Video Link: https://youtu.be/ervC6JvgNXw
In this episode, Charlie Munger was asked what is the wisdom behind holding bank stocks compared to other stocks and the future of banking with the rising Fintech and cryptocurrencies decentralizing finance.
In this episode, you’ll learn:
Charlie Munger on bank stocks and cryptocurrencies.
Why Charlie Munger did not buy into Bitcoin?
Will Daily Journal consider taking cryptocurrencies as an asset on the balance sheet like Tesla?
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JULIA LA ROCHE 00:00
[Inaudible] from Toronto, Canada. He asked what is the wisdom behind holding bank stocks compared to other stocks. Are they more stable?
CHARLIE MUNGER 00:11
Well, I think all stocks can fluctuate. And I do think banking run intelligently is a very good business. But, a very wise man said on an earlier occasion: The trouble with banking is that we have more banks than we have bankers.
The kind of executives who have a Buffett-like mindset and never get in trouble are a minority group, not a majority group. And it’s hard to run a bank intelligently. There’s a lot of temptation to do dumb things which will make the earnings next quarter go up but are bad for the long term. And some bankers yield to the temptations. So it’s difficult, but it’s not impossible investing in bank stocks successfully.
JULIA LA ROCHE 01:03
Jeffrey Malloy asked what is the biggest competitive threat to U.S. banks like Bank of America and US Bank — both equity holdings of the Daily Journal Corporation — over the long term? He asked is it digital wallets like PayPal, Square, or Apple Pay? Is it Bitcoin, decentralized finance, or something else?
CHARLIE MUNGER 01:30
Well, I don’t think I know exactly what the future of banking is and I don’t think I know how the payment system will evolve. I do think that a properly run bank is a great contributor to civilization and that the central banks of the world like controlling their own banking system and their own money supplies.
So, I don’t think Bitcoin is going to end up as the medium of exchange for the world. It’s too volatile to serve well as a medium of exchange. And it’s really kind of an artificial substitute for gold, and since I never buy any gold, I never buy any Bitcoin. I recommend that other people follow my practice. Bitcoin reminds me of what Oscar Wilde said about fox hunting. He said it was the pursuit of the uneatable by the unspeakable.
JULIA LA ROCHE 02:32
Charlie, you actually got a couple of questions from shareholders about Bitcoin. And one follow up here, Mark Blakely from Tulsa, Oklahoma. He asked has your opinion on cryptocurrencies remained the same? And would the Daily Journal consider Bitcoin or any other cryptocurrency as an asset on the balance sheet similar to what Tesla recently did?
CHARLIE MUNGER 02:58
We will not be following Tesla into Bitcoin.