Charlie Munger has never been known to mince words, but lately hes stepped up his patented wry criticisms of the financial world. In a little over a year, the Berkshire Hathaway vice chairman has likened Bitcoin to rat poison, blasted gambling parlor stock brokerages for encouraging risky investing, and compared meme stock traders to heroin addicts. And over the weekend, he continued a long-running tradition of criticizing his own industry.
Investment managers are nothing more than fortune tellers or astrologers who are dragging money out of their clients accounts, he told the Financial Times in a wide-ranging interview published Sunday, arguing theres currently a glut of investment managers thats bad for the country.
Munger, now aged 99, has spent 45 years as Warren Buffetts right-hand man at Berkshire Hathaway, growing the firm into one of the worlds largest global conglomerates and becoming a billionaire in the process. But on Sunday, he noted that the companys success success was by and large [a result of] low interest rates, low equity values, ample opportunities, arguing he lived during a perfect period to be a common stock investor.
We were a creature of a particular time and a perfect set of opportunities, he said.
Investment managers of today face a much more difficult environment due to stubborn inflation, higher interest rates, and rising competition, according to Munger.
Its gotten very tough to have anything like the returns that were obtained in the past, he said, noting that at the exact time that the game is getting tougher weve got more and more people trying to play it.
The legendary investor went on to warn of more trouble for banks due to the ailing commercial real estate sector that could put even more pressure on investment managers. But after the rapid demise of multiple regional banks in the U.S. this year, he said the good news is at least its not nearly as bad as it was in 2008.
Munger and Buffett have long argued that what they call financial helpersa group that includes financial advisors, hedge funders, stock brokers, and other money managersarent worth what the fees they charge. But throughout the pandemic, when the stock market soared to new heights and meme stock traders sought to make quick profits from struggling businesses, Munger stepped up his criticism.
The billionaire told Berkshire Hathaways Chief Investment Officer Todd Combs in an April 2022 interview that the rise of speculative retail trading was absolutely crazy, and pointed the finger at investment professionals for giving questionable advice at Berkshires 2022 annual shareholder meeting.
We have people who know nothing about stocks being advised by stock brokers who know even less, he said, calling it casino activity.
Munger believes that most financial advisors and wealth managers claim they can beat the market to draw in clients, but end up just putting the money into simple indexes to avoid big losses.
In other words, nobody can stand being that different from the crowd in results because theyre afraid of losing their fees, so they all end up doing the same thing, he said. Its mildly ridiculous. The world is mildly ridiculous.
