‘The stupidest investment I ever saw’: Charlie Munger trashes 2 popular investment trends — here’s what Warren Buffett’s business partner prefers instead
Billionaire investor Charlie Munger trashed two popular investing trends in a keynote address at Zoom’s Zoomtopia 2023 conference.
The vice chairman of Berkshire Hathaway — and Warren Buffett’s right-hand man — tossed a wet blanket on the excitement around artificial intelligence (AI).
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“I think it’s getting a huge amount of hype,” Munger said during his keynote address Oct. 4, according to Fortune. “I think it’s probably getting more than it deserves.”
He didn’t stop there. The no-nonsense 99-year-old also slammed Bitcoin — and to a wider extent, cryptocurrency — as “the stupidest investment I ever saw.”
With decades of investing experience under his belt, Munger is wary of hot commodities and stocks that could boom one year and tank the next. Here’s what he likes instead.
AI stocks
First, let’s unpack Munger’s negative comments on AI and crypto.
If you look at the so-called “Magnificent Seven” — the seven largest U.S. companies by market capitalization: Apple, Microsoft, Amazon, Google, Nvidia , Tesla and Meta — they’ve all initiated immense AI projects and there’s been a huge injection of private equity into AI-focused businesses.
Many inventors see AI as the next big thing — but Munger is not on the bandwagon, noting at the conference that it has existed since the 1950s.
“We’ve always had artificial intelligence, where software creates more software,” he said. “And, of course, that’s very useful, [but] we’ve had it for a long time.”
This bold take from Munger was hardly shocking. The investor announced he was “personally skeptical” about AI at Berkshire Hathaway’s 2023 annual shareholder meeting — adding: “I think old-fashioned intelligence works pretty well.”
“I know we won’t be able to uninvent it,” Buffett said. “But is it good for the next 200 years of the world?”
Both Munger and Buffett are known for making high-quality and long-term investments rather than jumping on the next hot asset or stock. Some of their long-term holdings are in companies that are actually driving the AI train, such as technology giants Apple and Amazon and some of the nation’s leading banks.
Munger has been very vocal about his dislike for cryptocurrencies in the past — and it seems the crypto crash of 2022 and the implosion of crypto exchange FTX have only etched his opinion deeper in stone.
“Don’t get me started on Bitcoins,” he told the Zoomtopia audience, as reported by Fortune. “Most of those investments are going to zero.”
Bitcoin prices dropped nearly 65% in 2022, with the popular cryptocurrency logging its worst annual performance since 2018. The overall crypto market fared no better. After hitting a peak of around $3 trillion in November 2021, the crypto market took a dramatic nosedive in 2022, hitting a two-year market value low of $796 billion when FTX imploded.
This year, the market has clawed back some ground and crypto prices have proven resilient. Bitcoin prices are up around 70% year-to-date.
The Zoomtopia keynote wasn’t the first time Munger trashed digital currencies. In February, he penned an op-ed for the Wall Street Journal wherein he described crypto as “a gambling contract with a nearly 100% edge for the house” and called for an outright ban on cryptocurrency.
At the Daily Journal’s 2023 annual shareholder meeting, shortly after the op-ed was published, Munger said of crypto: “It’s massively stupid. It’s very dangerous. The governments were totally wrong to permit it. I’m not proud of my country for allowing this crap. It’s worthless, it’s no good, it’s crazy, it’ll do nothing but harm.”
Munger’s favorite stocks
So what does one of America’s most successful investors like, if he’s not persuaded by AI and crypto?
Munger is a well-known value investor who works on the assumption that good opportunities are few and far between — and he’s willing to pay more for quality. Like Buffett, he plays the long game and uses the buy-and-hold investment strategy to reap the benefits of compound interest.
Munger’s latest 13F filing includes just four stock holdings: Wells Fargo at around 41%, Bank of America at around 40%, Alibaba at around 16% and U.S. Bancorp at around 3%.
Essentially, he has put all his eggs in two baskets: banking and e-commerce. Bank stocks in particular are a popular choice for value investors because most banks pay dividends, giving investors a share in profits.
Munger has a net worth of approximately $2.6 billion, according to Forbes.
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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 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.
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.
