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

[Transcript]

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.

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

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[YAPSS Takeaway]

"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." ~Charlie Munger