Charlie Munger: about adding to the BABA position using a small amount of margin (DJCO 2022)

TL;DR

Charlie Munger believes in concentrated investments with minimal losses, including recent investments in Chinese companies like Alibaba, despite potential risks.

Transcript

as charlie you and warren have been making concentrated investments since the 1950s many of these investments have led to gains but even more impressively none of them have led to significant losses as far as i can tell neither one of you has lost more than a few percentage points of equity on any single investment daily journal has recently been a... Read More

Key Insights

• 👣 Munger and Buffett have a successful track record of concentrated investments with minimal losses.
• 🥡 Daily Journal has made significant investments in Alibaba and foreign traded stock, taking on additional margin debt.
• 🗯️ Munger believes the potential gains in China outweigh the risks related to security threats, accounting standards, and human rights issues.
• 🇨🇳 He argues that fostering a better relationship between the US and China would benefit both countries.
• 🫡 Munger suggests that China's government system has its advantages and that it should be respected.
• 🧘 China's population control measures have contributed to its current economic position.
• 🌍 Trust among nations plays a vital role in investing in international companies.

Questions & Answers

Q: What makes Charlie Munger confident that his investments won't significantly impair Daily Journal's equity capital?

Munger acknowledges the risk of marketable securities declining but believes the potential gains outweigh the risk. He values concentrated investments and is not concerned about a small amount of margin debt.

Q: Does owning local shares of Alibaba provide legal ownership of the business?

Owning shares of Alibaba grants a derivative ownership, but Munger assumes that there is trust between nations and doesn't consider the risk significant.

Q: Why invest in China despite potential risks related to security threats, accounting standards, and human rights issues?

Munger believes that Chinese companies offer better strength and lower prices compared to their competition, making it an attractive investment opportunity.

Q: Does the influence of the Chinese government worry Charlie Munger?

Munger acknowledges the increasing concerns about political pressure from the Chinese government, but he believes that the US and China should strive to have a better relationship and promote friendship despite their ideological differences.

Summary & Key Takeaways

• Charlie Munger and Warren Buffett have made concentrated investments since the 1950s with minimal losses and significant gains.

• Daily Journal has invested a large percentage of its capital in Alibaba and foreign traded stock, taking on additional margin debt.

• Munger believes the potential risks and currency depreciation are worth the investment, and he addresses questions about Alibaba ownership and risks related to investing in China.