Charlie Munger Talk | Inflation as Big a Risk as Nuclear War, Bullish on Costco, Calls "Bank Account" Digital Currency

Legendary investor Charlie Munger expressed his disdain for cryptocurrency by directly equating it to venereal disease at the annual shareholder meeting of his media company, Daily Journal. Elon Musk revealed on Twitter that Munger had also predicted Tesla's failure in the early days. The article summarizes Munger's key points from the meeting.

Bullish on China

When asked about investing in Alibaba in China, Munger emphasized the vast manpower in China and the continuous advancement in technology, stating that Chinese companies are stronger than their competitors and have lower stock prices compared to American competitors. He pointed out the importance of China's style of capitalism in its economic rise.

Similar to many wise individuals, Buffett likes to invest in areas where he feels comfortable, but when it comes to investing in China, I would be more comfortable than Buffett.

He also mentioned the tension between the U.S. and China, stating that it is "very foolish" for the U.S. government to allow the current tension to escalate, suggesting that the relationship between the U.S. and China should be more harmonious and urging authorities to reconcile with Beijing.

Inflation

Munger has repeatedly warned about the severity of current inflation, suggesting that it may be more challenging to resolve than the inflation issue faced by the legendary figure in the U.S. financial sector, former Federal Reserve Chairman Paul Volcker in 1980.

In 1980, Volcker raised the federal funds rate from 10.25% to 20%, maintaining it above 16% from the end of the year to May of the following year. Although this ended the long-standing inflation in the U.S., it also laid the groundwork for economic recession in the future.

Munger stated:

You can say hyperinflation is a sign of the downfall of democratic countries. Clearly, we are in a long-term crisis. Look at the Roman Empire, where centuries of sustained inflation ultimately led to its demise; this may be a long-term, significant crisis second only to nuclear war.

He believed that former U.S. Treasury Secretary Larry Summers was right in claiming that the Federal Reserve underestimated the risk of inflation, and he revealed that personally, he would hold Berkshire, Costco, Daily Journal, and some Chinese stocks to deal with the crisis.

He emphasized: "You may have to pick a few not-so-bad options from a bunch of bad options."

Extremely Bullish on Costco

When asked about the high performance of Costco, Munger stated that he does not believe the actual value of a stock can rise endlessly, even for admirable companies like Costco, which may make people feel that its stock price is too high.

However, assuming I lead a sovereign wealth fund with an investment horizon of 30 to 50 years, I would buy Costco COST at the current price. Not that I am willing to buy directly; I cannot get used to buying at a high cost. Although the selling price is currently so high, I have never thought of selling any Costco shares.

He emphasized: "Costco will become an internet giant. It has a good culture and moral atmosphere and will be an unprecedentedly strong company. I hope all American companies can operate as well as Costco."

More Complex Investment Market

Munger mentioned that he has never hoarded cash in his investment career; he always finds good investment opportunities. However, Berkshire now accumulates a large amount of cash and cannot find investment targets.

He pointed out that one cannot buy anything at a price they are willing to pay, as many others in the market are busy pushing up prices, and many transactions are also driven up by bankers to earn transaction fees. He gave advice:

There is no universal investment advice. Some people are very smart and can invest in cutting-edge technology. Everyone should evaluate their skills for corresponding investments. The market in the future will be more complex, and college graduates will find it harder to get rich than I did.

Cryptocurrency

The host asked, having previously described cryptocurrency as rat poison, whether Munger is now more surprised by the mainstream acceptance of Bitcoin. Munger responded:

Not at all. Imagine a perfect currency used for extortion, kidnapping, regulatory evasion, etc. Why would the government accept a technology that is untraceable and supported by a group of people looking to get rich quick into the payment system? I certainly hate it very much, and the people's frenzy for Bitcoin is very bad, while the Chinese government's ban on cryptocurrency is a wise decision.

The host then asked about the future of cryptocurrency in the U.S.

I don't know, but the key is that our legislators will enter the cryptocurrency industry after leaving government agencies, making it difficult for the government to make the right decisions regarding cryptocurrencies like Bitcoin.

Munger also emphasized that he is proud of not getting involved in cryptocurrencies; it's like a kind of venereal disease. When asked about his views on CBDC, he believed that the U.S. already has digital currency, which is "bank accounts."