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Poor Charlie’s Almanack

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It seems that my reading queue tends to run in cycles.

For fiction, I’m now deep into the works of Larry McMurtry (Lonesome Dove…and many, many others).  No one else seems to have such a deft touch in describing Texas, in both historic and contemporary terms.

And for non fiction, I’ve taken on the task of mining all that has ever been written by or about Warren Buffett.  After all, if you’ve decided to model behavior, who else to learn from than the most successful investor of all times?

The crucial lessons learned are to limit your core investments to areas that you understand, and then to double down once you’ve committed yourself.  Having fewer eggs in the basket makes sense if you’ve taken the time to do your selection right in the first place.

The other major lesson has to do with investor psychology.  It’s so important not to get caught up in the herd like stampedes that typify wildly fluctuating market valuations.  The point is made time after time.  It’s not so much intellect as temperment that separates winners from losers in the marketplace.

And of course, it’s not possible to read about Buffett’s accomplishments without being directed time and again to his sidekick of nearly forty years, Charlie Munger.

Buffett and Munger were introduced by mutual friends, and they each found someone who could be considered a valued confidant and partner.  They differ widely in their political affiliations, but they have remarkable synergy in how they evaluate investment opportunities.

It’s easy to be overshadowed by a towering figure like Buffett, but it’s worth your time to plow through the coffee table sized mega book that is captioned in the title of this piece.  It’s a vast compendium of Munger’s writing and speaking on a wide variety of topics, surprisingly centered mostly on psychology.

Charlie Munger is a true polymath, and his interest are nothing if not wide ranging.  He is equally at home in scolding the accounting profession (for their laxity in caving in to their corporate clients who did not wish to expense their stock option compensation), and then in the next breath he is savaging academia for erecting Chinese walls between their many disciplines.

If one had to choose the glue that binds Munger to Buffett it would be their absolute faith in logic and their resolute determination to never be led by majority opinion.  They point is made several times.  You are never right because others agree with you…you are right only because that’s what the facts and the evidence confirm in weighing your beliefs and actions.

Munger turns 90 on January 1st, 2014.  There is not the least hint of his slowing down.  He maintains his base in southern California, and has never felt he had to be domiciled in Omaha in order to have his views represented to his partner.

Of all his contributions to the partnership, this one sums it up best:  It’s better to pay a fair price for a very good company, than to pay a good price for a fair company.

 

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