Charlie Munger may have been one of the greatest investors the US stock market has ever seen, helping Berkshire Hathaway become the investment giant that it is today.
Warren Buffett, who is seen as the leader and figurehead of Berkshire Hathaway, said after Munger's passing that Charlie was the architect of what Berkshire became.
Every year at the annual general meeting (AGM) of Berkshire Hathaway, Munger famously said little. A phrase he regularly said was "nothing to add" after Buffett had answered a question. Buffett and many other investors respected him greatly for his guidance.
Before Munger's passing, he made a couple of wise observations, which I think are worth revisiting and considering whether they have come true.
Pessimistic predictions
As reported in this Yahoo Finance article, February 2023 was the last Daily Journal annual shareholder meeting that Munger attended.
Munger reportedly said at the meeting that investors may need to get used to it being harder to make returns:
It's been almost too easy in the past for the investment class. It's natural that it would have a period of getting harder. The investment world is going to get harder for everybody.
He put this prediction down to two things. First, rising valuations and second, a government that was becoming more "hostile to business".
CNBC's Becky Quick asked how long he thought these challenges would last for, Munger replied:
I would say it will fluctuate naturally between administrations and so on. But I think basically the culture of the world will become more and more anti-business in the big democracies. And I think taxes will go up, not down.
Was he worried about the future? He gave a stereotypical Munger-like answer:
I don't worry about it much because I'm going to be dead. You know, it won't bother me very much when I'm lying there dead.
Was Charlie Munger right?
Perhaps. Trump has talked about wanting to reduce taxes for US companies, though the longer-term trend could be up.
We've seen the US stock market suffer in the last few weeks – the S&P 500 Index (INDEXSP: .INX) is down 8% since 19 February 2025.
However, the S&P 500 is up more than 30% since February 2023. I don't think Munger was making a prediction about the next year or two, but it shows the difficulty of making any sort of prediction about the stock market. It's probably too early to say whether Munger was right about future returns being harder. He was a long-term investor.
I do believe it'll be harder for the big US companies to make as strong returns in the next 10 years as the last 10, simply because they're even bigger now. I'd say it's easier for a business to double in size from US$1 trillion to US$2 trillion than it would be to double from US$2 trillion to US$4 trillion. Those huge tech titans were, and still are (despite the dip), priced for solid earnings growth in the foreseeable future.
He was also right in suggesting there may be an administration change, but he may not have anticipated the scale of the tariff implementations that the Trump administration is considering, which may not help trade or business profits globally.
But, in the face of lower US stock market prices, I think Charlie Munger would have referred to some timeless advice:
Be fearful when others are greedy and greedy when others are fearful. I think that's always a good investment strategy to live by.
