A compiliation of the best Warren Buffett/Charlie Munger quotes from the most recent Berkshire Hathaway Annual meeting and newsletter, submitted by a Nyquist investor.
Since interest rates in the U.S. began rising in mid-2005, he has preferred buying foreign stocks to investing directly in foreign currencies, still worried about the country’s trade imbalances resulting in a painful correction in the dollar and “significantly” higher inflation;
Speculation, instead of fundamentals, has begun to drive the housing markets but in particular commodities which could end badly for investors;
Private-equity firms and hedge funds were derided as “deal flippers” interested only in making large gains, rather than lasting ownership of companies. While they might not make money flipping, “They’ll make it on fees, fees, fees”;
When he gets an offer to buy a business from a private-equity firm, he “puts the phone down fast”, since their looking for strategic buyers, defining them as “someone who pays too much” which he won’t.
Too often, executive compensation in the U.S. is ridiculously out of line with performance,” noting that while serving as a director of twenty public companies during his career, a chief executive put him on the compensation committee just once;
Munger compared the current private-equity boom to real-estate speculation in the 1930s, when “you could borrow more money against some real estate assets than you could sell them for.”. Later he said said “compensation at investment banks was driven higher by a frenzy of envy. Half of students at the elite Eastern business schools want to go to private-equity funds or hedge funds. They seem to judge their progress in life by using Goldman Sachs as the minimum standard. This can’t possibly end well”;
Munger also predicted that “The chances of another nuclear device being used on purpose over the next 60 or 70 years is very high, and there’s not much anyone can do about it.”
Well 60-70 years covers a long time period (for me a quarter-century or a generation is sufficient length) but it reaffirms my position that risks are discounted in this market environment, awash in money with providers too optimistic of their expected return.
It is noteworthy of the times, that on Saturday 24,000 Berkshire shareholders attended the company’s annual meeting in Omaha’s Qwest Stadium One-quarter century ago, only 12 people attended the annual meeting, including his staff, an uncle and an aunt. Such is the importance of market timing.
Source: WSJ, May 8,2006