There's no need to fly to Omaha, Neb. to glean investment wisdom L.A. has its very own financial oracle, right here in Pasadena.
Charles T. Munger, vice chairman of Berkshire Hathaway Inc. and chairman of Pasadena-based investment company Wesco Financial Corp., has a following of loyal investors and admirers who travel from far and wide to attend Wesco's annual shareholder meetings.
This year's gathering, held last week at a seafood restaurant in Pasadena, was a smaller version of the annual Berkshire Hathaway meetings in Omaha, where Munger and company Chairman Warren Buffett hold forth for hours on financial questions large and small.
In Omaha, however, the spotlight is mostly on Buffett. In Pasadena, Munger is the star.
"He's brilliant," said Tom Prieto, an accountant from Valencia. "The way he sees the world is what I would like to emulate."
The annual meeting is less an occasion to review Wesco's financial performance than an opportunity to harvest Munger's insights on subjects ranging from child rearing to stock picking.
Of the latter, Munger thinks there are still bargains, but investors will have to work harder to find them.
"The world of easy investing is greatly diminished," said Munger, 73. "The market is now fairly priced. But that is the last thing you want. You want to buy at fortuitous prices."
He had particularly strong views on the current practice of offering corporate executives lavish amounts of stock options, saying: "I think it is a dumb way to incentivize at most companies."
With the exception of a few high-tech firms, where qualified executives are in short supply and require big incentives to stay at their desks, options usually are no better at motivating employees than traditional bonuses, he said. And they can skew a company's financial statements.
Munger recalled the old Carnation Co., where options were never given and executives even had to pay for coffee. "I like companies like that," he said. "The executives got rich, but to do so they had to buy the stocks like everyone else."
The discussion then shifted to more eclectic issues.
He expounded on the virtues of studying algebra (an aid to clear thinking) and plugged a favorite book, "Influence: The Psychology of Persuasion," by Robert B. Cialdini (Quill, 1993).
Beda Fong, president of Fossa Capital Management, traveled from Mountain View in the Silicon Valley in order to hear Munger. But instead of asking for stock tips, Fong sought advice on how best to raise children in a wealthy environment.
Munger, who has eight children from two marriages, admitted that beyond hiding the money (which some of his investors have done), he did not have the solution.
"I've had kids in both moderate and immoderate circumstances, and to be honest, my children that were raised when we had less money have worked harder," he said. "But luckily it's getting harder to get rich, so fewer of you will have to face that problem."
Wesco meetings used to be held in the cafeteria of the company's offices at the CenFed Bank building near Pasadena City Hall. But each year the crowd has gotten bigger, with last week's meeting bringing in roughly twice the number of people seen in 1997.
"Next year they might have to hold it in the Rose Bowl," joked Steven Royce, an attorney from New Mexico. "It has become something like a cult. But it's a friendly cult of making money with integrity."
For reprint and licensing requests for this article, CLICK HERE.
Stories You May Also Be Interested In
- Wesco Shareholders Approve Acquisition By Berkshire
- Buffett’s Final Offer: $385 Per Share for Wesco
- Berkshire Hathaway Buys Rest of Wesco
- The Money Book: Charles Munger
- Wall Street Disregards Munger's Downplaying of Wesco
- 50 Wealthiest: Charles Munger #37
- The 50 Wealthiest Angelenos: Charles Munger - #17