Charlie Munger has never been known to mince words, but lately he’s stepped up his patented wry criticisms of the financial world. In a little over a year, the Berkshire Hathaway vice chairman has likened Bitcoin to “rat poison,” blasted “gambling parlor” stock brokerages for encouraging risky investing, and compared meme stock traders to heroin addicts. And over the weekend, he continued a long-running tradition of criticizing his own industry.
Investment managers are nothing more than “fortune tellers or astrologers who are dragging money out of their clients’ accounts,” he told the Financial Times in a wide-ranging interview published Sunday, arguing there’s currently a “glut of investment managers that’s bad for the country.”
Munger, now aged 99, has spent 45 years as Warren Buffett’s right-hand man at Berkshire Hathaway, growing the firm into one of the world’s largest global conglomerates and becoming a billionaire in the process. But on Sunday, he noted that the company’s success success was “by and large [a result of] low interest rates, low equity values, ample opportunities,” arguing he lived during “a perfect period to be a common stock investor.”
“We were a creature of a particular time and a perfect set of opportunities,” he said.
Investment managers of today face a much more difficult environment due to stubborn inflation, higher interest rates, and rising competition, according to Munger.
“It’s gotten very tough to have anything like the returns that were obtained in the past,” he said, noting that at the “exact time that the game is getting tougher we’ve got more and more people trying to play it.”
The legendary investor went on to warn of more “trouble” for banks due to the ailing commercial real estate sector that could put even more pressure on investment managers. But after the rapid demise of multiple regional banks in the U.S. this year, he said the good news is at least “it’s not nearly as bad as it was in 2008.”
Munger and Buffett have long argued that what they call “financial helpers”—a group that includes financial advisors, hedge funders, stock brokers, and other money managers—aren’t worth what the fees they charge. But throughout the pandemic, when the stock market soared to new heights and meme stock traders sought to make quick profits from struggling businesses, Munger stepped up his criticism.
The billionaire told Berkshire Hathaway’s Chief Investment Officer Todd Combs in an April 2022 interview that the rise of speculative retail trading was “absolutely crazy,” and pointed the finger at investment professionals for giving questionable advice at Berkshire’s 2022 annual shareholder meeting.
“We have people who know nothing about stocks being advised by stock brokers who know even less,” he said, calling it “casino activity.”
Munger believes that most financial advisors and wealth managers claim they can beat the market to draw in clients, but end up just putting the money into simple indexes to avoid big losses.
“In other words, nobody can stand being that different from the crowd in results because they’re afraid of losing their fees, so they all end up doing the same thing,” he said. “It’s mildly ridiculous. The world is mildly ridiculous.”