Charlie Munger’s got a billion words of wisdom

About an hour before Charlie Munger, the Oracle of Pasadena, is set to speak, the pilgrims start filling a ballroom at the Pasadena Civic Center.

I am one of them. As I settle in, I meet Imelda McCarthy, retired and “a bit over 21,” who is here from Dublin, Ireland, and attending with her 34-year-old son, Darrach, who lives in West Los Angeles. Bush Helzberg, an investment manager, flew in with his wife from Kansas City, Mo. Michael McGowan, author of “The Guide to Gold,” comes every year from just down the street in Pasadena.

The 85-year-old Munger, round, balding, wearing a nondescript suit, is vice chairman of Berkshire Hathaway Inc. of Omaha, the company chaired by Warren Buffett.

Technically, this is a shareholders meeting for Wesco Financial Corp., a Pasadena company that’s chaired by Munger and 80% owned by Blue Chip Stamps, which is owned by Berkshire Hathaway. But that part of the event, held May 6, was adjourned in less than five minutes.

In reality, this is Munger-fest -- the one time of year when shareholders, investment managers and the press get to listen to Munger’s musings and ask him questions. The Pasadena billionaire, who is Buffett’s right-hand man, is considered one of the world’s savviest investors -- someone who has helped guide Buffett’s portfolio picks since 1959.


Like hundreds of people in the room, I clear my calendar to get an annual dose of Munger’s down-home wisdom and uncommon sense. He calls us -- the people who come from every corner of the globe to listen to him -- “cultists.” He gives us hope.

“I’m here to soak up more of his wisdom,” Helzberg said. “It’s priceless.”

A lifetime of practicing what he preaches has made Munger a billionaire: Good businesses are ethical businesses, he tells us. A business model that relies on trickery is doomed to fail.

Munger starts the session with “Socratic solitaire,” in which he asks himself a series of questions.

“How serious is the present economic mess?” Munger asks. “Deadly serious. The worst mess since the Great Depression. You can’t tell what happens when people get discouraged enough.”

He praised the government’s aggressive response to the crisis. But he says it might not work -- and cites the example of Japan, where significant government intervention in a financial crash was ineffective.

Darrach McCarthy, who also has attended several Berkshire Hathaway annual meetings, said he preferred this one. At the Berkshire meetings, Munger usually passes the microphone to Buffett, who of course has devotees of his own. But fans at this meeting hang on to Munger’s every word.

“You only hear from Charlie Munger here,” Darrach McCarthy said. “He’s got a very original take on things.”

Munger sees little need to discuss Berkshire’s sorry performance. Many of the people here were at Berkshire’s annual meeting just a few days before. Berkshire lost 9.6% of its book value in 2008 -- the company’s worst performance in 44 years. It’s still considerably better than the Standard & Poor’s 500 index, but not good enough.

Instead, Munger focuses on Wesco and its long-term outlook. He says Wesco is solid and well-financed, and predicts that the financial crisis will have no lasting effect.

Today he’s negative about the economy, but positive about stocks -- a bullish sign. In the late 1990s, Munger complained that he didn’t see much to buy. The market quickly proved him right. But, at current market prices, Munger sees many long-term investment opportunities.

“I am willing to buy common stocks with long-term money at these prices,” Munger said. “Is Coca-Cola worth what it’s selling for? Yes. Is Wells Fargo? Yes.” He owns both.

“If you wait until the economy is working properly to buy stocks, it’s almost certainly too late,” he said. “I have no feeling that just because there’s more agony ahead for the economy you should wait to invest.”

But you need to be selective.

Green energy is an example. A government push toward sustainable businesses might help revive the economy, but dumping money into every environmental firm to come along would be a dangerous path.

Not surprisingly, Munger was less than bullish on automakers. The U.S. auto industry has adapted too little, too late, he said, and seems capable of survival only with regular infusions of cash from taxpayers, which he doesn’t recommend.

“The natural consequence of capitalism is that some companies succeed and some companies die,” Munger said.

But capitalism, he said, doesn’t equal deregulation.

Financial firms, which were at the forefront of the economic cataclysm, need to be re-regulated into boring, slow-growing businesses, Munger said.

“I don’t see any reason why a major bank that was ‘too big to fail’ should be anything but a very boring business,” he said. “I don’t see any reason why you should have a system where every bright young man fresh out of college should have $8 billion to play with.”