Charles Munger at the Berkshire Hathaway annual shareholder meeting in Omaha, Nebraska on April 29, 2022.
David A. Grogan | cnbc
Charlie Munger believes there is trouble ahead for the US commercial property market.
99 year old investor told financial Times That US banks are loaded with “bad loans” that will weaken as “bad times come” and asset prices fall.
“It’s not as bad as it was in 2008,” he told the Financial Times in an interview. “But there are troubles in banking just as there are troubles everywhere.”
Munger’s warning comes as U.S. regulators asked banks to submit their best and final takeover offers for First Republic by Sunday afternoon, the latest in a tumultuous period for mid-sized U.S. banks.
Since the failure of Silicon Valley Bank in March, attention has come to First Republic as the weakest link in the American banking system. The bank’s shares sank 90% last month and then fell even further this week after First Republic revealed how dire its situation was.
Berkshire Hathaway, where Munger serves as vice chairman, has largely been on the sidelines of the crisis despite its history of supporting U.S. banks in times of turmoil. Munger, who is also a longtime investment partner of Warren Buffett, suggested that Berkshire’s restraint is partly due to the risks that could emerge from the banks’ many commercial property loans.
“A lot of real estate isn’t that good anymore,” Munger said. “We have a lot of disturbed office buildings, a lot of disturbed shopping centers, a lot of disturbed other properties. There’s a lot of distress there.”
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