Berkshire's Charlie Munger Warns Against Market Frenzy, Expects Lower Returns In Next Decade

Berkshire Hathaway Inc's (NYSE: BRK-A) (NYSE: BRK-B) Vice Chairman Charlie Munger, at a California Institute of Technology virtual event, pointed out the current market "frenzy." 

What Happened: Munger said that too many people are caught up in the frenzy of activity in the investment field. He doesn't like the idea of everyone getting sucked into finance and get rich by outsmarting the rest of the world in marketable securities.

Munger expects market returns in the next 10 years to be lower than the last 10. "Frenzy is so great, and the systems of management, the reward systems, are so foolish," he added.

Munger also warned against aggressive monetary easing policies. "We're in very uncharted waters. Nobody has gotten by with the kind of money printing now for a very extended period without some kind of trouble," he said. Warren Buffet's aide believes that the market is on "the edge of playing with fire."

Munger added that a loose monetary policy would have inflationary effects. "I can remember having a five-course filet mignon dinner in Omaha for 60 cents when I was a little boy. The world has really changed," he quipped. 

Munger called technology "a killer and an opportunity." Commenting on the recent surge in tech companies' value, Munger said he has never seen anything like it.

Munger compared Apple Inc AAPL to John D Rockefeller's empire. "It's been the most dramatic thing that's almost ever happened in the entire world history of finance." 

On the one hand, technological changes impact businesses, but on the other hand, Berkshire owns the Burlington Northern railroad. Munger said that the railroad is the most old-fashioned business he can think of and that it has been successful "not by conquering change but by avoiding it."

Munger also praised venture capital firm Sequoia Capital's record in getting the tech investments correct. He said that Sequoia had made more money than anybody.