Fri, Feb 18, 2022|Whitney Tilson

Munger speaks at the Daily Journal meeting; Munger was wrong about Tesla; Could Wages and Prices Spiral Upward in America? Chamath Palihapitiya resigns from Virgin Galactic's board; Greetings from Mont-Tremblant

1) Warren Buffett's right-hand man, 98-year-old Charlie Munger, is an investing legend in his own right, and I highly recommend the definitive book about him, Poor Charlie's Almanack: The Wit and Wisdom of Charles T. Munger (I wrote chapter three, provided the transcripts for several of Munger's talks, and edited it).

He hosted the Daily Journal (DJCO) annual meeting for more than two hours on Wednesday, and he's still sharp as a tack, quick mentally, with his usual strong opinions... You can watch the entire meeting here (it starts at 24 minutes: 50 seconds) (I recommend watching all of the videos at the maximum 2 times speed, as Munger speaks slowly).

If you don't have time to watch all of it, here's a five-minute summary by the Yahoo! Finance journalists who interviewed him. And here are the video clips they posted of Munger addressing various topics:

2) Munger isn't always right, however. This is what Tesla (TSLA) CEO Elon Musk tweeted on Wednesday:

3) Munger's most pointed and scary comments were about the dangers of inflation:

Inflation is a very serious subject... You could argue that it's the way democracies die... So it's a huge danger once you've got a populace that learns it can vote itself money. If you look at the Roman Republic, they inflated their currency steadily for hundreds of years, and eventually, the whole damn Roman Empire collapsed. So it's the biggest long-run danger we have probably, apart from nuclear war.

The safe assumption for an investor is that over the next hundred years, the currency is going to zero. That's my working hypothesis...

I most recently wrote about inflation – and my contrarian view – a week ago, Why I think inflation – and the worries about it – have peaked. I concluded: "Mark my words: This is the peak of inflation and associated worries about it."

That said, I could be wrong. This New York Times article explores the debate economists and investors are having: Could Wages and Prices Spiral Upward in America? Excerpt:

Earnings calls are replete with chief executives explaining that they are increasing pay to attract and retain talent. Unions have won pay bargaining fights. And the White House regularly celebrates signs that power in the workforce seems to have shifted toward employees and away from employers.

For the most part, that's good news for labor. But economists have increasingly warned that the confluence of economic trends shaping up now – high inflation, a sense among consumers that prices might stay high for a while and a strong labor market that has handed workers bargaining power – could set the stage for a situation in which wage growth and prices feed off each other.

"The combination of very high inflation, hot wage growth and high short-term inflation expectations means that concerns about falling into a wage-price spiral deserve to be taken seriously," Goldman Sachs (GS) economists wrote in a note last week.

That would be a big shift. America has not experienced a wage-price spiral since the 1970s and early 1980s, when rapid inflation and skyrocketing wages seemed to perpetuate each other. The Fed lifted interest rates to double digits and caused a painful recession to bring prices under control. Both wage growth and inflation have been slow in the decades since – until now.

But even if wages and prices are both rising now, it is not clear that they are egging each other on yet, which is a crucial distinction. In fact, labor market experts point out three big reasons to doubt that a wage-price spiral will happen today.

4) There couldn't be a more striking contrast between Munger and multiple-SPAC-sponsor Chamath Palihapitiya, who signaled the top of the SPAC bubble a year ago when he proclaimed himself the "king of SPACs" and "the next Warren Buffett" per this Bloomberg article: The King of SPACs Wants You to Know He's the Next Warren Buffett. Excerpt:

Chamath Palihapitiya has already drafted the next chapter in his charmed-life story.

The immigrant kid who bootstrapped his way into riches at Facebook (FB), made billions as a risk-hungry investor, and became the pied piper of the current blank-check craze now envisions himself as nothing less than the Warren Buffett of the Reddit era.

"Nobody's going to listen to Buffett," Palihapitiya, the founder of Social Capital, said in a Bloomberg Front Row interview. "But there has to be other folks that take that mantle, take the baton and do it as well to this younger generation in the language they understand."

The language, of course, is social media. That's where the 44-year-old billionaire talks up his deals, trolls the establishment, and hypes "all things Chamath." Recently, he stoked speculation he might run for governor of California. Occasionally, he tweets out shirtless selfies to his 1.3 million followers. His feed is a digital stream of consciousness.

With Twitter as his bullhorn, Palihapitiya has become the undisputed king of special-purpose acquisition companies, the hottest thing on Wall Street. Together with Ian Osborne, a public-relations soothsayer turned financier, he has sponsored six SPACs, raised a total of $4.34 billion, and acquired businesses in space travel, health insurance, financial services, and real estate.

I heaped scorn upon him at the time, writing on February 24:

y observation over the past two decades is that anytime a "new economy" guru compares himself to – while also trash-talking – the Oracle of Omaha, the market soon punishes his hubris!

I sure nailed that one...

Just this morning, space tourism company Virgin Galactic (SPCE) announced that Palihapitiya is stepping down from its board "to focus on other public company board commitments," sending the company's shares tumbling. They're now down 85% from their peak last June. But of course, Palihapitiya is long since out – he sold his entire personal stake last March for $211 million. What a total disgrace!

(This was one of the best trades in Empire Financial Research's history. After recommending SPCE to Empire Investment Report subscribers in December 2019 at $10.20, we recommended exiting in January 2021 at $50. One of our subscribers made more than $10 million!)

5) Greetings from Mont-Tremblant! Six of us (my wife, our two college-graduate daughters who live with us, two of their friends, and I) flew into Montreal last night, rented a huge Ford Expedition (which barely fit all our stuff), and I drove two hours slowly through near-blizzard-like conditions to the condo we rented. This deer greeted us on our arrival near midnight:

It snowed nearly a foot overnight, and this beautiful sight greeted us when we woke up and looked out the window. What a day for our first day of skiing this year!

Best regards,

Whitney

P.S. I welcome your feedback at WTDfeedback@empirefinancialresearch.com.