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February 25, 2021

25.02.2021-"Another opinion – is there a bubble in the stock market?"

25.02.2021-
As if responding to an article by Ray Dalio, another well-known investor spoke out on the same issue (see Charlie Munger warns of market 'frenzy'; frowns on gambling mentality, bitcoin, SPACs – https://www.reuters.com/article/us-dailyjournal-munger/charlie-munger-warns-of-market-frenzy-frowns-on-gambling-mentality-bitcoin-spacs-idUSKBN2AO2GY).

Charlie Munger, a longtime business partner of Warren Buffett, warned that the market is showing signs of a bubble, reflecting a "dangerous" mentality among a certain category of investors to gamble on stocks as if they were horses at a horse race. He notes that crowds of such investors "in a frenzy" buy shares, often on credit, just because they are growing, and calls this a very dangerous way of investing.

When asked if the current market resembles a dot-com bubble, Charlie Munger answered in the affirmative, expressing confidence that everything will end badly, but he does not know when.

Mr Munger also urged investors not to buy gold or bitcoin, pointing out that the latter is too volatile to become a global means of payment.

In the end, he spoke with disdain about the growing demand for SPAC, which raises money from investors in order to further merge with private companies and bring them to the public markets. Such speculations with companies that have not even been found yet are signs of an irritating bubble, and investment banks will continue to sell bullshit (in the original, a rougher word) while it is being sold.


Author: Atrani Capital Investment Director Igor Rotor.

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