Wednesday, May 7, 2008

Even Charlie Munger Makes Mistakes



Berkshire's Munger says investors should lower expectations.

"There will be a hell of a mess in these derivative books eventually," he said.

Munger said better accounting standards are needed and banks should not be allowed to put money into risky and complicated investments.

"These people wouldn't get away with this horrible behavior if the accountants didn't bless it," he said.

Munger said the testosterone-driven, competitive executives heading most investment banks are partly to blame for the current financial problems.

"I do not think we'd have this mess if women were running all the financial institutions," he said.
Perhaps someone should remind Mr. Munger that a woman, namely JP Morgan's Blythe Masters, invented the Credit Default Swap.

Credit default swaps were invented with collateralised debt obligations in 1995 by Blythe Masters, a 34-year Cambridge graduate who was then the head of JP Morgan’s Global Credit Derivatives group.
Ms. Masters, formerly CFO, is still on JP Morgan's executive committee and is now global head of commodities. Good timing.



I might also remind Mr. Munger of the crisis caused by a certain Helen of Troy.

4 comments:

Anaconda said...

HELEN OF TROY, THE FACE THAT LAUNCHED A 1000 SHIPS

And Achilles dragged Hector's lifeless body back and forth before the redoubt behind his chariot.

Finally, the Olympic gods got tired of the spectacle and restored the look if not the life to Hector's vanquished body.

Old Priam shed a tear.

And, at the breakpoint for the Greeks, the Trojan Horse was taken inside the redoubt and disaster befell the City of Troy.

Yet, the Greeks were subsequently scattered to the four winds, and Ulysses endurred his odyssey.

"Beware of Greeks bearing gifts."

Beware of government promises that "institutions" are too big to fail.

The exchange of gifts might be the steep price of regulation and oversite.

Anaconda said...

"GREEK FIRE" THE STRATEGIC ADVANTAGE

The Greeks, reign supreme in the genesis of Western civilization: Their development of logic and reason, science, drama, political science, democracy, architecture, music and poetry.

The Greek's Civility.

But what of their Art of War?

Maybe hoplites and the phalanx come to mind, even mighty warrior galleys dominating the Agean Sea.

In one of the lasting ironies of human civilization, of all the accoutrements of civilization the Greeks inspired, the Art of War protected their independence upon which all their other achievements rested.

And quite possibly petroleum was their secret stategic weapon.

"Greek Fire" is still mysterious today, no one quite knows its source, yet in the ancient chronicles, "Greek Fire" was said to be the strategic advantage that often tipped the balance when the Greeks were locked in close combat with their enemies.

So, even at the dawn of Western civilization, being in control of "Greek Fire" was critical in the development of all the other refinements, that made the Greeks... Great.

Petroleum still holds that place of honor today. It fuels America's economy which supports our war making machine, which itself, depends on "Greek Fire" to run and fight.

And this magic elixir is the basis of our strength... and weakness, today.

Those that think it's okay for America to allow its oil production to run down are deluded.

They don't know their history: Recent or ancient.

Well to be remembered, "Greek Fire," a friend to dispell darkness with light, and dispatch enemies with might.

An ode to "Greek Fire" and the men who lifted the torch of civilization.

The torch of "Greek Fire".

Bud said...

I think you might like my new self-published book. My book, "The Four Filters Invention of Warren Buffett and Charlie Munger" examines each of the basic steps they perform in framing and making an investment decision. Here is a 10 min. audio book summary: http://www.frips.com/4fsummary.mp3

Here is the review that George at valueinvestingnews.com and fatpitchfinancial.com did on my book. http://www.valueinvestingnews.com/four-filters-invention-warren-buffett-ch-0

As for my own views, “The Four Filters Invention of Warren Buffett and Charlie Munger” at http://www.frips.com is designed to be the next “Intelligent Investor.” It is a small book at 98 pages, and it concentrates mainly on the sequential process outlined by Warren Buffett. How do the best “frame” their investing decisions? The Four Filters cluster around the important business variables of Products, Customer-Sustainablility, Managers, and Price/Value.

The book also strives to prove that Buffett and Munger invented a Behavioral Finance Formula composed of three qualitative steps and one quantitative step, that is underappreciated by the
business and academic communities. In that respect, Buffett and Munger will have a greater long term impact on academics than the Efficient Market Hypothesis.

While my book is concentrated on Munger and Buffett’s approach to framing, this book contains the best of Graham, Carret, Fisher, Buffett and Munger. Read the summary a few times, and you will be motivated and hypnotized into thinking about ways you “frame” your important decisions. This is a subtle peek into sensible and optimal thinking within Behavioral Finance.

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