Billionaire investor Charlie Munger blasts traders, slams crypto, and rings the inflation alarm at Daily Journal's annual meeting

Warren Buffett's business partner discussed rampant market speculation, investing in China, and several other subjects.

• Charlie Munger tackled a slew of subjects during Daily Journal's annual meeting on Wednesday.
• Warren Buffett's business partner slammed traders, blasted cryptocurrencies, and praised China.
• The 98-year-old investor touted Costco stock and praised Activision Blizzard CEO Bobby Kotick.

Charlie Munger warned of dangerous speculation in markets, blasted cryptocurrencies, and rang the inflation alarm during Daily Journal's annual shareholder meeting on Wednesday. Yahoo Finance streamed the event.

Munger is best known as Warren Buffett's business partner and the vice-chairman of Berkshire Hathaway. He has also served as Daily Journal's chairman since 1977, and continues to manage the company's investment portfolio.

The 98-year-old investor, polymath, and amateur architect is notoriously blunt; his most memorable comments include dismissing bitcoin as "rat poison" and calling Robinhood a "gambling parlor" that's "beneath contempt."

Here's our live coverage of the meeting:

Disclosures

Munger was asked to reveal the security which Daily Journal purchased with margin debt in the fourth quarter. He declined to disclose it, noting both Berkshire and Daily Journal only share what they have to so other investors don't know what their buying.

Investing in China

The Daily Journal chairman was asked why he's happy to invest in China, whereas other top investors such as Jeff Gundlach are wary of doing so. Munger highlighted China's huge population and technological advances, and explained that he invested in the country because he could get better value.

"I feel about Russia the way he feels about China," Munger says about Gundlach, saying he empathizes with the DoubleLine Funds chief's concerns.

Munger was questioned about the risks tied to his Alibaba wager and undisclosed, leveraged bet. "We don't mind a tiny little bit of margin debt," he said.

The veteran investor elaborated on why he and Buffett invest in China, saying Chinese companies are stronger relative to competitors and cheaper than US rivals.

"Warren, like many other intelligent people, likes to invest where he's personally comfortable," Munger said, adding that he's more comfortable with China than Buffett.

"I don't think Alibaba is as entrenched as something like Apple and Alphabet," Munger said, predicting the internet will be a highly competitive space regardless of size.

Crypto

"I'm proud of the fact I've avoided it. It's like some venereal disease ... I just regard it as beneath contempt," Munger said about cryptocurrencies. He asserted that people welcome the tokens because of their usefulness in extortion, kidnapping, tax evasion, and said he admired the Chinese government for banning them.

Munger welcomed the idea of the Federal Reserve launching a central bank digital currency (CBDC), noting that in his view bank accounts are equivalent to digital currencies.

Market speculation

"The great short squeeze in GameStop was wretched excess, certainly the bitcoin thing was wretched excess," Munger said, adding that too much money is being thrown at venture capital. He warned that some people are using the stock market as a "gambling parlor," and says if he was the dictator of the world, he would put a tax on short-term gains that would make the stock market less liquid and discourage short-term investment.

"It's not a good marriage and we need a divorce," he says about stocks being bought and sold so frequently.

Munger compared the rampant speculation in markets to a drunken brawl and warned it could have devastating consequences for humanity. He predicted the current asset-price bubble will end badly, but said he couldn't predict when it would burst.

Inflation

"The troubles that come to us could be worse than what Volcker was dealing with, and harder to fix," Munger said, when he was asked to compare the current spate in inflation to the surge in prices during the 1970s.

Munger was asked what individual investors should do to prepare for inflation. He disclosed that his family owns shares of Berkshire, Costco, Daily Journal, some Chinese stocks via his friend and Himalaya Capital Management's boss, Li Lu.

"It may be that you have to choose the least bad of a bunch of options," he said.

Video games

"I really like Bobby Kotick, he's one of the smartest business executives I know," Munger said about Activision Blizzard's CEO. Berkshire revealed this week that it bought a $1 billion stake in the owner of "Call of Duty" and "World of Warcraft" in the fourth quarter.

Munger predicted gaming is here to say, but bemoaned that video games are too addictive, and a generation of young men are wasting too much of their lives playing them. He also expressed his distaste for violent video games, but celebrated other games as harmless pleasures.

The investor downplayed the metaverse, suggesting Activision Blizzard and other companies have gotten very large by creating traditional games.

Energy

Munger threw his weight behind the US government supporting investment in renewable resources, arguing that approach would conserve valuable petroleum reserves, and he doesn't want natural resources to be used up rapidly.

Berkshire meeting and the pandemic

Munger predicted Berkshire's annual meeting will be held in-person this year. He suggested the pandemic could fade into a flu-like threat that causes between 30,000 and 60,000 deaths a year, and Americans could learn to live with it.

Investing

"I'm always looking for something that's good enough to put Munger money in, or Berkshire money in, or Daily Journal money in," Munger said. He downplayed the importance of picking one index over another, and said he tries to swim against the tide as best he can.

Tech giants

Munger said he expected Microsoft, Apple, and Alphabet to be really strong companies 50 years from now. However, he noted that he wouldn't have predicted the department-store giants of his youth would fall by the wayside, or General Motors or Kodak shareholders would be wiped out.

Remote working

Munger noted that lots of people have grown accustomed to not being in the office five days a week, and he expects that to be a permanent shift. He suggested that corporate executives won't be flying around the world as frequently to meet in person.

He noted that Berkshire's directors have only met twice a year in-person for years, and he's happy other companies are saving money and acting more efficiently. He said it may be a good thing if people commute less, as it saves time and reduces traffic.

Stimulus

Munger said former Treasury Secretary Larry Summers was probably right that the US government provided too much stimulus, and it should be less liberal with its giving next time around.

Capitalism

Munger underscored how important capitalism "with Chinese characteristics" has been to China's economic success.

Newspapers and politics

Most newspapers will go out of business, with only the largest and most powerful ones remaining operational, Munger said. He bemoaned the loss of neutral voices in the media, and went on to call out gerrymandering, and the violent swings in politics as one party is replaced by another and vice versa. 

Munger also complained about the entrenched polarization among lawmakers, contrasting it to how the US became allies with Germany and Japan after World War II.

Windowless dorms

"Nobody in his right mind would prefer a blank wall in a bedroom to a wall with a window in it," Munger said about his controversial architectural design for a university dormitory. He explained the design was a trade off, and cruise-ship rooms also have a dearth of windows.

"That poor, pathetic architect who criticized me is just an ignoramus," Munger said. "He can't help himself."

Costco

"I've always believed that nothing was worth an infinite price," Munger said, noting that Costco stock could become so expensive that he wouldn't buy it. However, he said that if he was in charge of deploying a sovereign wealth fund's money, he would buy Costco at the current price.

The big-box retailer will be an "absolute titan on the internet" given its purchasing power and loyal customer base, Munger said. "I think it's going to be a big, powerful company as far ahead as you can see," he continued, adding that it has a good culture and moral ethos in his view.

Passive investing

"I think the world of Larry Fink but I'm not sure I want him to be emperor," Munger said, cautioning that too much passive investing wouldn't be desirable.

Cash and Berkshire

"In my whole adult life, I've never hoarded cash waiting for better conditions," Munger said, noting he always buys the best thing he can find.

He noted that Berkshire has excess cash, but it's not holding it in an attempt to time the market, it just can't find opportunities to deploy it.

"We can't buy any things at prices we're willing to pay," Munger said about Berkshire. He said other suitors were driving up prices of acquisitions, and many purchases were driven by bankers' appetites to earn fees on transactions.

Munger said investors are worried about the right things if they're concerned about inflation and the future of the republic.

Investment advice

Munger said he doesn't have any one-size-fit-all investing advice. He noted that some people are brilliant enough to invest in cutting-edge technology, and others should have more modest ambitions. He recommended people evaluate their skills and invest accordingly.

"Welcome to adult life," Munger said, addressing people who are finding the current market to be complex and difficult. He added that the people graduating from colleges today will have a much harder job getting rich than he did.

Humanity

Munger celebrated the social and technological advances in recent centuries, but noted that people are less happy today because they're obsessed with what everyone else has.

"The world is not driven by greed, it's driven by envy," he said. The investor said he's "conquered envy," but other people are "driven crazy by it."

Munger bemoaned people's desire for luxury goods, while noting their demand drives the capitalist system. "Who in the hell needs a Rolex watch so you can get mugged for it?" asked.

Relationship with Buffett

"God is about to give a different kind of blessing on Warren and me," Munger said, referring to the pair's mortality. "Warren and I have had a great run," he continued. "One of the great things about it is we've been surrounded by wonderful people."

"Warren and I have been very fortunate and of course there are lessons you can learn," Munger said.

Secrets to a happy life

"Realistic expectations, which is low expectations," Munger said about why he's content in life. "Take life's results as good and bad as they happen, with a certain amount of stoicism."

World Book

Munger said one Berkshire business that nobody ever talks about (you can read about it here) was World Book, a physical encyclopedia seller that was once a $40 million-a-year business for Berkshire. The encyclopedias were displaced by the internet and encyclopedia software, he said.

"Accidental gurus"

"Warren and I are accidental gurus," Munger said, noting that he and Buffett once knew all their shareholders, but as time passed more people listened in and the questions got stranger and stranger. Munger said he was initially uncomfortable with making so many pronouncements, but he and Buffett have gotten used to it, and he hoped viewers have as well.