Charles Munger, who became a billionaire while helping Warren Buffett build Berkshire Hathaway Inc., predicted it's going to get tougher for consumers to maintain their standard of living in coming decades.
"We should all be prepared for adjusting to a world that is harder," Munger, 91, said Wednesday at an event in Los Angeles. "You can count on the purchasing power of money to go down over time. And you can almost count that you'll have more trouble in the next 50 years than the last."
The cost of living in the U.S. excluding food and fuel rose more than forecast in February, climbing 1.7 percent from a year earlier. The Federal Reserve's preferred measure of inflation expectations - the five-year, five-year forward break-even rate - now projects consumer prices will increase at a 1.91 percent rate starting in 2020. That's up from 1.75 percent Jan. 30.
Munger spoke at the annual meeting for Daily Journal Corp., a Los Angeles-based newspaper publisher where he serves as chairman. Recalling an era when he paid 5 cents for a cup of coffee, he said the declining value of money in past decades didn't turn out to be as severe as he had anticipated. Addressing people who were unhappy with what happened, he said: "It's very likely to get worse."
Earlier Wednesday, Buffett announced that Pittsburgh-based H.J. Heinz, which is jointly owned by Berkshire and 3G Capital, was taking over Kraft Foods Group Inc. in his latest bet on grocery staples. 3G, cofounded by the Brazilian billionaire Jorge Paulo Lemann, runs operations at Heinz, which has cut thousands of jobs in the last two years.
"What's interesting about 3G is that they're teaching us something about reality," Munger said. "3G has - through enormous discipline, enormous will, and enormous intelligence - they have adopted a zero-based budgeting system that's more extreme than anybody else's."
Munger has built a persona on criticizing those he believes are financially reckless, whether citizens who shun hard work and tax obligations, or bankers who make risky bets. In 2010, speaking at the University of Michigan, he told students that people in financial distress should "suck it in and cope."
Wednesday he criticized politicians who rely on revenue from casinos or lotteries to balance their budgets. And he faulted some Wall Street practices.
"What do you think a derivatives trading desk is? It's a casino in drag," he said. "They make the witch doctors look good."
Munger's partnership with Buffett has been one of the most enduring and profitable in business history. In a February report reflecting on Berkshire's last 50 years and its future, Buffett said Munger helped his investment process evolve.
"The blueprint he gave me was simple," Buffett wrote. "Forget what you know about buying fair businesses at wonderful prices; instead, buy wonderful businesses at fair prices."
Munger was also responsible for persuading Buffett to purchase See's Candies, a California chocolate-maker, in 1972. The company has earned $1.9 billion since then, much of which Buffett was able to spend on other businesses.