Bill Ackman's life-changing advice for me; Stocks and bonds soared in November; How Rising Profits Could Prevent the Economy From Faltering; Li Lu's tribute to Charlie Munger; Munger's humor

1) Given how much of a Warren Buffett fan I am, it's a bit embarrassing to admit that when I was at Harvard Business School in my late 20s, I didn't even know who he was.

I did have a strong interest in business and got a great general business education... But my interest at the time was in entrepreneurship, not investing. So when the most famous investor in the world came to speak on campus, I didn't even go.

But later, once I had paid off my business-school debt and saved up some money that I wanted to invest, I called my college buddy Bill Ackman – at the time, he was running a small hedge fund called Gotham Partners. (Now, he's the world-famous billionaire behind hedge fund Pershing Square Capital Management.) I asked for his advice, and I remember exactly what he told me:

Read everything Warren Buffett has ever written, and you can stop there. That's all you need to know.

I took Bill's advice... and was immediately hooked.

Buffett's idea of trying to buy dollar bills for 50 cents immediately resonated with me because my parents knew how to squeeze a dollar until it screamed. We rarely went out to eat, only bought used cars, and shopped for clothes at thrift shops.

I continued reading everything I could by and about Buffett and started attending every Berkshire Hathaway (BRK-B) annual meeting (I've now been to 26 in a row!). Soon, I felt confident enough to start buying a few stocks. To my delight, most of them went up – some by a lot.

The combination of discovering Buffett, having early success in picking stocks, and looking for a new line of work led to my decision in mid-November 1998 to launch my own hedge fund, which opened its doors only six weeks later on January 1, 1999.

By all rights, I should have gotten incinerated.

I now realize that I was nothing more than a late-'90s bull market genius, riding popular tech stocks like AOL, Dell, and Intel, irrespective of valuation. But just in the nick of time, I realized that these stocks had formed an enormous bubble, and I sold them before they took me down.

To some extent, I was lucky... But I also created my own luck. And Buffett's teachings about value investing were a big part of that.

From my fund's inception in 1999 through its peak in 2010, it returned nearly 200% for our investors. Meanwhile, the S&P 500 Index was about flat over that same time frame.

But then I missed the long bull market that followed...

I was so scarred by the market crash in 2008 and early 2009 that I kept seeing another one just around the corner. As a result, I invested too conservatively, quickly selling my winners, holding a lot of cash, and maintaining significant short exposure.

As a result, I only made a little bit of money while the stock market more than doubled over the next seven years. Feeling like I was letting my investors down, I decided to return their capital and closed my fund in late 2017.

The following year, I spoke with Stansberry Research founder Porter Stansberry, and we came up with a plan to create Empire Financial Research – inspired by and affiliated with Porter's own business.

As regular readers know, this year we merged Empire's operations into Stansberry... and I have taken over as lead editor of the company's flagship Stansberry's Investment Advisory newsletter.

I'll be working closely with the amazing Investment Advisory team to bring subscribers our best ideas – thoroughly researched and distilled into an easily readable format – just like we did this past Friday in the latest monthly issue.

Investment Advisory subscribers can read the full issue right here. But if you aren't a subscriber, I don't want you to miss out... Find out how to gain instant access to this brand-new Investment Advisory issue – including our latest stock recommendation – by clicking here.

2) I knew November was a good month for investors, but I hadn't realized how good until I read Charlie Bilello's latest Week in Charts...

As you can see in this table Bilello posted, the S&P 500 had its 18th biggest monthly gain since 1950:

(By way, as you can see in the last three rows, the market has performed well above average in the aftermath of the strongest months.)

Meanwhile, as Bilello writes, "the Bloomberg U.S. Aggregate Bond Index closed 4.5% higher, its best month since May 1985 and 8th best return since inception of the index in 1976." Here's Bilello's table on this:

Not surprisingly, therefore, a classic 60/40 portfolio (60% stocks and 40% bonds) "gained 7.3% in November, its 2nd best month in the past 30 years (trailing only April 2020) and 9th best since 1976," as Bilello writes. Take a look at this chart he posted:

3) So where do the markets go from here?

I remain constructive – perhaps even bullish.

The economy remains strong – last week, the Commerce Department revised third-quarter GDP growth up from 4.9% to 5.2% – and corporate profits have rallied strongly, as this "Heard on the Street" column in today's Wall Street Journal notes: How Rising Profits Could Prevent the Economy From Faltering. Excerpt:

... corporate profits rose by 6.7% in the third quarter compared with a gain of 1.6% in the second.

The profit rebound has been more than evident at big public companies, too. With most results in, earnings per share at companies in the S&P 500 look to have risen 7.1% in the third quarter from a year earlier, according to London Stock Exchange Group, after slipping 2.8% in the second. The profit gains look likely to continue: Analysts, whose estimates tend to be too dour this far along into a quarter, expect S&P 500 earnings to grow by 5.2% in the fourth quarter.

The rebound in profits might matter a lot not just for the stock market but also for the economy. That is because available Commerce Department data back to the late 1940s show that by the time corporate profits are growing again after a decline, a recession is either well under way or has just come to a close – or there was no recession at all.

4) My friend Li Lu, who moved from New York City to Pasadena roughly 15 years ago to work directly with Charlie Munger, posted this beautiful tribute to his mentor:

Remembering my teacher Charlie Munger

Thursday, November 30, 2023

I was on a business trip in Asia on Tuesday when I got the call from the Munger family informing me that Charlie was in his final hours. I hopped onto the next flight I could find to California, and before departure, was able to talk to Charlie through the help of his daughter. Charlie had largely lost consciousness, but still I could clearly hear him trying to make a sound to acknowledge he had heard me. Upon landing, I learned that Charlie had left us a few hours earlier.

I arrived at his Santa Barbara home and had the opportunity to spend cherished time with family members, reminiscing about all things Charlie. Charlie was engaging, humorous and full of wit even at Thanksgiving dinner just a few days ago, family members told me. I visited his home library again. In that very room, exactly 20 years ago, also on a post-Thanksgiving weekend afternoon, following the introduction by our mutual friend Ron Olson, Charlie and I first struck up a deep conversation which ran for several hours. It began an investment partnership that has now endured two decades. Charlie became my mentor, partner, dear friend and above all, life-long role model.

I was so deeply grateful that the Munger family made a special arrangement the next day for me to say a proper and private goodbye to Charlie.

There, lying quietly with eyes closed, Charlie looked the same as ever, peaceful and sincere with a subtle smile on his face. There was a serenity about him. For a moment, I was reminded of the Living Buddhas I once saw in the Buddhist temples of Thailand. In the Buddhist tradition, the bodies of truly enlightened monks, through life-long self-cultivation, can remain incorrupt, without any traces of mummification after death. In that moment, it is what I saw in Charlie, an enlightened sage with an incorruptible body, surrounded by a glimmer of eternal light.

Charlie was not a Buddhist. That vision can never be tested. But it is incontrovertible that his legacy and impact will live on for generations to come.

In our capitalist society, where do virtue, moral responsibility, truth-seeking and public service fit in? Charlie Munger answered these questions through his long exemplary life. He insisted on making money in the most morally sound way, entering transactions only when, if positions were reversed, he would comfortably take the other side. He sought worldly wisdom through life-long learning. He guided life with rationality devoid of mental deficiencies such as envy, resentment and self-pity. He faced and persevered through countless adversities with stoicism and equanimity. As he gained in wealth and stature, he showed little appetite for the trappings of that success, and instead spent his wealth on worthy causes and tirelessly spread his worldly wisdom to those who would listen, often with humor. He remained deeply engaged with family, friends, partners, and the broader world with loving assiduousness through his last days.

In his later decades, Charlie Munger's ideas began to spread across the world, particularly in the most populous countries of China and India. In China, the Mandarin language version of Poor Charlie's Almanack, an anthology by and about Charlie Munger, sold over 1.2 million copies over the last 10 years. There, the educated class increasingly came to view Charlie as the embodiment of the modern-day Confucianism, maintaining a virtuous and enlightened life while embracing the market forces of capitalism. In time, that vision of modern Confucianism will be crucial for Chinese modernization and how China interacts with the rest of the world.

Charlie's teachings will continue to spread, inspire and impact the world even more profoundly. That will be his eternal legacy.

Here's an old picture of Li Lu (in red on the right) and me (on the far left) with a group of friends (that's Bill Ackman in the middle) when we went mountain biking in the desert outside of Las Vegas in 2007:

5) Munger had quite a sense of humor – here's one of his funny quips:

Best regards,

Whitney

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