In this Monday, May 7, 2018, file photo, Berkshire Hathaway Vice Chairman Charlie Munger listens to a question during an interview in Omaha, Neb., with Liz Claman on Fox Business Network's "Countdown to the Closing Bell." Investor Warren Buffett’s right-hand man, Munger, says the U.S. stock market is overvalued, but he doesn’t know when the bubble will burst. Munger said Wednesday, Feb. 24, 2021, that the recent frenzy over GameStop’s stock was driven by small investors gambling on the stock market. (AP Photo/Nati Harnik, File)
OMAHA, Neb. (AP) — Investor Warren Buffett's right-hand man says the U.S. stock market is overvalued, but he doesn't know when the bubble will burst.
Billionaire Charlie Munger is a vice chairman at Buffett's Berkshire Hathaway conglomerate. He typically sits alongside Buffett to field questions at Berkshire's annual meetings in Omaha, Nebraska, each spring.
“I think it must end badly but I don’t know when,” Munger said of the stock market's run to record levels. He fielded questions for two hours Wednesday at the annual meeting of another company he is chairman of, the Daily Journal, which operates a small legal newspaper in California and sells software to court systems.
Munger said the recent frenzy over GameStop's stock was driven by small investors gambling on the stock market.
“That’s the kind of thing that can happen when you get a whole lot of people who are using liquid stock markets to gamble the way they would in betting on race horses,” Munger said.
Munger said inexperienced investors are being lured into the market by newer brokerages like Robinhood that offer commission-free trading. Robinhood has defended its practices but critics say some features on its trading platform make investing seem like a game, such as showering a user’s screen with virtual confetti every time they make a trade.
“The frenzy is fed by people who are getting commissions and other revenues out of this new bunch of gamblers,” Munger said.
GameStop shares surged more than 1,000% over two weeks last month as small investors snapped up shares of the stock that a number of hedge funds had bet against heavily. The stock of the struggling video game retailer has been extremely volatile since then as it fell back to earth.
Munger also took aim at the special purpose acquisition companies, or SPACs, that have exploded in popularity on Wall Street. Last year, the investment vehicles designed to invest in young businesses that don't yet have shares trading in the public market raised $76 billion from investors, up from $13 billion the year before.
“I think this kind of crazy speculation in enterprises not even found or picked out yet is a sign of an irritating bubble,” Munger said.
In between more serious topics, Munger mixed in lighter advice on life for investors.
“The first rule of a happy life is low expectations. That’s one that you can easily arrange. If you have unrealistic expectations, you’re going to be miserable all your life,” Munger said.
The Daily Journal's annual meeting was held in Los Angeles on Wednesday just a few days before Buffett is scheduled to release his annual letter to Berkshire Hathaway shareholders. Buffett's letter will be posted online on Saturday morning.
7 Stocks to Watch When Student Debt Forgiveness Gets PassedNow that the Biden administration is fully in charge, student debt forgiveness has moved to the front burner. Consider these numbers. There is an estimated $1.7 trillion in student debt. The average student carries approximately $30,000 in student loans.
If $10,000 of student debt were to be canceled, there are estimates that one-third of borrowers (between 15 million to 16.3 million) would become debt-free. Of course, if the number hits $50,000 as some lawmakers are suggesting the impact would even greater.
Putting aside personal thoughts on the wisdom of pursuing this path, it has the potential to unleash a substantial stimulus into the economy.
And as an investor, it’s fair to ask where that money would go. After all, there’s no harm in having investors profit from this stimulus as well.
A counter-argument is that the absence of one monthly payment may not provide enough money to make an impact. However, Senator Elizabeth Warren referred to the effect student loans have in preventing many in the millennial and Gen-Z generations from pursuing big picture life goals such as buying a house, starting a business, or starting a family.
With that in mind, we’ve put together this special presentation that looks at 7 stocks that are likely to benefit if borrowers are set free from the burden of student loans.
View the "7 Stocks to Watch When Student Debt Forgiveness Gets Passed".
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