Munger's investment wisdom

Yesterday morning, my friend suddenly sent me a message that Charlie Munger had passed away and had completed the last leg of his life peacefully in a California hospital.

Thinking of Mr. Warren Buffett’s sudden release of his will a while ago, I suddenly thought about whether the old gentleman saw his old partner’s current physical condition and forced him to think about arranging the future in advance.

The reason why my friends will send me this message is mainly because recently, we have been reading a book “Munger’s Way”, and I often leave a message to my friends to talk about my feelings and experiences during the reading process.

The book chronicles Munger’s speeches and answers to shareholder questions at every shareholder meeting from 1987 to 2022. The content recorded in the book is very detailed, and the book is well translated---- there is almost no stiff, long-winded, and procrastinating feeling in ordinary translated books, but it reads like an elder’s outspoken teaching and sincere guidance to the younger generation.

The 35 years from 1987 to 2022 are also colorful in the history of American finance, covering several major stock market crashes in the history of American finance from the 80s to the present:

On Black Monday in October 1987, the Dow Jones plunged 38% and the S&P plunged 35%.

In the dot-com bubble of 2000, the Dow Jones plunged 36% and the S&P plunged 50%.

During the 2007 U.S. subprime mortgage crisis, the Dow Jones plunged 53% and the S&P plunged 55%.

In 2020, the Dow Jones plunged 40% and the S&P plunged 35%.

In the shock and reopening of the financial market again and again, ordinary people feel turbulent and confused, and institutional investors experience bankruptcy and collapse and overnight liquidation, but what I read is the stability and composure of a wise man in the face of disaster.

This stability and composure comes from his unique understanding and appreciation of investing.

The reason why Munger can optimistically see a bright future through disasters every time is what the old gentleman himself said: the key to investing in a company is whether its business is good or not, and whether the team is good or not. He believes that as long as these two core elements remain the same, disasters and downturns are always short-lived, and brightness and growth are long-term.

I think maybe this is what Munger and Warren Buffett call “long-termism”, grasping the core elements that can penetrate the timeline and market fog— abandoning interference, fearless bulls and bears, believing in the future, and firmly believing that prices will eventually match value.

Many people in the market think that the investment methods of the two old gentlemen are just words, and that their real secret weapon is “secret”.

When reading Munger’s speech at the shareholders’ meeting, although I found that his speech was reserved and did not answer every question in detail, the questions he did not answer were only specific “tactical” questions, and the most critical “strategic” questions, Mr. Lao has taken the trouble to give detailed answers at every shareholders’ meeting.

This already speaks to the true meaning of investing.

As an investor, the grasp and application of strategy is the general outline, and the specific tactics are different from place to place and from person to person. For example, when we invest in crypto assets and invest in the stock market, the specific tactics are certainly different, and the specific tactics of investing in the stock market and investing in precious metals cannot be the same. However, no matter which subdivision is invested, the big ideas and techniques, and the foothold of analyzing the problem (that is, the strategic problem) must be universal.

Munger used the 35-year history of shareholders’ meetings to perfectly validate this method and this set of ideas.

In Munger’s dictation, there are three examples that stand out to me the most: Coca-Cola, Wells Fargo, and Freddie Mac.

All three companies have made mistakes, experienced troughs, and experienced significant drawdowns in their share prices over the past 35 years. Every time such an incident occurs, and shareholders question Munger’s investment, he gives a meticulous analysis and clear answers. His answers are always based on the judgment of the business and the team.

And the facts after the fact have proved again and again that Munger’s judgment was right.

This is probably the most precious treasure and testimony that this history has left us.

Although we invested in the crypto assets that Munger was most disliked during his lifetime, Mr. Lao’s ideas and methods are definitely a weapon for us to judge the projects in crypto assets, especially those that intend to invest in the long term.

In future articles, I will look at the timing and combine some examples, interspersed with my thoughts and experiences after reading this book, hoping that all crypto asset investors can get inspiration and gain from it.

Source: Golden Finance