There was a table I recreated that showed the annual returns from the Munger Partnership, which was the fund he ran before joining Buffett at Berkshire Hathaway for good:
The results are spectacular but look at how volatile his returns were. Munger was down more than 53% during the 1973-1974 bear market.
The losses didn’t matter, of course, because the gains more than made up for them.
The same dynamic applies to Berkshire Hathaway.
Munger joined Buffett full-time at the former textile company-turned-investment-arm in 1978. Since then Berkshire Hathaway has compounded capital at nearly 19% per year, an incredible return.
But there were plenty of drawdowns along the way to those unbelievable returns:
Over the past 40+ years Berkshire Hathaway has experienced drawdowns of -20%, -32%, -34%, -46%, -51%, -22% and -25%. That’s plenty of bear markets and crashes.
Which brings us to one of my favorite Munger quotes:
If you’re not willing to react with equanimity to a market price decline of 50% two or three times a century you’re not fit to be a common shareholder and you deserve the mediocre result you’re going to get compared to the people who do have the temperament, who can be more philosophical about these market fluctuations.
Of course, being more philosophical about market fluctuations is not easy.
Losing money is no fun. Making money is hard. Investing is HARD.
It can be grueling for mere mortals like you and I but it’s even hard for legends like Munger and Buffett.
A few weeks ago I listened to one of Munger’s final interviews on The Acquired Podcast.
Even at 99 years old he was still cagey and sharp.
The overarching theme of Munger’s message in this interview was how difficult it was to produce such an enviable track record.
I loved his answer when asked if Buffett and Munger could replicate Berkshire Hathaway’s success if both we in their 30s starting out today:
The answer to that is no, we wouldn’t. We had… everybody that had unusually good results… almost everything has three things: They’re very intelligent, they worked very hard, and they were very lucky. It takes all three to get them on this list of the super successful. How can you arrange to have just […] good luck? The answer is you can start early and keep trying for a long time, and maybe you’ll get one or two.
Refreshingly humble.
Munger mentioned how hard it is to achieve investment success on multiple occasions:
Why shouldn’t it be hard to make money? Why should it be easy?
It was never easy. It’s thoroughly understood it was never easy, and it’s harder now. Those are the two. But it takes time.
I knew when I was 70 that it was hard. It’s just so hard. I know how hard it is now. Always, people who are getting this 2 and 20, or 3 and 30, or whatever, they all talk because oh, it was easy. And they get to believing their own bullshit. And of course, it’s not very easy. It’s very hard.
I love it.
There are so many successful people today who try to make it seem like it should be easy to replicate their success.
If you just follow these 10 simple steps or read this one book or live by these inspirational quotes, blah, blah, blah.
Finding success can be simple but it’s never easy.
It’s even harder to recreate the success of someone else considering how much luck is involved in the process.
Each person has to play the game given his own marginal utility considerations and in a way that takes into account his own psychology. If losses are going to make you miserable – and some losses are inevitable – you might be wise to utilize a very conservative patterns of investment and saving all your life. So you have to adapt your strategy to your own nature and your own talents. I don’t think there’s a one-size-fits-all investment strategy that I can give you.
TORONTO – Canada’s main stock index was higher in late-morning trading, helped by strength in energy stocks, while U.S. stock markets also moved up.
The S&P/TSX composite index was up 34.91 points at 23,736.98.
In New York, the Dow Jones industrial average was up 178.05 points at 41,800.13. The S&P 500 index was up 28.38 points at 5,661.47, while the Nasdaq composite was up 133.17 points at 17,725.30.
The Canadian dollar traded for 73.56 cents US compared with 73.57 cents US on Monday.
The November crude oil contract was up 68 cents at US$69.70 per barrel and the October natural gas contract was up three cents at US$2.40 per mmBTU.
The December gold contract was down US$7.80 at US$2,601.10 an ounce and the December copper contract was up a penny at US$4.28 a pound.
This report by The Canadian Press was first published Sept. 17, 2024.
TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets climbed to their best week of the year.
“It’s been almost a complete opposite or retracement of what we saw last week,” said Philip Petursson, chief investment strategist at IG Wealth Management.
In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.
The S&P/TSX composite index closed up 93.51 points at 23,568.65.
While last week saw a “healthy” pullback on weaker economic data, this week investors appeared to be buying the dip and hoping the central bank “comes to the rescue,” said Petursson.
Next week, the U.S. Federal Reserve is widely expected to cut its key interest rate for the first time in several years after it significantly hiked it to fight inflation.
But the magnitude of that first cut has been the subject of debate, and the market appears split on whether the cut will be a quarter of a percentage point or a larger half-point reduction.
Petursson thinks it’s clear the smaller cut is coming. Economic data recently hasn’t been great, but it hasn’t been that bad either, he said — and inflation may have come down significantly, but it’s not defeated just yet.
“I think they’re going to be very steady,” he said, with one small cut at each of their three decisions scheduled for the rest of 2024, and more into 2025.
“I don’t think there’s a sense of urgency on the part of the Fed that they have to do something immediately.
A larger cut could also send the wrong message to the markets, added Petursson: that the Fed made a mistake in waiting this long to cut, or that it’s seeing concerning signs in the economy.
It would also be “counter to what they’ve signaled,” he said.
More important than the cut — other than the new tone it sets — will be what Fed chair Jerome Powell has to say, according to Petursson.
“That’s going to be more important than the size of the cut itself,” he said.
In Canada, where the central bank has already cut three times, Petursson expects two more before the year is through.
“Here, the labour situation is worse than what we see in the United States,” he said.
The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.
The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.
The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.
— With files from The Associated Press
This report by The Canadian Press was first published Sept. 13, 2024.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
