Billionaire investor Charlie Munger trashed two popular investing trends in a keynote address at Zoom’s Zoomtopia 2023 conference.
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The vice chairman of Berkshire Hathaway — and Warren Buffett’s right-hand man — tossed a wet blanket on the excitement around artificial intelligence (AI).
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“I think it’s getting a huge amount of hype,” Munger said during his keynote address Oct. 4, according to Fortune. “I think it’s probably getting more than it deserves.”
He didn’t stop there. The no-nonsense 99-year-old also slammed Bitcoin — and to a wider extent, cryptocurrency — as “the stupidest investment I ever saw.”
With decades of investing experience under his belt, Munger is wary of hot commodities and stocks that could boom one year and tank the next. Here’s what he likes instead.
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AI stocks
First, let’s unpack Munger’s negative comments on AI and crypto.
If you look at the so-called “Magnificent Seven” — the seven largest U.S. companies by market capitalization: Apple, Microsoft, Amazon, Google, Nvidia , Tesla and Meta — they’ve all initiated immense AI projects and there’s been a huge injection of private equity into AI-focused businesses.
Many inventors see AI as the next big thing — but Munger is not on the bandwagon, noting at the conference that it has existed since the 1950s.
“We’ve always had artificial intelligence, where software creates more software,” he said. “And, of course, that’s very useful, [but] we’ve had it for a long time.”
This bold take from Munger was hardly shocking. The investor announced he was “personally skeptical” about AI at Berkshire Hathaway’s 2023 annual shareholder meeting — adding: “I think old-fashioned intelligence works pretty well.”
At the same meeting, Buffett likened the advent of AI to the creation of the atomic bomb.
“I know we won’t be able to uninvent it,” Buffett said. “But is it good for the next 200 years of the world?”
Both Munger and Buffett are known for making high-quality and long-term investments rather than jumping on the next hot asset or stock. Some of their long-term holdings are in companies that are actually driving the AI train, such as technology giants Apple and Amazon and some of the nation’s leading banks.
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Bitcoin and crypto
Munger has been very vocal about his dislike for cryptocurrencies in the past — and it seems the crypto crash of 2022 and the implosion of crypto exchange FTX have only etched his opinion deeper in stone.
“Don’t get me started on Bitcoins,” he told the Zoomtopia audience, as reported by Fortune. “Most of those investments are going to zero.”
Bitcoin prices dropped nearly 65% in 2022, with the popular cryptocurrency logging its worst annual performance since 2018. The overall crypto market fared no better. After hitting a peak of around $3 trillion in November 2021, the crypto market took a dramatic nosedive in 2022, hitting a two-year market value low of $796 billion when FTX imploded.
This year, the market has clawed back some ground and crypto prices have proven resilient. Bitcoin prices are up around 70% year-to-date.
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The Zoomtopia keynote wasn’t the first time Munger trashed digital currencies. In February, he penned an op-ed for the Wall Street Journal wherein he described crypto as “a gambling contract with a nearly 100% edge for the house” and called for an outright ban on cryptocurrency.
At the Daily Journal’s 2023 annual shareholder meeting, shortly after the op-ed was published, Munger said of crypto: “It’s massively stupid. It’s very dangerous. The governments were totally wrong to permit it. I’m not proud of my country for allowing this crap. It’s worthless, it’s no good, it’s crazy, it’ll do nothing but harm.”
Munger’s favorite stocks
So what does one of America’s most successful investors like, if he’s not persuaded by AI and crypto?
Munger is a well-known value investor who works on the assumption that good opportunities are few and far between — and he’s willing to pay more for quality. Like Buffett, he plays the long game and uses the buy-and-hold investment strategy to reap the benefits of compound interest.
Munger’s latest 13F filing includes just four stock holdings: Wells Fargo at around 41%, Bank of America at around 40%, Alibaba at around 16% and U.S. Bancorp at around 3%.
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Essentially, he has put all his eggs in two baskets: banking and e-commerce. Bank stocks in particular are a popular choice for value investors because most banks pay dividends, giving investors a share in profits.
Munger has a net worth of approximately $2.6 billion, according to Forbes.
