Gold's Bright and Shiny Surge 11/28/23

0:00Live from the Nasdaq market side in the heart of New York City's Times Square. This is Fast Money. I'm Melissa Lee coming to you live from Studio B at the NASDAQ. On the desk tonight, Carter Worth, Dan Nathan, Guy Adami and Julie Beal. We've got breaking news at this hour. Charlie Munger, Warren Buffett's right-hand man and the former vice chairman of Berkshire Hathaway, has passed away at the age of 99. He was just over a month away from turning 100 years old. Our Becky Quick looks back at Munger's long life and his under-recognized role in helping Warren Buffett become one of the richest people on Earth.

0:34Charlie Munger was best known as Warren Buffett's right-hand man. Their investing partnership dating back decades. I would say that every time I'm with Charlie, I've got at least some new slant on an idea that causes me to rethink certain things. And we've had so much fun in the partnership over the years. It's been almost hilarious. It's been so much fun. Buffett credits the Berkshire Hathaway vice chairman with teaching him the importance of paying up for high quality businesses. When he weaned me away from the idea of buying very so-so companies at very cheap prices, knowing that there was some small profit and looking for really wonderful businesses that we could buy at fair prices.

1:18It's not that much fun to buy a business where you really hope this sucker liquidates before it goes broke. The willingness to pay for quality paid off for Munger and Buffett in deals like their 1972 purchase of See's candies and their decision in the late 1980s to buy a substantial stake in Coca-Cola. Before his Berkshire days, Munger owned his own successful investment firm and practiced law. In 1962, he and a group of attorneys founded Munger Tolls, now known as Munger Tolls & Olsen, a very prominent law firm. Munger, like Buffett, grew up in Omaha, Nebraska. And as teenagers, they both worked at Buffett's grandfather's grocery store, but not at the same time as Munger was seven years older.

2:00It wasn't until Buffett was in his late 20s and Munger was in his mid-30s and living in California that they were introduced to each other by mutual friends. We had dinner together in 1959. In five minutes, Charlie was rolling on the floor laughing at his own jokes, and I do the same thing. They began to spend hours each week on the telephone, talking investments, and Buffett urged Munger to trade in a career in law for one in investing. I met Charlie and he was practicing law and I told him that was okay as a hobby, but it was a lousy business. Fortunately, I listened. From 1962 until 1975, Munger's investment partnership produced a 19.8 % compound annual return versus just 5 % for the Dow.

2:45It wasn't until 1978 that Munger formally joined Berkshire as vice chairman. But Munger's even-tempered, risk-averse, and pragmatic approach to investing was a major influence on Buffett from the time they first met, helping Berkshire Hathaway grow into a multi-billion-dollar conglomerate that owns well-known businesses like Dairy Queen, Geico, Hellsberg Diamonds, and Burlington Northern. Munger, however, didn't limit himself to just Berkshire. He was chairman of Wesco Financial from 1984 until 2011 when it was totally assimilated into Berkshire. During those years, he was known for his deadpan humor and straight-shooting style at shareholder meetings where he interacted at length with his investors.

3:25After Wesco, Munger moved the show and his growing collection of fans to another company where he remained chairman, the Daily Journal. Charlie, one of my favorite lines from you is you want to hire the guy with the IQ of 130 that thinks it's 120 and the guy with an IQ of 150 who thinks it's 170 will just kill you. You must be thinking about Elon Musk.

3:51He brought his blistering one-liners to Berkshire Hathaway's annual meetings, too. What I needed to get ahead was to commit against idiots. And luckily, there's a large supply. Professional traders that go into trading cryptocurrencies, it's just disgusting. It's like somebody else is trading turds and you decide I can't be left out. Charlie's big on lowering expectations. Absolutely. That's the way I got married.

4:25My wife lowered her expectations. And despite a net worth of around$2 billion, for Munger, money wasn't everything. All you succeed in doing in your life is to get early rich from passive holding of little bits of paper. and you get better and better, but only that for all your life, it's a failed life. Life is more

4:54than being shrewd at passive wealth accumulation. Well, with that, we're through.

5:08Becky Quick joins us now. Now, Becky, you knew Charlie better than anybody at this network covered Berkshire Hathaway for so long. We all knew Charlie for his his wit, his Mungerism, so to speak. But I think the interplay between Warren Buffett and Charlie Munger is really fascinating. The friendship, but also sort of the give and take and how Charlie was the true foil to Warren Buffett in terms of bouncing investment ideas. I remember Warren Buffett called Charlie the abominable no man. Yes, that really that really captured it all. Yeah, kind of saying no to Warren when nobody else could or would, saying this doesn't work and here's why.

5:44Look, they did figure out together a different thought of investing, a different way of building things. Warren Buffett had been an acolyte of kind of this idea before, Ben Graham's ideas, that you go around looking for cigar butts and you can get a few more smokes out of the last few drags on that cigar butt, buying good businesses, decent businesses at really cheap prices. Charlie Munger is the one who kind of changed Warren Buffett's thinkings on these things, where he said we should be buying great businesses at decent prices. You don't have to go so low and just get a great bargain price for it.

6:21If you have a great business, that will eventually take care of itself. Buffett has been very outspoken about how Charlie shaped him and all of those things. Today, Warren Buffett putting out a statement saying Berkshire Hathaway could not have been built to its present status without Charlie's inspiration, wisdom and participation. And just a couple of weeks ago when I sat down with Charlie, he did talk a little bit about how things started at Berkshire Hathaway. Here's what he had to say. I did not really think that we'd ever have one. It would, in the, so many hundreds of billions in Berkshire.

7:05I did not anticipate when Warren and I were starting with our little piddly start, that we'd ever get to a hundred billion, much less several hundred billion.

7:21It was an amazing occurrence.

7:28What happened that you didn't anticipate? What led to that success? Well, we got a little less crazy than most people. A little less stupid than most people. And that really helped us. In addition, we were given as much longer time to run than most people. because something kept us alive in our 90s and it gave us a long track from our little fiddling start all the way to the 90s those are the two things that really happened and of course we wised up over time we got into better and better companies and we understood more and more of the bad things that could happen you know how easy they could creep in and we avoided them even more assiduously when we were older than we did when we were young.

8:20And it all worked. I think back in 2015, for the 50th anniversary of Berkshire, you wrote in the shareholder's letter that, among many other things, you had a$60 billion pile of cash at that point. You thought that that pile of cash would decline over time because you'd be able to buy more and more things. Now you've got almost$160 billion in cash. Is there an opportunity for a really big purchase with that? And do you think you'll see one? Well, of course, there's an opportunity for a purchase a lot bigger that people can make who don't have$160 billion. We have$160 billion in cash, plus a great credit rating we deserve.

9:06And who in the hell has that? Not very many. Yes, but what it's going to be I can't tell you. It can't be anything too small because it doesn't matter how good it is, we're of a size now, or too small it just doesn't move the needle very much. So we need something big to come along and use up all our cash and some borrowing.

9:36But who's more likely to find something than a guy who has$160 million in cash, plus a long history of buying bargains? I don't think it's hopeless. It may have to be done by some different people. You know that next time we may not be able just to squeeze a little more lemon juice out of the old lemons. We may be able to, we may have to squeeze some new lemons, meaning new people may have to make the decisions. But who can make them better than somebody that has watched the early process all through all those years and seen how well it works, and who starts with a little legacy of$160 million of cash?

10:23JUDY WOODRUFF So you're talking about Greg Abel, Jane, TED and Todd. or somebody not yet identified.

10:34Melissa, that was just two weeks ago today. And Charlie Munger at 99 months, or 99 years and 11 months, really still had great command of everything that he saw very quick mentally, very capable of sitting and kind of reflecting on all of these things. But he's a huge reason why Berkshire Hathaway is the company that it is today. And he will be sorely missed. Are there investments that Berkshire Hathaway has held or has currently that has Charlie Munger's fingerprints all over it? Sure. I mean, probably BYD is the biggest example of that. They got in very early. And that was something that Charlie Munger was very excited about because of the guy who was running the company.

11:24There were a couple of trips to China, one with Warren and Charlie both traveling to China to see their investment there. And I think they were both kind of blown away by what they saw. But Costco at different times. But BYD is probably the biggest example of that. Right. All right. Becky, thanks so much for joining us tonight. Becky Quick on Charlie Munger. Very sad news tonight to digest. He was a larger-than-life force in the investment scene guy. Yeah. No, it's incredible. You know, you want to say to Becky, I'm sorry for your loss because how close she is with Mr. Munger and Mr. Buffett. Clearly, over these years, I mean, that's more than a friendship.

12:06I mean, that's a long relationship that they've had. I'm sure it's an emotional night for Becky. But in terms of the loss for the community, you learn a lot of things. I mean, I'm sure this show sort of flew in the face of everything they believed in. And I'm sure sometimes if they had it on, they would sort of wince. But the genius of what they do, just understanding good businesses and the power of investing and staying with something, I don't think any of us should forget that. He's also been a critic of bad corporate governance practices, calling companies out. He's called, you know, investing in cryptocurrency, gambling in drag.

12:39He's definitely he doesn't beat around the bush when it comes to so many topics. No. I mean, the Costco thing is interesting because Munger was on the board in 97 and Buffett bought in 98 and he held it all the way through until it spiked post-COVID and they sold their Costco position in 2020. And it still is right now at that relative high, has not made a new high relative. Yeah, it's interesting what Guy just said, though, you know, like fast money. And again, there's investment styles for all sorts of people. And I think that, you know, if you are a trader and the like, you learn lessons from people like Charlie Munger and Warren Buffett.

13:14We've been listening to Becky. As long as I've been in the business, I feel like I've been listening to her on a quarterly basis, interview those. And every single one of those interviews, I've taken something away that's helped me think about the markets. Right. Julie. Yeah, no, I mean, you know, us at Cain, we're long term quality investors. So a lot of Charlie's ethos is very much in ours. And what I appreciate so much about him is the humility he took to investing. He never tried to make it fancy. He never tried to exclude people from understanding it, like we're such brilliant people up on the mountaintop declaring what is important and what's good.

13:49He really made it accessible. And I think that was his genius in creating simplicity and understanding fundamentals. And so he'll be very missed. We're looking at this footage of the annual meeting, which is so widely attended. So many people want to go to meet. It was almost like meeting rock stars here. But these were average investors, for the most part, who invested in Berkshire Hathaway because they believed in the investing ethos that Julie had outlined. So it's amazing to think that, you know, even before the age of a fast money or so on, he opened up this annual meeting to legions of investors who then learned from them.

14:25Groundbreaking without question. It's interesting. In the last clip that we watched, Becky's interview, she mentioned$160 billion of cash. I think it's$157 billion. But what's interesting about that is, I mean, that's a record amount of cash that they currently have. And the bears, like myself, will say that's because maybe they look at the climate and say there's nothing. And the flip side of the coin is you heard Mr. Munger speak to it. We're just waiting for the right size deal to come along. And it has to be something will move the needle. And think about maybe the most incredible of all. In the financial crisis, there was one person left.

14:56Goldman Sachs turned to him and everyone said, if he gets my stamp of approval, we're OK. It was the only thing left. Right. Only thing. Let's now bring in value investor Whitney Tilson, who attended the last 26 Berkshire Hathaway meetings. He's a longtime Charlie Munger follower. Whitney, great to have you with us. Thanks for bringing your perspective on Charlie. I know you've known him for a long time, and you're part of poor Charlie's almanac, because Munger is so known for so many of these Mungerisms. What are your favorites? What really sticks with you? Yeah, well, I've been listening with interest to all the comments from the folks there about what a legendary investor Charlie is.

15:39And that's how I first discovered him when I started my little hedge fund back in the late 1990s, discovered Buffett and Munger been going to all the Berkshire meetings since then. And then Charlie would have his own Wesco and more recently Daily Journal annual meetings, you know, a couple of weeks afterward, usually. And it was like it's sort of like a church. And you've got the pope and that's Warren Buffett. And then you've got the senior cardinal monger. And what I quickly discovered is that I was getting a lot more from both of these wise old gentlemen in areas outside of investing. And that's what I think, you know, once people discover these guys, most people discover them because they're trying to make money.

16:23They're investing their own money or they're in the investment business. But let me give you an example. I remember more than 20 years ago sitting there at the Wesco annual meeting and Munger in response to some question said, all I want to know is where I'm going to die. So I never go there. And everybody laughed. And he said, no, I'm serious. He said, once you've reached a certain position in life that basically all of you in the audience have reached a certain level of education and financial security, your main focus in life should be not to screw it up. So he always talked about invert, always invert.

16:59So he said, most people, the way they think and approach life is, is, you know, how can I reach for that brass ring and reach another level of success, right? And what he said is, is instead, once you reached a certain point pretty early in your life, your main goal should be how not to screw it up. And so he gave many of his famous speeches like the 24 causes of human misjudgment. He was always telling stories of how people who had it all brought themselves to ruin. And that really made a big impact on my life. And so after being one of the contributors, here's a copy of Fort Charlie's Almanac, which, by the way, is the first thing I would recommend anyone read if they want to understand Charlie.

17:42I was one of the contributors to this because I was so obsessive. It is one of the great honors of my life, writing this book that's a tribute to him. It's amazing how much he has contributed to things and subjects outside of investing, Whitney. But I'm curious, as an investor, what did you take away from Munger? Were there investments that you were led specifically to by Munger or Munger's thinking, at least, when you're thinking about going in? Yeah, well, I wish I had followed him more closely. I sort of followed the first part because he was very clear, very clear thinking about investing in high quality businesses, even if you have to pay a little up for it going in.

18:28And that led me to some of the greatest investments in my career in companies like Apple and McDonald's and Home Depot and all. Where I didn't control myself as well as I should have is I should still own those stocks today. Thanks to Charlie's teachings, I identified some of the greatest businesses of all time and owned them for a while. But, you know, with the benefit of hindsight, I wish I'd had more of Munger's patience and owned them, you know, for a lifetime, because that's what he and Buffett have done with their most successful investments. Whitney, you've dedicated. It's interesting. I mean, you're a disciple.

19:06clearly. You've had a great career. But, you know, I listened to Mr. Munger talk about giving back and Mr. Buffett as well. You've done that as well. And my sense is, you know, a lot of things you've done on the continent of Africa may have been inspired by the teachings of Mr. Buffett and Mr. Munger. Can you speak to that? Yeah, it's interesting. I mean, both of them are very generous and philanthropic and are giving their fortunes away to their charities. But interestingly, both of them mostly spent their time on what they felt they were uniquely good at, which was investing and compounding their money over time.

19:45I've probably spent a greater percentage of my time traveling to Africa, supporting Ukraine over the past year, et cetera, just because it's something I'm very passionate about. But I tip my hat to these gentlemen for being laser focused on what they were uniquely good at and building enormous fortunes that are going to make a big difference to millions of people for generations. Whitney, you've discussed how much you've learned about investing from them over the last couple of decades, and you've seen them do it over very different market cycles. Have there ever been any big surprises? Have you ever seen their metal be tested in a way that surprised you?

20:30Well, I do remember back in the early days during the internet bubble when Berkshire stock hit a multi-year low in March 10th. The day the Nasdaq peaked in March of 2000 was the day Berkshire Hathaway bottomed. And I remember the annual meeting right around that time. It's about a month or two later. And everyone was questioning how they could have missed this. And they didn't care one iota. They were just so comfortable in their own skins. They knew it was a bubble and it just didn't bother them. And that's happened again and again. They have more recently, both of them have been super vocal about the dangers of cryptocurrencies, just pure instruments of speculation and have warned people away from it.

21:17And there, the story's still out. Bitcoin's at, what,$37 ,000 these days. So I'm pretty confident, though, that they will be vindicated on this, just as they've been vindicated on all of their other big calls over the years. Can there be, I don't want to ask this in this way, but can there be another Charlie Munger, an investor who spans a generation, who has that sort of following, who can speak out so honestly about so many different topics in such a blunt manner? or it just doesn't feel like the environment can produce anyone like a Charlie Munger anymore. Yeah, I hear you. Like, I'm struggling to think of other than Buffett himself, who's seven years younger and hopefully has, you know, many more years to live.

22:04They're both cut from the same mold. But after that, boy, it's hard to think. You know, Munger was really, really one of a kind. I don't think there'll ever be anyone who could ever replace him or anyone who will be quite like him. Whitney, thank you. Good to see you. My pleasure. Whitney Tilson. Julie Beal, what do you take from Munger in how you invest? You're talking about how the investment style is probably more similar than the investment style of any of these traders here on this desk to Charlie Munger's. you know i i talk to clients a lot um about how you know the real value that i add is when i say no it's not when i say yes and i think it's very much in line with always wanting to be extremely discerning and not just being attracted to something because it's a little shiny or it's a little cheap and it's hard sometimes because you'll think there's a real opportunity and you're so smart for wising it up and finding it out but often the situations are pretty simple and straightforward.

23:08You need to understand your businesses and you need to say no. You need to be extremely discerning and not just go for something that's a kind of quick flip because chances are someone knows something a little bit more than you do. So I think for me, it's just being very discerning and focusing on quality. And sometimes that's very hard because quality won't be sexy. It'll be out of favor, just like that time period in the NASDAQ. There are definitely periods where at Cain we lag because we don't have the sexiest companies, but they're really great businesses. And over a cycle, if you can have the discipline and the character to just sit still, sit on your hands and not just trade to, you know, create value or make yourself feel like you're so important, you really end up better off for the long term.

23:50All right. We've got to take a quick break. Again, the news here, Charlie Munger dead at age 99. Back right after this.

24:02welcome back to fast money the gld etf rising by more than a percent today and now at its highest level since may it is up more than nine percent over the past two months alone while the s &p 500 is up close to six percent in that period in a couple minutes we'll hear from one market watcher who says gold's rise could fuel a risk on rally into the new year but before we get to that Let's ask here on the desk, can stocks and gold really keep moving higher together? Guy. It's interesting, and Carter clearly has thoughts, but one of his theses for a while was rates would go lower and at a certain point stocks would follow.