According to his business associate, Warren Buffett’s choice to spend billions of dollars in Japan was “a no-brainer” and seemed to be a gift from God.In an interview with the Acquired podcast that was published this week, Charlie Munger, Berkshire Hathaway (BRKA) vice chair and lifelong protégé of Warren Buffett, stated, “It was awfully easy money.””It seemed as though God had opened a chest and filled it with wealth.”During the summer of 2020, Berkshire said that it had acquired around 5% of the shares in each of the top five trading companies in Japan. The American industrial and insurance conglomerate told shareholders it could hold and grow the size of those interests over time, but at the time it had spent a total of $6.7 billion.

As Japan’s stock markets surged to 33-year highs this year, Berkshire revealed that it had actually doubled down, increasing its average holding in each business to more than 8.5%. With its recent announcement that it may potentially increase its interests in each company to 9.9%, the US behemoth still has opportunity to grow.This year, the Nikkei and Topix indexes in Japan have both increased by more than 20%.In Japan, the companies supported by Berkshire are referred to as “sogo shosha,” or general trade corporations, and include Itochu, Marubeni, Mitsubishi Corporation, Mitsui & Co., and Sumitomo. They are essential to the nation’s economy since they work in a variety of sectors, such as manufacturing, energy, and technology.Munger called the investing opportunity an exceptional chance to invest in very liquid, highly stable assets with minimal risk. The 99-year-old remarked, “Something like that—if you’re as smart as Warren Buffett, maybe two, three times a century, you had an idea like that.”

The CEO clarified that Japan’s historically low borrowing rates allowed Berkshire to pull off its largest wager outside of the US. According to him, this implied that the company might obtain low-cost loans for up to ten years ahead of time and utilize the money to purchase 5% dividend-paying equities.”You could borrow [easily] because these trading companies were really established, old companies with all these cheap copper mines and rubber plantations,” Munger continued.

He said that because of Berkshire’s excellent credit rating, it was in a unique position to borrow money at a cheap interest rate. He claimed that other businesses “couldn’t get it.” However, Berkshire’s credit allowed it to. You had to be extremely patient and only work on small portions at a time in order to obtain it. It took an eternity.

As of right now, Munger claims the conglomerate has invested at least $10 billion.The third-largest economy in the world is seeing increased optimism due to Buffett’s decision to invest in Japan. The renowned investor has already praised “the future of Japan,” drawing additional attention to the nation from other international supporters.

A ‘miracle’ investment

Munger discussed investments made in other parts of Asia in his extensive conversation.He hypothesized that BYD, the Chinese electric vehicle manufacturer that is in direct competition with Tesla (TSLA) and counts Berkshire as a longtime investor, is a “miracle.”

“However, that guy has an extremely high IQ and works 70 hours a week.” In an apparent allusion to Wang Chuanfu, the billionaire founder and chairman of BYD, Munger stated, “He can do things you can’t do.”

Munger said that he had lost money on an investment in South Korea’s Hyundai Motor and stated that he was not a fan of trying to select winners in the industry outside of “one or two” manufacturers that have excelled in the production of electric automobiles.Apart from the industry leaders, He then on, “I just don’t even look at the auto industry.”

TSMCRegarding Taiwanese chipmaker TSMC (TSM), Munger reiterated Berkshire’s stance, stating that he would rather have “something with a real consistent brand of its own, like Apple.” One of Berkshire’s largest holdings, with a market value of $177.6 billion as of the second quarter, has long been the iPhone manufacturer.In a rare turnaround, Berkshire announced earlier this year that it had sold off its entire position in TSMC as the “Oracle of Omaha” voiced concerns about the company’s home base of Taiwan and geopolitical issues. The massive semiconductor company is revered as a national treasure in Taiwan, and its existence is thought to provide the West great motivation to protect the island from any forceful Chinese attempts to seize it.Munger praised the Chinese economy despite its current problems, stating that it “has better future prospects for the next 20 years than almost any other big economy.” China is the second largest economy in the world.

Leading businesses in China are “stronger and better” than those in practically every other country, he continued, and they are also “available at a much lower price.” “Therefore, I am naturally open to a certain amount of China risk in the Munger portfolio.”However, Munger stated that the days of discovering simple chances had passed when examining the investment landscape in a broader context. “There was a lot of low-hanging fruit” in the early going for Berkshire’s operations, he said.”At this time, there are no easy or low-hanging fruit for you to pick.”

Leave a Reply

Your email address will not be published. Required fields are marked *