When Charlie Munger speaks, we listen
In the digital era of Reddit trading, meme stocks and cryptocurrencies, seasoned fund managers are not in fashion in the financial markets.
This young generation of speculators prefers to listen to Elon Musk and Cathy Wood rather than hear what people who have had a sublime track record over the past 50 years have to say.
We do, and cannot resist publishing the recent comments made by Charlie Munger of Berkshire Hathaway last Friday at a time where Berkshire has more cash than ever on its hands.
Berkshire Hathaway Inc.’s Charlie Munger told a conference Friday that markets are wildly overvalued in places and that the current environment is “even crazier” than the dotcom boom of the late 1990s that subsequently led to a bust.
“I consider this era an even crazier era than the dotcom era,” Munger, 97, said at the Sohn conference in Sydney, The Australian Financial Review reported.
Munger also said that he wished cryptocurrencies didn’t exist, and praised China for taking action to ban their use, according to the AFR.
“I wish they’d never been invented,” he said. “And again I admire the Chinese, I think they made the correct decision, which was to simply ban them.
In my country, English-speaking civilization has made the wrong decision, I just can’t stand participating in these insane booms, one way or another.”
Munger, who was speaking after Berkshire’s cash pile hit new heights at $149.2 billion of funds in the third quarter, also said he was bullish on renewable energy.
“I love the fact that we’re rapidly reducing the burning of coal and the burning of gasoline and diesel,” he said. “I think that’s a smart thing for the world to be doing and it would be smart even if there were no global warming.”
Charlie Munger may be 97 years’ old, but he has seen a lot and demonstrated a lot. We could not agree more with his assessment of the current situation in the financial markets and of China.
We have always argued that China, thanks to its political governance and contrary to the free-wheeling system of the US, is taking much faster the corrective actions needed to preserve its growth momentum and society.
Unfortunately, the US, as always, will need a major crisis to take the same corrective actions and we see that crisis unfolding in the coming two years, leading to decades of under-performance and de-leveraging.
A clear sign that this new generation has no clue about valuation is the fact that after having tried to sell TESLA three years ago at a 10th of its current valuation, and after having warned two years ago that Tesla was hugely overvalued, Elon Musk is currently offloading billions of Dollar of his stake without impacting the appetite of a generation that is ready to pay 349x the current earnings of his company.
Cathy Wood’s ARK Innovation fund now ranks in the lowest 1 % performing funds of the entire universe, down another 12 % last month, after having attracted billions in 2020 through her communication in social media.
Satya Nadella, the CEO of Microsoft has just sold 50 % of his stake in the company last week…
All these are signs that we are quickly reaching a turning point…
We are happy to be long China and Short the USA.
The ultimate peak will be marked by the collapse of Crypto-currencies in our view and investors should be watching Bitcoins very carefully.
A break below the US$ 51’000 will mark the beginning of the end.
US DOW JONES INDUSTRIAL
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