“Crazier than the dot-com boom.“
That was the verdict of the vice chairman of Berkshire Hathaway
Charlie Munger, describing current stock markets and company valuations out of touch with reality, at the Sohn Hearts & Minds Investment conference in Sydney on Friday.
“Some of the valuations we saw in the dot-com boom were higher,” he said, according to The Australian Business Review. “But overall, I consider this as being even crazier than the dot-com boom, which blew up in 2000.”
Specifically, Munger said many U.S. companies were trading 35 times earnings, making it tough for average investors to get a foothold, with valuations the most extreme he’d seen in recent history.
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One stock that is in favor with Berkshire Chairman Warren Buffett’s right hand man is discount retailer Costco
which the 97-year old said he likes over U.S. e-commerce giant Amazon.com
Costco’s business model is centered on its customer memberships, which means those going into the stores are buying its products. “I predict that Costco will eventually become a huge internet player,” he said.
The retailer’s business model also helps it to keep prices lower as it buys in bulk. “We are all lucky to have Costco,” he said. Berkshire owns Amazon, but not Costco.
Munger also singled out one of Berkshire’s holdings, China electric-car group BYD
which he described as “one of the best companies in the world.”
He’s also backing the shift to renewable energy, such as wind and solar. “I love the fact we’re rapidly reducing the burning of coal and the burning of gasoline and diesel…and replacing them with electricity from renewable sources.”
One big dislike that hasn’t changed for Munger is cryptocurrencies, which he believes “should have never been invented.” China made the right decision to ban them, while the U.S. “has made the wrong decision” not to, he said. Bitcoin
was trading below $57,000 in the early hours of Friday, but has nearly doubled this year.