As Warren Buffett's partner and frequent friend, Munger is an uncompromising investment guru. Buffett himself commented on Charlie Munger in this way: “Charlie has pushed me in a different direction. This is the power of his thoughts; he has broadened my horizons. I evolved from an orangutan to a human at an extraordinary rate, otherwise I would be much poorer than I am now.” As an extraordinary investment guru, how did Munger get through a period of sharp market decline?
Picture: Buffett and Munger (right)
“If you live long enough, sometimes you won't catch up with investment trends”
This phrase comes from Munger's late 20th century when Berkshire's Wesco Financial shares plummeted.
Munger experienced four major bear markets in his investment career. The worst one was from 1973 to 1974. During the “Beautiful 50” market, the market gave these leading companies high valuation premiums with average growth but strong profit stability. At that time, Munger invested 61% of his capital in blue chip printing companies. After the “Beautiful 50” crash, the biggest decline in the S&P 500 index reached 48%. Munger lost 31.9% and 31.5% respectively in these two years. In the worst bear market since the Great Depression, this company caused serious damage to his investment portfolio.
Picture: “Pretty 50” crashed in the 70s
The second time was when the third oil crisis broke out in 1990. The situation in the Middle East region continued to fluctuate, and the US stock market experienced a sharp decline. Berkshire's stock price went from the beginning of that year to...