Charlie Munger Says the Current Market is Even Crazier Than Dot-Com Era

The Dot-Come era led to one of the biggest market crashes in history. It also led to the bankruptcies of several heavily invested companies, and almost bankrupted several large companies that are around today. Investors who lived in that era are left with very painful memories from it. All this and more is why it was shocking to see Charlie Munger, who helps run Warren Buffett's Berkshire Hathaway, claim that the market today is even crazier than it was back then. 

He stated that a lot of companies are now trading at 35x earnings and that this makes it hard for investors to actually invest into these companies. On this point, he isn't wrong. A lot of companies are trading at a ridiculous multiple of earnings. To prove his point, Apple is trading at 31x earnings, Microsoft is trading at 37x earnings, Amazon is at 66x earnings, and Tesla is trading at 315x earnings. It is hard to look at this and remember that the average p/e ratio historically has been 10-15x earnings.

Berkshire Hathaway is sitting on around 140 billion dollars worth of cash right now as they have struggled to find what they believe is worthwhile investments in today's market. If the market does crash, they are in an amazing position to deploy their capital at much fairer valuations. 

Charlie Munger, in the same speech, also went after Cryptocurrency which has exploded in popularity over the last two years. Crypto as a whole is worth around 2 and a half trillion dollars right now and Bitcoin makes up almost a whole trillion of that. 

While talking about crypto, Charlie stated, “I wish they’d never been invented, and again I admire the Chinese, I think they made the correct decision, which was to simply ban them. In my country, English-speaking civilization has made the wrong decision, I just can’t stand participating in these insane booms, one way or another.”

Only time will tell if this market will end the way the dot-come era has. There are, of course, great companies out there still with reasonable valuations. There are definitely huge bubbles in the market though. EV companies have been largely criticized as being in a market bubble, and there is arguable a bubble happening with fintech companies as well. 

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