A few months after the death of Berkshire Hathaway Vice President Charlie Munger, Warren Buffett, head of the investment company, remembers statements made by his long-time partner about the current state of the stock market.
• Warren Buffett complains about the casino stock market
• Similarities to Munger statements
• Warning against “stupid things”
Warren Buffett with over 80 years of stock market experience
Warren Buffett can look back on a career in the stock market spanning more than 80 years. The stock market legend bought his first share at the age of eleven. At that time, he purchased three shares in the company Cities Service for just under $38 each. Since then, a lot has happened in the “Oracle of Omaha” portfolio: the portfolio of Berkshire Hathaway, Buffett’s investment company, was worth $347.36 billion at the end of the year.
Buffett complains: Stock market has degenerated into a casino
But not only Buffett’s shareholdings, the market itself has also changed fundamentally since then, as the Berkshire boss criticized in his letter to investors at the end of February 2024. “Although the stock market is massively larger than it was in our early years, today’s active participants are no more emotionally stable or better educated than when I was in school,” Buffett complained in the letter. “For whatever reason, the markets today exhibit much more casino-like behavior than when I was a teenager. The casino now lives in many houses and attracts residents every day.”
Investors and Speculators: Munger’s Legacy
The stock market expert was probably alluding to a statement by Berkshire Vice President Charlie Munger, who died in November 2023 and with whom Buffett maintained a close relationship for years. The entrepreneur, also known as “Buffett’s right-hand man,” supported the investment company’s business and provided his friend and partner with advice and support before he died a few days before his 100th birthday.
According to Fortune, Munger distinguished between two types of market participants: investors and speculators. While investors are characterized by their discipline, hard work and prudence in acquiring assets, Munger was negatively impressed by speculators who are solely looking for quick profits and have no regard for the intrinsic value of what they are purchasing . “They love gambling, and the problem is that it’s like heroin,” he criticized in a 2022 interview with Berkshire Hathaway Investment Officer Todd Combs. “A certain percentage of people who start doing it just overdo it. It’s so addictive. It’s absolutely crazy, it’s maddening. Civilization would have been much better off without it.”
Berkshire Hathaway remains true to its investment rules
However, Buffett also believes comprehensive research is essential before investing. However, the expert does not consider investing in trend stocks to be appropriate. “A fact of financial life should never be forgotten,” warned the stock market expert in the letter to shareholders. “Wall Street – to use the term figuratively – wants its customers to make money, but what really gets tempers flaring is feverish activity. In such times, any stupidity that can be marketed is marketed with vigor – not from everyone, but always from someone.” At Berkshire Hathaway, however, they are still not deterred by such approaches. “One investing rule at Berkshire has not changed and will not change: Never risk permanent loss of capital,” Buffett added. However, due to the “tailwind” provided by the US stock market and the “power of compound interest”, the investment company does not need this at all and can rely on a strong market environment.
Editorial team finanzen.net
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