To paraphrase an old investment ad campaign: “When Charlie Munger speaks, people listen.” After all, Munger has had a storied career spanning decades with Warren Buffett, is a billionaire and as vice chairman of Berkshire Hathaway has a platform to discuss all manner of public and private sector events.
In a series of commentaries at the annual shareholder meeting of the Daily Journal, Munger said that some states — including California, Connecticut and New York — have been “stupid” as they have driven wealthier individuals away amid onerous tax and regulatory policies.
The comments came in the wake of the news this week that Amazon had abandoned efforts to base a headquarters in New York City. In addition, some politicians, such as New York Rep. Alexandria Ocasio-Cortez, have embraced 70 percent marginal tax rates on incomes that are north of $10 million.
The states mentioned above, said Munger, have effectively “shot themselves in the foot” with tax burdens — and where, as estimated by WalletHub, the tax rate in Connecticut is 10.2 percent, while in California it is 9.6 percent.
Speaking of the wealthy in general, Munger maintained that they are attractive citizens for any city or state, noting that “they are old, they keep your hospitals busy, they don’t burden your schools, police departments or prisons. Who wouldn’t want rich people?” But, as quoted by CNBC, amid the Financial Crisis that struck a decade ago, and where bailouts and historically low interest rates had helped the wealth and given tailwinds to asset prices, “nobody was doing that because they love the rich; they just didn’t have any other tools in the kit,” he said.
The resulting income inequality, Munger said, “wasn’t malevolent and it was an accident and it probably won’t happen again.”
Munger said, too, that in reference to taxes there is “a lot of ignorance” and that political battles mean that “hatred blinds reason and both sides are blinding reason.”
Regarding individual company initiatives, and as recounted by Bloomberg, his commentary also touched on Sears, where the company is exiting bankruptcy in the wake of an acquisition deal with Eddie Lampert’s ESL Investments: “If you take on the job that’s impossible to do, you’re going fail at it,” Munger said. “That’s the lesson.”
“I don’t know how it’ll work out,” he said, as quoted by Bloomberg. “There’s a lot of vested interests in that field who are probably from the status quo and it’s not going to be easy fixing anything.”
The commentary came as the financial trade press reported that Berkshire cut holdings in Apple and boosted holdings in JPMorgan Chase. At the end of the year, the company held 249.6 million shares in Apple, down from 252.5 million at the end of the third quarter. And at the end of the year, the company held 50.1 million shares in JPMorgan, as compared to 35.7 million in the previous period. Other bank stocks curried favor with Berkshire, as the firm bought 18.9 million shares of Bank of America, and 4.4 million shares of U.S. Bancorp.