Collection: Charlie Munger - #63 'Worry on Banks'


Video Link: https://youtu.be/BwGL6iuMvyM


In this episode, Charlie Munger was asked whether he is worried about the derivative portfolios of major U.S. banks getting large on the balance sheets and S.E.C. reporting doesn’t require much transparency?


In this episode, you’ll learn:

  • Why all intelligent investors worry about banks?

  • When should you invest in banks?

To check out all Collection: Charlie Munger <click here>

[Transcript]

(Source: https://youtu.be/X1Oi3esiry8)

AUDIENCE MEMBER 00:08

So my concern is that done a lot of research on the banks and you guys have done a great job and helping me. But I also saw the derivative portfolios of major U.S. banks are getting quite large on the balance sheets. S.E.C. reporting doesn’t require much transparency.


So I thought do you guys worry about this kind of stuff – I know you've been having the past – in the banks that you own? And do you worry about other banks as well? Thanks.


CHARLIE MUNGER 00:36

Well, all intelligent investors worry about banks because banks present temptations to their managers to do dumb things.


There’s so many things you can easily do in a bank that looks like a cinch way of reporting more earnings soon, where it’s a mistake to do it, long-term considerations being properly considered.


As Warren puts it, “The trouble with banking is there are more banks than there are good bankers.” And he’s right about that.


So I would say that if you invest in banks you have to go in at a time when you got a lot going for you. Because there’ll be a fair amount of stupidity that creeps into banking.

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