Charlie Munger: Why he's HOLDING Bank Stocks while Berkshire Sold? | Collection: Charlie Munger #273
Another person wrote in, Norman Bergman, who asks, “Charlie, Berkshire has unloaded the bank stocks. If it’s not good enough for Berkshire shareholders, why is it good for us?”
Well, I might have different ideas.
If you own securities — marketable securities within a corporation, located in California, you pay huge state and federal taxes if you sell things at a big gain. And that affects our willingness to sell somewhat.
Those bank stocks I bought on the bottom tick in the foreclosure crisis. Literally, it was the bottom tick, and they’re practically all gain. So I immediately give the government 40-some-percent, everything we sell out of it — out of those bank stocks.
So — and of course, they’re producing a tax — the dividends are almost tax free. So based on what we would get if we sold them and the return we’re getting out of the dividends, it’s not so bad for us. The answer is it’s — we’re not in a normal position. All factors considered, we’re willing to hold them for a while.
And there is a big disadvantage in adding a huge layer of federal corporate taxes and state taxes between us and any money we make in a state like California, which is a very business unfriendly state as my people are rushing to come out and incorporate in California.
And there are all kinds of states that have no income taxes and deliberately use that lure to bring in corporations. California is trying to force its wealthy people and its wealthy corporations out of the state. And I must say it’s working fine. They’re leaving just one after another. (Laughter)
And that’s just the way it is.
But you know if we succeed in the software business, it will all come good in the end. And if we fail, we have a crutch under us in our real estate and our securities, which means we won’t lose so much from the present market price. So it’s not a crazy thing to own now at the market valuation, but it’s not cheap either.
It is important to consider various factors when making investment decisions