What caught my eye this week.
Unfortunately one of my investing heroes, Charlie Munger, died this week. And he had the temerity to do it on a Tuesday.
Which means that by now those of you who’ve heard of him – let alone admired the man – will have been mainlining Munger quotes for five days straight.
Meanwhile the rest of you either never of heard of Warren Buffett’s best friend until this week, or you’ve probably heard enough of him by now.
Ho hum – I have to write something. Feel free to skip to the links!
Grumpy old man
You see, Charlie Munger has felt weirdly important in my life for the past couple of decades.
Perhaps it’s because I read The Snowball and Damn Right when my father was in the intensive care ward that he would only leave as an utterly changed man.
Munger somehow spoke to me when he said:
“You should never, when facing some unbelievable tragedy, let one tragedy increase into two or three through your failure of will.”
The financial crisis was raging outside. Lehman Brothers had just collapsed. I learned about that in a copy of the FT purchased in the hospital’s WH Smiths.
I was angry with the world that my father was going out like this, after living such a dutiful life.
And so I did what anybody would do. I got out my smartphone and tried to figure out how quickly I would need to compound my wealth to catch-up with where Charlie and Warren were at my age.
It already looked pretty futile. Almost without adjusting for inflation…
Charlie joked – when recently divorced and impecunious – that he drove a beaten-up car to “keep away the gold diggers.”
And after complications with a cataract surgery had left him in agony in one of his eyes, he had the eye ground out.
My dad would never see me ‘make it’, I realised, as if he cared about that.
Compounding takes too long.
“You should never, when facing some unbelievable tragedy…”
Tell us another one
You might be expecting me to here say something about how Munger’s investing wisdom – which I’ve gulped down as freely as the next stock-picking junkie – gave me the conviction to buy shares in X, or to understand that I should do more of Y and much less Z when I allocate my money.
Yada, yada, yada.
Dozens of articles claimed as much this week. Some were surely sincere, but I have my doubts about most.
I know personally a couple of the hundreds of writer-investors who wrote their own Munger memorials.
And honestly, if Munger influenced them then it must have been with his fashion sense because I’ve never detected it in their investing.
But I don’t say that to be bitchy. I do believe many of them really were touched by Munger’s passing.
You see, for nerds like them, me – us – Charlie Munger was more like a rockstar than a textbook.
Oh yes, everyone says they learned from him. But what they really mean is they liked his funny zingers.
They also liked that he’d seemingly gotten so rich on his own terms, while saying whatever he liked.
And that he made it look easy – because most of us turned up in the final act.
They didn’t hear his famous quips by sitting through five-hour Berkshire Hathaway meetings.
And certainly not his mock curmudgeonly pronouncements made at the AGMs for his own pet enterprise, The Daily Journal.
They mostly heard of the witty things said by Munger many years later, in articles that collated the witty things said by Charlie Munger.
Munger’s zingers were indeed quality. There’s a collection or two in the links below.
I have nothing further to add
No, for many active investing enthusiasts, the death of Munger is more akin to the death of David Bowie.
You remember the outpouring when Bowie died?
Cynthia, now 71-years old, says the androgynous Bowie gave her the freedom to live life on her own terms. The former estate agent and mother-of-three never forgot the moment when the drug-taking musical genius looked out at 25,000 awestruck fans and possibly caught her eye in 1972. It’s a story Cynthia often tells the other ladies at the Rotary Club in Tunbridge Wells. But Cynthia hopes to have a new tale to tell soon, as she plans to make a pilgrimage to London next month, to drive past the Bowie mural in Brixton on her way to see her son-in-law, Richard, who is living in Wimbledon.
Yes I’m being facetious. Good for Cynthia. And good for me and all Munger’s fans.
Some people make the world bigger for the rest of us simply by being in it.
David Bowie. Charlie Munger.
Have a great weekend.
From Monevator
Best S&P 500 ETFs and index funds – Monevator
What cheap investment trust should I buy next? – Monevator [Mogul members]
From the archive-ator: There are many ways to be an investor – Monevator
News
Note: Some links are Google search results – in PC/desktop view click through to read the article. Try privacy/incognito mode to avoid cookies. Consider subscribing to sites you visit a lot.
House prices advancing after pause in rate hikes, says Nationwide – Sky
Leasehold ban not included in housing reform law – BBC
SIPP holders to get cash warnings and be offered default funds – MoneyWeek
EIS and VCT income tax relief extended until 2035 – Baker Tilly
Next-gen billionaires to collect more from inheritance than wealth, says UBS – Guardian
Crypto Kings dethroned as crackdown sweeps away old guard [Search result] – FT
Sir James Dyson loses libel case against Daily Mirror – This Is Money
The climate crisis explained in ten charts – Guardian
Products and services
How to get the best deal on a Christmas tree this weekend – Guardian
Registration date for new free childcare scheme announced – Which
Gap between easy access and one-year fixed savings just 0.6% – This Is Money
Get £100-£200 cashback when you open an account with Interactive Investor. Terms apply – Interactive Investor
FCA announce anti-greenwashing rules for investments, savings and more – Which
How to get up to three lots from Nationwide’s £200 switching offer – Be Clever With Your Cash
Open an account with low-cost platform InvestEngine via our link and get up to £50 when you invest at least £100 (T&Cs apply. Capital at risk) – InvestEngine
Robinhood set to launch trading app in UK. Again… – This Is Money
Happy 35th birthday to fixed-rate mortgages – This Is Money
Chic city centre flats for sale, in pictures – Guardian
Comment and opinion
Divorce: do the numbers still add up? [Search result] – FT
Four index funds control 25% of the US market. Problematic? [Podcast] – A.L.T.I.F.
Withdrawal symptoms – Humble Dollar
How the market shapes your portfolio – A Wealth of Common Sense
What’s really driving inflation and bond yields? [US but relevant] – Morningstar
The ‘What I Don’t Want’ list – Mr Stingy
The problem with being a long-term investor – Financial Samurai
Cocaine hippopotamuses [US tax detail but relevant] – Fortunes & Frictions
Solving the wrong problem – Of Dollars and Data
How you earn is as important as what you earn – The Root of All
Don’t buy and sell stocks. Just hold – New York Times [h/t Abnormal Returns]
How target-date funds stabilise markets [US but interesting] – Morningstar
Not long remembered – Humble Dollar
Most Americans are better off financially than before the pandemic – SAHM
Naughty corner: Active antics
Berkshire Hathaway’s success will continue after Munger (and Buffett) – Morningstar
HMRC urges crypto holders to disclose gains [Search result] – FT
RIP Charlie Munger mini-special
Charlie Munger, investing genius, dies at age 99 – CNBC
Charlie Munger, Berkshire Hathaway vice-chair, 1924-2023 – Financial Times
The advice Charlie Munger gave Warren Buffett: live life backwards – CNBC
Charlie Munger – Buggy Humans in a Messy World
‘Take a simple idea and take it seriously’ [Search result] – FT
Investing and life lessons from Munger [Podcast] – Motley Fool via Apple
Charlie’s last interview with CNBC at 99
– via Acquirer’s Multiple
Nine of Munger’s best lessons and words of wisdom – Morningstar
44 more quotes [aka Mungerisms. Rest well Charlie] – Yahoo Finance
Kindle book bargains
When McKinsey Comes to Town by Walt Bogdanich – £0.99 on Kindle
The Birth of Netflix by Marc Randolph – £0.99 on Kindle
A Kidnap Negotiator’s Guide to Influence and Persuasion by Scott Walker – £0.99 on Kindle
Dead In The Water by Matthew Campbell – £2.59 on Kindle
Environmental factors
How to make pets more environmentally-friendly – BBC
Why nature-based solutions are crucial to fighting the climate crisis – Guardian
How COP28 can help readers and itself [Search result] – FT
During Covid-19 lockdowns, fish hit the park – Hakai
BA and Virgin Atlantic face formal complaints over sustainability claims – Guardian
Robot overlord roundup
Humanity will just have to trust Sam Altman now – Slate
Introduction to large language models [Video] – Andrej Karpathy via YouTube
Off our beat
Frugal versus independent – Morgan Housel
To achieve your dreams you have to be a little crazy – Darius Foroux
Rating year-ahead reports on their stock picture choices [Search result] – FT
How time outdoors improves memory, imagination, and logic – Guardian
The train wrecked in slow motion [Warning: childbirth trauma] – Slate
Pontins: what happened to the former UK holiday park giant? – BBC
Harder than it looks – We Are Gonna Get Those Bastards
And finally…
“Show me the incentive and I’ll show you the outcome.”
– Charlie Munger
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Munger dead, Brigit Forsyth dead same week, to be honest for me, I will miss her more. It won’t be the same watching the likely lads anymore, anyhow, Dec 2023 and my ISA portfolio is now only 6% down.
Will the santa rally drag me any closer to 0% down.
As usual, a nice set of links!
Particularly liked the ALTIF podcast and the Withdrawal symptoms post.
The Acquired podcast with Munger from a few weeks ago was also good listening. Quite a long chat.
Fair play on Charlie. I am one of those geeks who would read the DJO annual transcripts. As it’s eulogy time, I doubt many people will have mentioned Alibaba, which was an unfortunate late error, though also a reminder that even the best make mistakes.
Munger’s greatest things for me have been:
1) Incentives, incentives, incentives. As you put it in ‘And finally’. It’s one never to forget.
2) Behavioural psychology. Whether it’s James Montier, or Cialdini, Munger was the route in for me on all this stuff, which remains a huge thing for me.
I also think he’s a personification of the ‘Phil Fisher’ or ‘Compounder’ GARP ethos, as the person who changed Buffett over from being a Grahamite. Of course things may change again, but it’s been easier to go for Quality over ‘cigar butts’ for a while now, and to me seems like a lazier way of investing.
@Griff #1
In the space of a couple of days: Henry Kissinger, Charlie Munger, Jimmy Corkhill, Shane MacGowan, Alistair Darling, Brigit Forsyth, and worst of all, John Byrne.
I feel I am late to the Berkshire train (albeit with B shares of course), but hopefully the success and foundations will continue well even Buffett departs.
By strange quirk of coincidence, I’d pre-ordered a Kindle copy Poor Charlie’s Almanack, due out on Monday, just before then reading the news that he’d passed. What a great life, and learnings passed on. RIP.
That writing in itself was a zinger. Well done. It made tonight’s glass of red taste even better and would no doubt get a nod of approval from Charlie.
As ever, the Morgan Housel link was a zinger too. What a writer he is.
RIP Charlie Munger. “It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent.”
With the DFA paper on SSRN (“Another look at timing the Equity Premiums”) quoted in the NYT article as linked to above: The only surprise here is that this sensitivity analysis showed that there were as many as 30 (4.2%) out of 720 ‘strategies’ which were ‘successful’.
The 720 in the sample here are essentially just randomly generated ‘stylised’ long-short ‘strategies’ (3 timing approaches x 3 regions x 4 premiums x 2 measurement windows x 5 breakpoint and switchback pairs x 2 rebalancing frequencies).
Nobody in their right mind is going to go about developing and selecting any actual Tactical Asset Allocation model that way, yet alone put any of their hard earned money into it IRL.
Whilst DFA’s paper is correct in what it literally says (TAA is hard; a Fama-French factor premium rotation and market timing approach based upon – basically – random choices of sensitivity variables is very unlikely to work out; and small input changes can lead to significantly different outcomes, challenging the robustness of an approach); I can’t help but think that this is a sophisticated straw man argument. It would have been more useful, IMO, for DFA to have really ‘kicked the tyres’ and (continuing the motoring metaphors) to have taken a detailed look ‘under the hood’ of some actual and widely used TAA approaches.
@TLI:
Re: “It would have been more useful, IMO, for DFA to have really ‘kicked the tyres’ and ….”
You will be telling me next that a load of Monkeys did not pen Shakespeare, the tooth fairy is nonsense or perhaps – to be seasonal – Santa Claus really does exist!
Thanks for the excellent links, again. Maybe this time I will read up on Munger and Buffett as I always mean to, although I think I probably owe more to John Bogle in terms of people who’ve influenced my financial strategy in life (and Monevator of course!). We don’t really have British equivalents of “investment rockstars”, do we? I think we prefer to talk about those who crash and burn, like Woodford, or that we can’t wait to see others go the same way. I know I’ll only be really interested in what Nick Train has to say when he goes bankrupt.
Always amazed at how the media report house prices after any survey comes out. The Nationwide release leads to ‘prices advancing’ as reported.
When you look at the report one notices the magical ‘seasonally adjusted’ is used – never specified, never consistent year to year, never consistent across surveys.
The actual figures, unadjusted, show avg price Oct 23 £259,423 and Nov 23 £258,557 – which is going DOWN not UP.
Time for the media to qualify figures more?
I wish I could use this magical adjustment on my investment performance when it has not been great!
@Al Cam #9: yes indeed.
It’s similar to (and perhaps in some sense a flip side of) Research Affiliates’ 2012 paper simulating blindfolded monkeys selecting US stocks by throwing darts (the idea, sometimes called Malkiel’s monkeys, goes back to Burton Malkiel in a Random Walk Down Wall Street in 1973).
You need both full context to make sense of such results, and then have to try to disect what’s actually going on.
Safal Niveshak (who’se articles appeared in Monevator’s weekend reading links on 10 Aug 2019, 14 Feb 2020, and on 1 Jul and 21 Oct 2023) tries to take apart some of the superficiality of much of the research like this here:
https://www.safalniveshak.com/any-monkey-can-beat-the-market/
> superficiality of much of the research like this
p-hacking is a thing, eh? Who’d a thunk it 😉
@ermine: Mathematical Investor nailed it in October:
https://mathinvestor.org/2023/10/aliens-made-this-rock-the-post-hoc-probability-fallacy-in-biology-finance-and-cosmology/
@Griff — Still a smidgeon down here too from ATH though the last month has worked wonders. Wouldn’t say no to Santa, though I know that’s heresy.
@Al Cam — Yes, very interesting podcast from the ALTIF lads. For those who don’t like podcasts, they are talking with the author of The Power Of The Twelve, who notes that just a handful of index tracker and private equity firms already have voting control over vast swathes of the US economy. Discussion ensues.
@jim — Yes, featured that here and agree it was a heartening listen. Feels a bit hubristic thinking how well he sounded now. Ho hum. Getting to 99 can’t be knocked.
@tom_grlla — Me too. I’ve even owned the stock! I fancied it was something of a special situation though I got bored and sold. As you probably know, they have capitalized away a lot of tech spend on an online court reporting system that they hope to build into a must-have subscription business, or something like that, plus you had Charlie’s 3-4 stock investment portfolio. (Vague as it was three or so years ago. Long since pulled the plug on that bathtub of memories…)
Is quality investing for the long term lazier? Interesting question. It’s certainly less frantic. But as you know for WEB and CM it involved reading 12+ hours a day. The Nomad guys didn’t seem to be at the golf course, either. Be interesting to take a peek into Nick Train’s daily diary… 🙂
@Scott — Has been a bit of a cluster, eh.
@JDW — The Morningstar read linked to above is good on that, if you missed it. It’s been clear for 10+ years that BRK was being turned into a machine that leverages vast amounts of free capital for low but very stable returns, without needing all the fireworks around the edges. That said, if they’d not bought Apple so judiciously would the shares have continued to beat the market? I haven’t done the maths but it’s possible the answer is no. Then again, they did. 🙂
@Vic Mackey — Thank you so much! Yes, Morgan is a superstar now. Been tracking him for 15+ years, since he was at The Motley Fool US!
@TLI — My own view is that it’s probably possible for some idiosyncratic people to time the market, just like some farmers can tell in Spring when there’ll be a good harvest. But whether by a lifetime or luck or an inextractible and very maleable skill, who knows? I am certain there can’t be a straightforward timing signal, or at least not one that will persist more than half a generation or so. Markets are adaptive systems. Nothing so easy on offer.
@Jim McG — Cheers! Darn Right is a good read if you can get hold of a copy. (I just saw last night I could sell my paperback version for £55 at the moment!)
@Pete — One has to seasonally adjust to see a trend though, right? I think it’s clear that at the moment interest rate expectations softening has fed through to falling mortgage rates and firmer demand. At the same time, inflation will have done a bit of a number on real prices versus nominal. I present this without comment as to whether a firming up is a good thing, big picture wise. 😉
Question – Is there a way for stocks acquired via sharesave option for eg to be deposited into ISA/SIPPs ? Any provider that enables this ?
Just read the Morgan Housel Frugal v Independent piece. There’s priceless wisdom in there – Ronald Read, Geoffrey Holt, Chuck Feeney; these people should be the role models for our troubled times. Reminds me what a friend from uni used to say, ‘freedom’s just another word for having nothing to lose’.