten years, 20 years ago, 40 years ago, about that situation?

CHARLES THOMAS MUNGER: I don't think, since the day they invented the hydrogen bomb, I've had a moment when I didn't think that mankind's main problem was avoiding-- a modern war using hydrogen bombs. It's a very serious problem.

BECKY QUICK: Charlie, can I ask you about some news of the day today? While you were in your board meeting, and then with the shareholders, there was news out that Amazon was actually pulling its headquarters bid for New York City. And I don't know how closely you follow that. But it's certainly an interesting study when you start looking at how much- states and municipalities should be doing to woo corporate investments and when or if there's a time where it's giving too much, or if they're standing up and have just left a potential for a huge investment?

CHARLES THOMAS MUNGER: Well, of course, we've had states doing this kind of thing for a long, long time. And, by and large, the states that have done it have been wise to do it.

BECKY QUICK: The states that have wooed companies.



CHARLES THOMAS MUNGER: It's been smart of them to-- to woo outside companies to come in. And, and of course it will go on time the wretched excess, that's our system. No, I don't worry too much about it. And -- and my attitude toward them is on the-- utter phenomenon of nature. It's hardly ever been anything like it in the history of our country. And very talented, driven people. And I would not have predicted the success that happened. And now that it's happened, I wouldn't want to predict that it was going to stop, either. I think it may run a long way.

BECKY QUICK: Just back to the idea of whether New York created big problem for itself. I was just thinking about in terms of the new tax laws that are there, and the the blue states, the SALT states, have lost a lot in the new tax legislation. And it's basically punishment from the government for having such high local taxes, because they can no longer deduct those on a federal level. So New York's going to get hit with that. You combine that with the idea that it's not going to be-- not just only wooing Amazon, but what message that may send to the broader business community, could a state like New York or someone in the northeast region really have have shot themselves in the foot with a double whammy?

CHARLES THOMAS MUNGER: There are a number of places that have shot themselves in the foot. Connecticut, California, New York City. They-- it's-- it's been serious. And driving the rich people out is pretty dumb if you're a state or a city. And the idea that you're going to help New York by driving the rich people out, of course it hurts New York. And of course it hurt Connecticut. The idea of that beautiful real estate in Connecticut, down 50% in value--


CHARLES THOMAS MUNGER: --they've driven out all the rich people. And California's doing the same thing. I know a lot of rich people who left California. It-- I think it's really stupid for a state to drive the rich people out. They're old. They keep your hospitals busy. They don't burden your schools, the police department, your prisons. They give a lot. Who wouldn't want rich people? I think Florida and Hawaii have both been very smart in the way they've recruited rich people. And I think Connecticut and California have been stupid.

BECKY QUICK: Do you think the country risks some of those same stupid policies if you tax--

CHARLES THOMAS MUNGER: Well, some of the people in California are so anti-growth, they like driving the rich people out. That's not my view. But, you can understand why some people think that way.

BECKY QUICK: Let's go back to Amazon and the growth that you've seen there. I know in the past that you've said--

CHARLES THOMAS MUNGER: It's incredible what they've done.

BECKY QUICK: Yeah. And you've called Bezos 'ferociously smart'--


BECKY QUICK: What do you think about the prospects for Amazon longer term? There-- there are some movements in Washington that push back against him, whether it's because he's the owner of The Washington Post or whether it's just-- one company getting too big and-- and regulators worrying about that.

CHARLES THOMAS MUNGER: My guess is he still has a long ways to go. Up.

BECKY QUICK: You're a lawyer, too. He--


BECKY QUICK: Well, once a lawyer always a lawyer, correct?

CHARLES THOMAS MUNGER: Not really. That was a long time ago.

BECKY QUICK: What do you think about his move that he's made recently with the the owner of The Enquirer to say, 'Look,' he just came out and said, 'They're blackmailing me. They're extorting me.'"

CHARLES THOMAS MUNGER: Well, I admire people who simply confront problems head-on. And so I have no quarrel with his confronting The National Enquirer. But I regard it as a little nothing place that the world would be-- could well do without. And so-- and to the extent they've behaved badly, and he's objecting vigorously-- I'm all for it.

BECKY QUICK: Let's talk about bad behavior in business. Because I think of you sometimes as the high priest, somebody who looks around and lauds good behavior, but also calls out bad behavior where he sees it. What-- what do you think some of the worst behaviors are in business today?

CHARLES THOMAS MUNGER: Well, I think the behavior of the mortgage and banking industry in the delusional prosperity that preceded the great real estate bust was obscene. Practically everywhere. And I think that the people who got into a lot of trouble richly deserved it. And-- I think they didn't get enough. If God were just, there would have been-- there would have been more penalties. They were bailed out, to some extent, because the country had to do it. And-- but it never should have been allowed to run. I mean all that disgusting lying and-cheating and delusional assumptions and-- and-- it was just-- we all would consider it totally illicit and awful to adulterate the baby food to make more money to an extent where the babies died. And they were doing pretty much the same thing with the basic-- with their basic product. They were adulterating it so badly that it threatened the whole welfare of the republic. This was deeply evil. It's one of the things Elizabeth Warren is really right about.

BECKY QUICK: And you don't agree with her on much.

CHARLES THOMAS MUNGER: That's true. But I agree with her on that.

BECKY QUICK: Is that behavior still taking place? Or you think it's-- it's been put to--

CHARLES THOMAS MUNGER: Well, it's attenuated, thank God. But, is there still some craziness in finance? Of course. There always will be. But it's-- it's way better.

BECKY QUICK: Anything that rises to your radar screen now that may be under the radar for other people?

CHARLES THOMAS MUNGER: Well, nobody knows how much of this money printing we can do. And of course we have politicians who like-- and are in both parties, who like to believe that it doesn't matter how much you do. That we can ignore the whole subject and just print money as convenient. Well, that's the way the Roman Empire behaved, then it was ruined. And that's the way the Weimar Republic was ruined. And-- it's-- there is a point where it's dangerous. You know, and of course, my attitude when something is big and dangerous is to stay a long way away from it. Other people want to come as close as possible without going in. That's too tricky for me. I don't like it.

BECKY QUICK: In terms of possibly getting sucked up into it?

CHARLES THOMAS MUNGER: Yes. I-- I-- if there's a big whirlpool in the river, I stay a long way away from it. There were a bunch of canoeists once that tried to-- to run the Aaron Rapids. I think they were from Scandinavia. And-- and the fact that the whirlpools were so big made them very eager to tackle this huge challenge. The death rate was 100%. I regard that as a normal result.

BECKY QUICK: Bill and Melinda Gates put out their annual letter this week, too. And in it, they had a list of a number of things that have caught them by surprise, things they learned that they didn't see coming. One of them, I think, was that toilets haven't really changed in the last 100 years. Another was that--

CHARLES THOMAS MUNGER: Well, they have, as a matter of fact. The Japanese made the openings bigger. And what you want to go away goes away better. They have changed. They're way better. I don't think they pay enough attention to their toilets.

BECKY QUICK: Same basic construct, though.

CHARLES THOMAS MUNGER: They haven't noticed to see they-- the-- the increased of the size of the whole without telling them.

BECKY QUICK: It does wash away more waste with less water. I will give you that.

CHARLES THOMAS MUNGER: But it takes away more waste.

BECKY QUICK: Takes away more with less.


BECKY QUICK: They had a list of things. Some is that data can be sexist, obviously. Whoever's programming stuff puts it in. Another is that D.N.A. tests can actually catch serial killers.

CHARLES THOMAS MUNGER: Well, that has been a pleasant change.

BECKY QUICK: Catching serial killers?


BECKY QUICK: Yeah. I would agree. I use this, though, as a way of just getting into things that may have caught you by surprise. Is there anything recently that really caught you off guard or that snuck up on you?

CHARLES THOMAS MUNGER: I was surprised when central banks started printing money and buying massive amounts of private securities and, they hadn't done that previously in my lifetime. At least not in a big way. And they did it massively. And it seems to have worked considerably. And that surprised me. And by the way, it surprised the whole economics profession. If you read the textbooks on economics, nobody was predicting that this would be the logical response.

BECKY QUICK: We're not out of it yet, though.

CHARLES THOMAS MUNGER: No, of course not. You're never out of it until you're dead.

BECKY QUICK: Do you think we can call it a success without seeing quantitative easing wrapped up, the big balance sheets kind of wound down? Or, do you think we've come far enough out of it to say this worked?

CHARLES THOMAS MUNGER: Well, all human successes are successes so far. And this is a success so far, and we don't know for sure what the ultimate consequences would be. In the old days, when people thought, 'This year the currency should be backed with gold,' and they wanted the inflation rate to be zero, and the social safety net to be almost zero, they created a lot of GDP growth and a lot of prosperity, but with horrible recessions. And to some extent, the recessions automatically cured themselves. But when we got into the business of big interventions driven by the example of the Great Depression, what we got is pretty much a century of extreme prosperity with relatively minor recessions. And-- but we're using methods that are so extreme that maybe we can't use a lot more of them. And we don't know the answer to that. If an economist told me he knew the answer to that, I wouldn't believe him. Either way. It wouldn't matter which way his opinion was. I just think we don't know.

BECKY QUICK: Is that because that question's too hard, or you just don't trust economists in general?

CHARLES THOMAS MUNGER: Well, the reason the economists are wrong is because it's so hard.


CHARLES THOMAS MUNGER: You know, the great philosopher who said 'A man never steps into the same river twice', you know, 'the man is different, and so is the river, when he goes in the second time,' that's the trouble with economics. It's not like physics. The-- the-- the same damn recipe done a different time gets a different result.


CHARLES THOMAS MUNGER: And I don't think the economics profession-- I think they're gradually coming to that recognition. But it makes their subject harder, not more easy. And they weren't handling it so perfectly even when they thought it was easier. So of course it's hard for them.

BECKY QUICK: And-- and Charlie--

CHARLES THOMAS MUNGER: How-- why would anybody think they know exactly? Take Japan's present position.


CHARLES THOMAS MUNGER: Can Japan double its national debt just because it feels like it from here? I don't know.

BECKY QUICK: I don't know.


BECKY QUICK: Charlie, so many of the people who come here come because they're looking for advice not on business or investments as much as they're looking for just advice on life. There were a lot of questions today, people trying to figure out what the secret to life is, to a long and happy life. And-- and I just wonder, if you were--

CHARLES THOMAS MUNGER: Now that is easy, because it's so simple.

BECKY QUICK: What is it?

CHARLES THOMAS MUNGER: You don't have a lot of envy, you don't have a lot of resentment, you don't overspend your income, you stay cheerful in spite of your troubles. You deal with reliable people and you do what you're supposed to do. And all these simple rules work so well to make your life better. And they're so trite.

BECKY QUICK: How old were you when you figured this out?

CHARLES THOMAS MUNGER: About seven. I could tell that some of my older people were a little bonkers. I've always been able to recognize that other people were a little bonkers. And it helped me because there's so much irrationality in the world. And I've been thinking about it for a long time, its causes and its preventions, and so forth, that I-- sure it's helped me.

CHARLES THOMAS MUNGER: And -- staying cheerful-- with-- because it's a wise thing to do. Is that so hard? And can you be cheerful when you're absolutely mired in deep hatred and resentment? Of course you can't. So why would you take it on?

BECKY QUICK: Is there any advice you would go back and give your 20-year-old self?

CHARLES THOMAS MUNGER: I have not-- many of my children have worked out well. And I've had very little to do with it. I think they come into the world, to a certain extent, pre-made. And you just sit there and watch. I don't think they're-- it's been simply amazing to me as a parent to note know much is sort of preordained. The shy baby is the shy adult. The booming, obnoxious, domineering baby is the booming, domineering, obnoxious adult. I've never found a way to fix that. I can be cheerful about it, but I can't fix it. I can change my reaction, but I can't change the outcome.

BECKY QUICK: Well, Charlie, I want to thank you so much for your time today. It's really been a pleasure being here.

CHARLES THOMAS MUNGER: Well, I'm glad to be here. You know, I seem to have a whole group of people in India and China that like me. Now, that's pretty much my whole favorable constituency. But it's more than a lot of other people have. And so, I'm thankful for what I have.

BECKY QUICK: And we are thankful for having you here. Thank you.

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