Charles Munger: Here’s Why Investing Is So Much Tougher Today

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Here’s a great recent interview with CNBC’s Becky Quick and Charles Munger discussing the difficulty of being an investor today, compared to when he and Warren started. Here’s an excerpt from the interview:

Q4 hedge fund letters, conference, scoops etc

Charlie Munger

Becky Quick: Charlie thank you very much for taking the time to sit down with us today. You spent a lot of time today talking about how people who think that they can beat the market averages are probably fooling themselves, how much tougher it’s gotten to be a value investor, or even just an investor in general. And I was just wondering, do you think the golden era of investing is over?

Munger: Well not forever.

Quick: Why?

Munger: Well, because I think it isn’t like the last recession or the last big opportunity that the world is ever going to get is passed. There’ll be opportunities in the future. There are times that are easier and there are times which are harder.

Quick: So is right now tougher? 

Munger: Now it’s tougher.

Quick: Just because valuations have come up so much.

Munger: Of course, a) the valuations have come up, and b) the competition. Sorting through those opportunities is more intelligent, more aggressive, and more numerous. Of course it’s harder. The net result is people are gonna get worse results.

Quick: Do you think that the number of people who are smarter, who have better information than they used to, that will go down? Or it will just be a question of valuations coming down at some point?

Munger: Well I think valuations will go up and down because they always have and I think we’ll have smart people in this game forever. Lots of them. The opportunities that we all remember came from a demoralized period when about 90% of natural stock buyers got very discouraged to stocks, that’s what created the opportunity for these fabulous records that my generation had. And that was a rare opportunity that came to very few people of whom I was one. Warren was another.

People who start now have a much less… they have lower opportunity.

You can watch the interview here:

(Source: YouTube)

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Tobias Carlisle is the founder of The Acquirer’s Multiple®. He is also the founder of Acquirers Funds®. The Acquirer’s Multiple® is the valuation ratio used to find attractive takeover candidates.