Hedge fund boss says the best investment advice he ever got was a ‘terrific’ message from late Charlie Munger
The way investors would hang on to the late Charlie Munger’s every wisecrack (you can read 500-plus pages worth in “Poor Charlie’s Almanack”), you’d think he’d formed a comedy team with fellow billionaire and business partner Warren Buffett.
But funny as he was, Munger was equally sharp and insightful. And Josh Friedman — the co-CEO, co-founder and co-chair of Canyon Partners, an L.A.-based hedge fund — isn’t bashful about praising Munger’s investment advice.
“Charlie Munger used to say that things fall into three categories: yes, no, and too complicated to figure out,” Friedman said in a July interview with Bloomberg. “There’s a basic message in there that I think is a terrific one.”
Friedman notes that he doesn’t follow the Munger way chapter and verse; Canyon Partners prides itself on complex investment opportunities. But he does embrace Munger’s three-pronged strategy, which he describes this way: “You have to be patient, and you have to be aggressive when the opportunities are abundant, and you have to be quite disciplined at a time when they’re not.”
From Munger to Friedman, a value orientation
It’s no hyperbole to say that in the 55-second clip, Friedman by way of Munger lays out a solid blueprint for market success. While many investors betray irrationality and impulsivity — they sell low in a panic, try to time the market or invest in overhyped IPOs — Munger and Buffett made their fortunes through studious, deliberate decision-making.
The approach is known as value investing and based on principles Munger followed, and Buffett learned, at the feet of markets guru Benjamin Graham. It has many nuances but the underlying principle is that if a share price is below its book value, it’s undervalued — and thus a good buy. If the price sits above its book value, it’s overvalued. Buffett famously said of Graham’s 1949 tome “The Intelligent Investor,” “Picking up that book was one of the luckiest moments in my life.”
It’s no surprise, then, to see this statement on Canyon’s landing page: “For 30-plus years, Canyon Partners has employed a deep value, credit intensive approach.”
Since its founding in 1990, Canyon Investors has grown to oversee more than $24 billion in assets under management.
Once you know to look for it, you can see Munger’s philosophy reflected in many of Friedman’s other media appearances. In another Bloomberg video, he talks about the dangers of a herd mentality that prioritizes greed stampedes over evaluating individual investments based on their merits.
“I think most of the big mistakes people make are because they see others doing it and they feel like, ‘Oh my God, how did I miss that? I’d better get into that,’” he said. “You’ve got to think independently, you’ve got to be a contrarian, and you can’t be motivated by fear of missing out or by envy.”
In the Munger video, he acknowledges that during the past decade, tasty opportunities were everywhere in equities, venture capital and especially credit markets. (Canyon works within corporate and structured credit.)
With interest rates “ridiculously low” in the 2010s, “It was easy to put money in things that were silly, in retrospect,” said Friedman. “Having the kind of patience and discipline that Charlie Munger and Warren Buffett have had is a great lesson for everyone in the investment world.”
This touches on another cornerstone the billionaires leveraged to build Berkshire Hathaway: buy and hold. As the name implies (and today’s avarice defies), the longer one keeps a stock, the better its prospects. And that could last for decades or more. Or even more. In another letter to Berkshire shareholders (this one in 1988), Buffett declared, “Our favorite holding period is forever.”
Given that Munger died at 99 and the Oracle of Omaha turns 94 in August, that’s not too far-fetched a time frame.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
TORONTO — Canada’s investment product regulator says it imposed more than $14 million in fines and other financial enforcements in its last fiscal year.
The Canadian Investment Regulatory Organization (CIRO) says the total also includes imposed costs and the forced return of ill-gotten profits.
The regulator says it also ordered suspensions and permanent prohibitions in a significant proportion of proceedings against individuals.
Enforcement efforts included a $2 million fine against Fortrade Canada for recommending a high-risk product to unsophisticated retail clients, and a $1.7 million fine and permanent ban on securities-related business against Paul Walker for a range of misconduct including soliciting more than $1.5 million in investments for an outside business activity.
CIRO was created at the start of 2023 through a combination of the Investment Industry Regulatory Organization of Canada and the Mutual Fund Dealers Association of Canada.
The new self-regulatory organization says it is focused on harmonizing its regulatory approach to create more consistency and timeliness with enforcement action.
This report by The Canadian Press was first published July 16, 2024.
