Munger on Wall Street: Easy Money Corrupts

Right in step with my post on Market Outlook Part 1: Rise of the Speculative Movement, Charlie Munger points out how the “easy money” on Wall Street enabled “regrettable behavior” as it drove speculative activity. Truly, when “idiots and naives were making a fortune”, one has to question their means. As I point out in Market Outlook Part 2: The End of the Speculative Movement and Market Outlook Part 3: How To Be Successful Post the Speculative Movement, with the “easy money” days behind us, investors are going to have to get back to doing the hard work required to understand the true, economic profitability of companies – a task for which New Constructs has developed particular skill and proprietary technology.

“Lord Acton had this law that you all taught: that power corrupts, and absolute power tends to corrupt absolutely. The Munger version of that is “easy money corrupts, and really easy money tends to corrupt absolutely.” And I don’t think it was good for Wall Street that they had this absolute torrent of really easy money when idiots and naives were making a fortune selling shoddy mortgages with ridiculous theories. It was very regrettable behavior. And it was the easy money that allowed it.

The link to the story that has the quote above is here.

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