The only intelligence investing is value investing...to acquire more than one is paying for.
Charlie MungerI knew a guy who had $5 million and owned his house free and clear. But he wanted to make a bit more money to support his spending, so at the peak of the internet bubble he was selling puts on internet stocks. He lost all of his money and his house and now works in a restaurant. It's not a smart thing for the country to legalize gambling [in the stock market] and make it very accessible.
Charlie MungerThe tradition of always looking for the answer in the most fundamental way available - that is a great tradition, and it saves a lot of time in this world.
Charlie MungerA lot of opportunities in life tend to last a short while, due to some temporary inefficiency... For each of us, really good investment opportunities aren't going to come along too often and won't last too long, so you've got to be ready to act and have a prepared mind.
Charlie MungerSo you can get very remarkable investment results if you think more like a winning pari-mutuel player. Just think of it as a heavy odds against game full of craziness with an occasional mispriced something or other. And you're probably not going to be smart enough to find thousands in a lifetime. And when you get a few, you really load up. It's just that simple.
Charlie MungerA lot of success in life and business comes from knowing what you want to avoid: early death, a bad marriage, etc.
Charlie MungerThere are a lot of things in life way more important than money. All that said, some people do get confused. I play golf with a man who says, " What good is health? You can't buy money with it."
Charlie MungerOur approach has worked for us. Look at the fun we, our managers, and our shareholders are having. More people should copy us. It's not difficult, but it looks difficult because it's unconventional - it isn't the way things are normally done. We have low overhead, don't have quarterly goals and budgets or a standard personnel system, and our investing is much more concentrated than average. It's simple and common sense.
Charlie MungerThe laws of thermodynamic s are such that if the water is getting warmer - and I believe it is - the energy of the weather is going to go up.
Charlie MungerOne could imagine a period like Japan13 years ago, however, in which indexing over time wouldn't work.
Charlie MungerIt's in the nature of stock markets to go way down from time to time. There's no system to avoid bad markets. You can't do it unless you try to time the market, which is a seriously dumb thing to do. Conservative investing with steady savings without expecting miracles is the way to go.
Charlie MungerHow should the best parts of psychology and economics interrelate in an enlightened economist's mind?... I think that these behavioral economics...or economists are probably the ones that are bending them in the correct direction. I don't think it's going to be that hard to bend economics a little to accommodate what's right in psychology.
Charlie MungerBerkshire's whole record has been achieved without paying one ounce of attention to the efficient market theory in its hard form. And not one ounce of attention to the descendants of that idea, which came out of academic economics and went into corporate finance and morphed into such obscenities as the capital asset pricing model, which we also paid no attention to. I think you'd have to believe in the tooth fairy to believe that you could easily outperform the market by seven-percentage points per annum just by investing in high volatility stocks.
Charlie MungerI don't spend much time regretting the past, once I've taken my lesson from it. I don't dwell on it.
Charlie Munger[With] closet indexing....you're paying a manager a fortune and he has 85% of his assets invested parallel to the indexes. If you have such a system, you're being played for a sucker.
Charlie MungerAcquire worldly wisdom and adjust your behavior accordingly. If your new behavior gives you a little temporary unpopularity with your peer group then to hell with them.
Charlie MungerThere is the sheer amount of Franklin's wisdom. And the talent. Franklin played four instruments. He was the nation's leading scientist and inventor, plus a leading author, statesman, and philanthropist. There has never been anyone like him.
Charlie MungerI do not think you can trust bankers to control themselves. They are like heroin addicts.
Charlie MungerI think we have some special talents. That being said, I think it's dangerous to rely on special talents - it's better to own lots of monopolistic businesses with unregulated prices. But that's not the world today. We have made money exercising our talents and will continue to do so.
Charlie MungerBlack-Scholes is a know-nothing system. If you know nothing about value - only price - then Black-Scholes is a pretty good guess at what a 90-day option might be worth. But the minute you get into longer periods of time, it's crazy to get into Black-Scholes. For example, at Costco we issued stock options with strike prices of $30 and $60, and Black-Scholes valued the $60 ones higher. This is insane.
Charlie MungerThe interesting thing is the field is so big - it's enormous. One thing a modern civilization needs is energy.
Charlie MungerWhere you have complexity, by nature you can have fraud and mistakes. You'll have more of that than in a company that shovels sand from a river and sells it. This will always be true of financial companies, including ones run by governments. If you want accurate numbers from financial companies, you're in the wrong world.
Charlie MungerThe normal expectancy of the average investor - for example, the pension funds of AT&T or IBM - is 6% for a long time.
Charlie MungerThe way to win is to work, work, work, work and hope to have a few insights And you're probably not going to be smart enough to find thousands in a lifetime. And when you get a few, you really load up. It's just that simple.
Charlie MungerNever, ever, think about something else when you should be thinking about the power of incentives.
Charlie MungerI know just enough about thermodynamics to understand that if it takes too much fossil-fuel energy to create ethanol, that's a very stupid way to solve an energy problem.
Charlie MungerFancy computers are engaging in legalized front-running. The profits are clearly coming from the rest of us - our college endowments and our pensions. Why is this legal? What the hell is the government thinking? It's like letting rats into a restaurant.
Charlie MungerWe have never had the will to enforce the immigration laws. What you see is what you'll continue to get.
Charlie MungerBernie Ebbers and Ken Lay were caricatures - they were easy to spot. They were almost psychopaths. But it's much harder to spot problems at companies like Royal Dutch [Shell].
Charlie MungerMy idea of a good place to shop is Costco - it has these heavily marbled fillet steaks. The idea of eating some wheat thing and washing it down with carrot juice has never appealed to me.
Charlie MungerWith Congress and the S.E.C. so heavily peopled by lawyers, and with lawyers having been so heavily involved in drafting financial disclosure documents now seen as bogus, there was a new "lawyer" joke every week. One such was: "The butcher says 'the reputation of lawyers has fallen dramatically', and the check-out clerk replies: "How do you fall dramatically off a pancake?
Charlie MungerWhat's fascinating . . .is that you could now have a business that might have been selling for $10 billion where the business itself could probably not have borrowed even $100 million. But the owners of that business, because its public, could borrow many billions of dollars on their little pieces of paper- because they had these market valuations. But as a private business, the company itself couldn't borrow even 1/20th of what the individuals could borrow.
Charlie MungerI've been associated with Warren ( Buffett) so long, I thought I'd be just a footnote.
Charlie MungerA few public hangings will really change behavior. One of our Presidents said if he could execute three people each year for no cause, it would make it a lot easier to govern. When someone said that's not enough, he said, "Oh yes it is, because I'd publish the list of people under consideration."
Charlie Munger