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Derivative trading with mark-to-market accounting degenerates into mark-to-model. Two firms make a big derivative trade and the accountants on both sides show a large profit from the same trade.

Charlie Munger

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Charlie Munger
Age: 100
Born: 1924
Born: January 1
Business Person
Financier
Investor
Lawyer
Omaha
Nebraska
Charlie Thomas Munger
Charles T. Munger
Charles Thomas Munger
Large
Accounting
Trade
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Firm
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Model
Derivative
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Derivatives
Two
Models
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Mark
Degenerates

More quotes by Charlie Munger

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How should the best parts of psychology and economics interrelate in an enlightened economist's mind?... I think that these behavioral economics...or economists are probably the ones that are bending them in the correct direction. I don't think it's going to be that hard to bend economics a little to accommodate what's right in psychology.
Charlie Munger
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One of the first big bubbles, of course, was the huge and horrible South Sea Bubble in England. And the aftermath was interesting. Many of you probably don't remember what happened after the South Sea Bubble, which caused an enormous financial contraction, and a lot of pain. They banned publicly traded stock in England for decades.
Charlie Munger
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If you can get good at destroying your own wrong ideas, that is a great gift.
Charlie Munger
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The more hard lessons you can learn vicariously rather than through your own hard experience, the better.
Charlie Munger
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Missing out on some opportunity never bothers us. What's wrong with someone getting a little richer than you? It's crazy to worry about this.
Charlie Munger
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I like people admitting they were complete stupid horses' asses. I know I'll perform better if I rub my nose in my mistakes. This is a wonderful trick to learn.
Charlie Munger
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There are two kinds of businesses: The first earns 12%, and you can take it out at the end of the year. The second earns 12%, but all the excess cash must be reinvested - there's never any cash. It reminds me of the guy who looks at all of his equipment and says, 'There's all of my profit.' We hate that kind of business.
Charlie Munger
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As I continued through Cicero's pages, I found much more material celebrating my way of life.
Charlie Munger
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Go to bed smarter than when you woke up.
Charlie Munger
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We tend to buy things - a lot of things - where we don't know exactly what will happen, but the outcome will be decent.
Charlie Munger
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You must value the business in order to value the stock.
Charlie Munger
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Your life must focus on the maximization of objectivity.
Charlie Munger
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The liabilities are always 100 percent good. It's the assets you have to worry about.
Charlie Munger
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The cost of being a publicly traded stock has gone way, way up. It doesn't make sense for a little company to be public anymore. A lot of little companies are going private to be rid of these burdensome requirements.
Charlie Munger
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I bet Richard Fuld doesn't have an ounce of contrition. It's just megalomania. When it's like that, you need rules to prevent catastrophe. When banks are borrowing the government's credit rating, you need rules to prevent stupid things.
Charlie Munger
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Kellogg's and Campbell's moats have also shrunk due to the increased buying power of supermarkets and companies like Wal-Mart. The muscle power of Wal-Mart and Costco has increased dramatically.
Charlie Munger
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Tthe first rule is that you can't really know anything if you just remember isolated facts and try and bang 'em back. If the facts don't hang together on a latticework of theory, you don't have them in a usable form.... You may have noticed students who just try to remember and pound back what is remembered. Well, they fail in school and in life.
Charlie Munger
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Move only when you have an advantage. It's very basic. You have to understand the odds and have the discipline to bet only when the odds are in your favor.
Charlie Munger
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It's natural that you'd have more brains going into money management. There are so many huge incomes in money management and investment banking - it's like ants to sugar. There are huge incentives for a man to take up money management as opposed to, say, physics, and it's a lot easier.
Charlie Munger
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It's not the bad ideas that do you in, but the good ones.
Charlie Munger