Must-read “insider” insight from Warren Buffett and Charlie Munger

2015 marks the 50th anniversary of Berkshire Hathaway’s annual shareholders’ meeting. Regular Daily readers know Berkshire is “superinvestor” Warren Buffett’s holding company. And this year, the Legacy Portfolio’s chief analyst, Greg Wilson, was there to cover it for PBRG subscribers.

In the excerpt below, Buffett and his Berkshire partner, Charlie Munger, address the one thing that prevents most people from making money as stock investors…

Warren Buffett: There’s a certain irony in that we would do the best over decades in a market where people act very foolishly. The more people respond to short-term events and anything that causes people to be wildly enthusiastic or wildly depressed is actually what allows people to make lots of money in securities.

On the other hand, it’s not the greatest thing for society. Charlie and I benefited enormously over a 50-year period where there have been a few periods—with probably the most extraordinary being 1973-1974—where you could buy stocks unbelievably cheap, cheaper than 2008-2009.

It doesn’t make sense to have that much volatility in the market. Humans behave the way humans behave, and they’re going to continue to behave that way over the next 50 years.

If you’re a young investor, you can sort of stand back and value stocks as businesses and invest when things are very cheap, no matter what anyone is saying on television or what you’re reading, and perhaps, if you wish, sell when those are terribly enthused.

It is really not a tough intellectual game. It’s an easy game if you can control your emotions.

And Charlie and I have talked about it before… there may be even more speculative influences in the Chinese market than in the U.S., because it’s a relatively new development and may lend itself to even more extremes. And that should produce great opportunities.

Charlie Munger: There are great opportunities for excess and nasty contractions after unnatural booms, and so on. I think China is wise to dampen the speculative moves.

And I don’t think value investing will ever go out of style. Who in the hell doesn’t want value when they buy something? How can there be anything else that makes sense other than value investing?

Warren Buffett: It never gets that popular, though.

Charlie Munger: People are looking for an easier way, and that is a mistake. It looks easier, but in fact, it’s harder [referring to speculation]. And there’s a lot of misery to be obtained by misusing stocks.

Warren Buffett: No one buys a farm to make a lot of money in the next week or next month. They buy based on what they think the long-term future is. If they make a reasoned calculation of that and the purchase price looks attractive, they buy it. And they don’t get a quote on it every day or every month or even every year.

And that’s probably a better way to look at stocks.

Reeves Note: Legacy Portfolio subscribers can review Greg’s full notes from the Berkshire meeting right here. The Legacy Portfolio is now closed to new members until 2016. Click here to access the VIP waiting list. You can get early access to Legacy next year at a special discounted rate… and real Legacy content and updates from us over the next 12 months.