Investors can find plenty to admire in Charlie Munger, Warren Buffett’s business partner who has passed away just shy of his 100th birthday.
His success is beyond question. His investment portfolio was performing at least as well as Buffett’s even before they joined forces at Berkshire Hathaway, and Buffett credits him with changing his approach to buying companies.
The reason he was so successful wasn’t because he lived humbly even as he was building a vast fortune, though he did avoid a lavish lifestyle. Nor was his success due to him being funny and likable, even if he could be gruff and direct.
It’s also not down to never making mistakes. Like any human, he made plenty. He even relished them, treating each misstep as an opportunity to learn.
No, Munger managed to do well because he was good at one thing: clear thinking. He had an amazing, almost superhuman ability to tune out distractions, to separate signal from noise, and to be well aware of what he didn’t know.
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In practical terms, that means he didn’t follow fads or chase a quick buck–he was viciously critical of crypto and meme stocks. If an investment case was too difficult to understand in simple terms, he just put it aside, even if that meant missing out on big gains. And he wasn’t afraid to sit on his hands, waiting for the right opportunity to come around.
Investors looking at the market now should note that Berkshire Hathaway’s cash pile has grown to a record. The Federal Reserve might be able to start thinking about rate cuts, as Christopher Waller insinuated Tuesday, but Berkshire remains cautious.
Record holdings in money-market funds suggest that others hold a similar view. Traders will want to emulate Munger’s clear thinking as they figure out their next move.
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—Brian Swint
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Investors Reflect on the Legacy of Charlie Munger
Company executives and investors reflected on the death and legacy of Charlie Munger, the outspoken business partner and sounding board of
Berkshire Hathaway
CEO Warren Buffett for more than 50 years. Munger died at 99, about a month shy of his centennial birthday.
- Buffett has said Munger helped him see the value during the late 20th century in growth companies such as
Coca-Cola
,a shift from his previous focus on cheap, undervalued companies. Buffett also credited Munger with Berkshire investing in
BYD
,a Chinese car and battery maker.
- Like Buffett, Munger ran an investment partnership that racked up outsize returns earlier in his career. The partnership, which predated his involvement at Berkshire, generated a 13.7% annualized return from 1962 to 1975 versus a 5% yearly gain for the Dow Jones Industrial Average.
- Buffett and Munger met in 1959. He later convinced Munger not to practice law full time. Munger was a longtime director of
Costco Wholesale
and chairman of the
Daily Journal
,a newspaper and investment company. Munger fans enjoyed his appearance at the Daily Journal’s annual meetings.
-
Apple
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CEO Tim Cook posted on X that Munger was a “titan of business,” adding that he “inspired a generation of leaders.” Microsoft founder Bill Gates said he was “a guiding influence for countless people, including me, in a post on LinkedIn.
What’s Next: Big changes at Berkshire will come when Buffett steps down and after his death. The likely post-Buffett team will be Greg Abel as CEO, Ajit Jain in charge of insurance businesses, and Ted Weschler and Todd Combs overseeing the investment operations. Buffett’s older son, Howard, is expected to be chairman.
—Andrew Bary and Brian Swint
***
Apple Moves to End
Goldman Sachs
Card Partnership
Apple and Goldman Sachs look set to end their credit-card partnership despite extending it through 2029 just over a year ago. It’s part of the Wall Street bank’s swift retreat from consumer banking.
- Tech giant Apple sent Goldman a proposal to exit from the contract in the next 12 to 15 months, The Wall Street Journal reported late Tuesday. It’s not yet clear whether Apple has found a new issuer for the card.
- The proposal includes exiting the high-yield savings account the pair launched earlier this year, as well as the credit card rolled out in 2019, the report added, citing people briefed on the matter.
- The reversal of Goldman’s foray into consumer lending has been a rapid one. The Wall Street bank said in January it lost $3 billion on consumer banking since 2020.
- The bank announced the sale of its lending platform GreenSky in October at a substantial loss, before moving to end its credit card partnership with General Motors earlier this month, according to reports. In August, it sold its personal financial management unit.
What’s Next: Apple should be able to find a new issuer, and continue its push into financial services. Goldman just wants to undo its messy consumer banking experiment, and quickly. All in all, it’s probably for the best that the pair go their separate ways.
—Callum Keown
***
Amazon
’s
Cloud Services Business Expands AI Offerings
Amazon.com
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and
Nvidia
announced multiple expansions to their work in artificial intelligence, including new chips for cloud customers to run their artificial intelligence applications and access to Nvidia’s latest chips. Amazon also unveiled a new chatbot.
- Amazon Web Services will host Nvidia’s AI supercomputing platform, giving businesses supercomputing for training large language and generative AI models. They are also working on what they called the world’s fastest GPU-powered supercomputer for Nvidia to further its AI products.
- At its Las Vegas Reinvent conference, Amazon Web Services also introduced a new Trainium2 AI chip, which will be used to train AI modelssuch as chatbots, and a fourth-generation Graviton4 processor, which consumes less energy than other chips.
- It also announced Amazon Q, a chatbot for businesses it said could help users in building applications, resolving errors, and helping with coding new features. Q aims to challenge
Microsoft
-backed start-up OpenAI’s ChatGPT chatbot.
- Q will cost business users $20 a person a month, and $25 a month for additional features for developers and IT workers. Copilot for Microsoft 365 and Duet AI for Google Workspace for business workers each cost $30 a person a month.
What’s Next: AWS also will be first to use an updated version of Nvidia’s Grace Hopper Superchip, Bloomberg reported. The new in-house Amazon chips are part of its effort to stay ahead of cloud rivals Microsoft Azure and
Alphabet
’s
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Google.
—Janet H. Cho, Adam Clark, and Angela Palumbo
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Supreme Court to Hear Arguments Challenging SEC’s Enforcement Power
The Supreme Court hears arguments today that could ultimately change how federal agencies operate. As a vehicle for industry groups taking aim at federal agencies, today’s case against the Securities and Exchange Commission could change regulation of everything from antitrust, energy, and labor to markets.
- The case challenges the SEC’s use of administrative proceedings, including agency judges. Business groups such as the Business Roundtable; libertarian organizations like the Koch family-funded Americans for Prosperity; and business celebrities Mark Cuban and Elon Musk support it.
- In the September fiscal year just ended, the SEC brought about 230 cases in regular federal courts and over 550 administrative proceedings. Across federal agencies, nearly 2,000 internal judges handle hundreds of thousands of cases.
- A hedge fund manager George Jarkesy was ordered by an SEC judge to pay $450,000 in penalties in 2014. The agency commissioners backed that ruling. But the Court of Appeals for the Fifth Circuit in Texas overturned it and held that the agency’s administrative courts were unconstitutional.
- The Supreme Court will seek views on three ways that the Fifth Circuit found the SEC administrative court was unconstitutional. A number of administrative law experts have filed advisory briefs with the Supreme Court to argue that the Fifth Circuit ruling is wrong.
What’s Next: Jarkesy’s lawyers will argue that defendants in SEC cases have a constitutional right to a trial before a federal jury. A win for him could undermine the SEC’s ability to impose large settlements, and could also affect the Federal Trade Commission, which also uses administrative judges.
—Bill Alpert and Liz Moyer
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Fed Speakers Give Different Interpretations of Inflation Progress
Two speakers from the Federal Reserve provided different interpretations on the progress being made to push the inflation rate back toward the 2% target, giving investors something to chew on with just weeks to go before the central bank’s final policy meeting of the year.
- Fed Gov. Christopher Waller said he’s encouraged by signs of slowing economic momentum. He told the American Enterprise Institute that data show the labor market is cooling, consumer spending is slowing, and economic activity is moderating.
- Waller noted “still significant uncertainty” over whether more tightening is needed. In October, he said the “torrid” pace of third-quarter economic growth meant that if it did not cool off, then progress on inflation could stop “or even reverse.”
- Fed Gov. Michelle Bowman took a more hawkish tone, telling the Utah Bankers Association and Salt Lake Chamber that although she supported the Fed’s decision to hold interest rates steady earlier this month, she expects that the Fed will need to increase it.
- Investors and economists are betting the Fed is done with rate increases. Futures markets put a 97% probability on the Fed holding rates steady again in December, according to the CME FedWatch Tool. Today’s beige book could provide more anecdotal evidence about how the economy is doing.
What’s Next: The Bureau of Labor Statistics will release the latest personal-consumption expenditures data on Thursday, and the consumer price index for November will arrive on Dec. 12. Fed Chair Jerome Powell will speak at Spelman College in Atlanta on Friday.
—Megan Leonhardt and Janet H. Cho
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Dear Quentin,
My father lent my brother the funds to purchase a house in 2006. The loan was formal and registered in the county. The interest was 4%, and it was a 30-year loan for $300,000. It was bought as an investment property for my brother. It is in a very rural area.
My parents made many improvements, replacing windows, siding and fencing. They paid all taxes and insurance — although, according to the loan, my brother should have paid them. They managed the farm, including cattle and hay, and improved the fields.
They also signed a document in 2016, indicating they would pay “rent” toward the loan for use of the property. My brother paid $150,000 at the beginning of the loan, then nothing. He said he would pay it off when our parents died and he got his inheritance.
My dad, who is in his late 90s, has early dementia and delirium induced by a urinary-tract infection. My brother had him sign a deed that he had paid off the loan. I have power of attorney for my father, and am his estate’s executor and trustee. I looked at the loan terms. My brother owed $205,000. I hit the ceiling.
The state was ready to investigate for financial exploitation. I believe the nursing home that supplied the notary was in the wrong by ruling my father was of sound mind, given that they knew I had power of attorney and was concerned about my father’s cognitive health.
Dad said he would give the other siblings the same amount over time. My brother went ballistic and said our siblings should not get cash gifts. The property has more than doubled in value, but he still feels cheated. I’ve consulted an attorney, who agrees the written documents should prevail.
What can I do?
—Betrayed Brother
Read the Moneyist’s response here.
—Quentin Fottrell
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—Newsletter edited by Liz Moyer, Rupert Steiner, Callum Keown
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