Munger was full of praise for Lee in the recent Wesco annual meeting.
From a forbes interview:
How would you make Paul Volcker look like a sissy if you regulated Wall Street?Munger: I would economically restrain what investment banks and banks do more than he would. I would separate derivatives from the basic bridges of civilization. We don't want civilization contaminated by extreme speculation. I'd ban all the derivatives trading except for metals and commodities. The new stuff is a marvelous gambling game. It swamps any commercial transactions that are needed. Gambling does not become wonderful just because it pertains to commerce. It's a casino. You shouldn't be able to use $500,000 to do a $5 million trade.
If I were the Lee Kwan Yew (formidable former Singapore leader) I'd make finance far less attractive to go into. I'd raise taxes, maybe put a Tobin (Yale economist) tax on all transactions. If Warren was the benevolent despot of the U.S., these things (derivatives) would have never existed. Warren wrote a letter in 1982 objecting to the creation of the S&P 500 derivative contract. Its message: This is going to do more harm than good. He tried to prevent it from happening. I think he believes civilization would be better if they didn't exist. Still, Warren has great difficulty not buying a mispriced item in the financial market. We bought derivatives even though we didn't believe in their existence.
Is there an example of a prudent decision like the Marshall Plan after WW2?
The George Washington of Singapore, Lee Kuan Yew, decided to marry the smartest girl in his class. Their son is now the PM of Singapore. He was a very practical man. He didn’t want people dying of Malaria so he drained all the swamps and didn’t care if a little fish went extinct. He didn’t like the drug problem and he looked around the world to solve the drug problem. He found the solution in US by copying the US Military’s policy. Any time you can be tested and if you fail you go to jail. If something was going to grow like cancer he would check it hard with the wrath of God. He turned a country with no resources or agriculture into a prosperous country, starting from 0 mph. We need to pay more attention in our country to the Singapore model.
They hate Lee Kuan Yew in liberal arts colleges. They hate that Singapore doesn’t allow free speech. But, time after time he has been successful and even the leaders of China came to Singapore and learned from Lee Kuan Yew. Charlie doesn’t care whether the cat is black or white, as long as it catches mice. In many respects the US is too damn permissive. We don’t step hard enough on things that can grow into trouble. If some of the silly accounting practices had been stopped, then none of this would have happened
On accounting for financial institution
There is Alice in Wonderland and nut case accounting in the US. These people need to be thrown out and people who think more like Lee Kuan Yew need to be installed. Jamie Dimon of JP Morgan is actually complaining about this but he is the only one. Charlie takes his hat off to him but his derivative book needs to go away. He should not run a gambling parlor next to a legitimate business. Actually, in recent years, some of our banks actually bought casinos. “Why run a casino in drag when you can run a real casino?”
On the distorted incentives between banking executives and regulators
There is a huge pay discrepancy between regulators and bankers. What happens when they finish public service and then move into the private sector? Should that be curtailed?
Munger thinks that the revolving door between Wall Street and the US government regulators is a big problem. Lee Kuan Yew of Singapore decided to pay civil servants more to get around this problem. America’s main problem is not corruption-- it is cognitive inadequacy.
On moving to Singapore
Munger spoke very highly of Singapore. A member of the audience asked that given the problems in the US, would he ever move to Singapore?
Munger said he would never leave the US. Singapore could be a good place for someone else. If crime tripled in the US them Singapore could get an influx of rich people from the rest of the world. He doesn’t know what is going to happen but he will still be here (Los Angeles). He loves the US, despite the flaws.
If I were the Lee Kwan Yew (formidable former Singapore leader) I'd make finance far less attractive to go into. I'd raise taxes, maybe put a Tobin (Yale economist) tax on all transactions. If Warren was the benevolent despot of the U.S., these things (derivatives) would have never existed. Warren wrote a letter in 1982 objecting to the creation of the S&P 500 derivative contract. Its message: This is going to do more harm than good. He tried to prevent it from happening. I think he believes civilization would be better if they didn't exist. Still, Warren has great difficulty not buying a mispriced item in the financial market. We bought derivatives even though we didn't believe in their existence.
Excerpt from the Wesco annual meeting notes from The Inoculated Investor blog:
Is there an example of a prudent decision like the Marshall Plan after WW2?
The George Washington of Singapore, Lee Kuan Yew, decided to marry the smartest girl in his class. Their son is now the PM of Singapore. He was a very practical man. He didn’t want people dying of Malaria so he drained all the swamps and didn’t care if a little fish went extinct. He didn’t like the drug problem and he looked around the world to solve the drug problem. He found the solution in US by copying the US Military’s policy. Any time you can be tested and if you fail you go to jail. If something was going to grow like cancer he would check it hard with the wrath of God. He turned a country with no resources or agriculture into a prosperous country, starting from 0 mph. We need to pay more attention in our country to the Singapore model.
They hate Lee Kuan Yew in liberal arts colleges. They hate that Singapore doesn’t allow free speech. But, time after time he has been successful and even the leaders of China came to Singapore and learned from Lee Kuan Yew. Charlie doesn’t care whether the cat is black or white, as long as it catches mice. In many respects the US is too damn permissive. We don’t step hard enough on things that can grow into trouble. If some of the silly accounting practices had been stopped, then none of this would have happened
On accounting for financial institution
There is Alice in Wonderland and nut case accounting in the US. These people need to be thrown out and people who think more like Lee Kuan Yew need to be installed. Jamie Dimon of JP Morgan is actually complaining about this but he is the only one. Charlie takes his hat off to him but his derivative book needs to go away. He should not run a gambling parlor next to a legitimate business. Actually, in recent years, some of our banks actually bought casinos. “Why run a casino in drag when you can run a real casino?”
On the distorted incentives between banking executives and regulators
There is a huge pay discrepancy between regulators and bankers. What happens when they finish public service and then move into the private sector? Should that be curtailed?
Munger thinks that the revolving door between Wall Street and the US government regulators is a big problem. Lee Kuan Yew of Singapore decided to pay civil servants more to get around this problem. America’s main problem is not corruption-- it is cognitive inadequacy.
On moving to Singapore
Munger spoke very highly of Singapore. A member of the audience asked that given the problems in the US, would he ever move to Singapore?
Munger said he would never leave the US. Singapore could be a good place for someone else. If crime tripled in the US them Singapore could get an influx of rich people from the rest of the world. He doesn’t know what is going to happen but he will still be here (Los Angeles). He loves the US, despite the flaws.
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