Mungowitz Tells the Tale of the Marxist Stock Investor Who Lost Half His Wealth.

Mungowitz, is Michael Munger, professor at Duke, economist, political scientist, Libertarian gubernatorial candidate, and all around great guy.

I once wrangled him into sitting on a board of an organization I worked with and he was nice enough to even say that he was happy to do it. His blog Kids Prefer Cheese is very good, and he doesn’t take himself too seriously, which is refreshing.

He once took down people for washing out recycled glass containers in a post. He explained how inefficient it was and what a waste of energy. I used the argument against my wife, and she still has not forgiven me for it.

In this recent entry, Munger tells the tale of a colleague, “Mr. Marxist-breath” who was 70, yet had all of his stocks in high risk, high growth companies just as the market went down.  Marxist-breath, of course, got hammered.

Munger says that “Mr. Marxist-breath” for all his bad mouthing of Mr. Market, actually liked the guy too much. Marxist-breath had too much faith in Mr. Market .

Those who know the true nature of Mr. Market, however, never get real cozy with him. They know that Mr. Market changes moods all the time. And that is OK, because one can always short Mr. Market.

(From Kids Prefer Cheese)

“Capitalism is terrible! Look at all the money we lost! It’s unpredictable. How can you defend markets?”

I should have shut up. A nice person would have shut up, and been sympathetic. But that’s not me, is it? So, I said, yes, there are fluctuations, but since you are well over 70, surely you were invested safely, right? I myself was only 50, but I had liquidated all our financial assets and converted everything to cash or very short bonds, in summer of 2007. So I didn’t really lose anything.

He gaped at me. “I lost 50% of my wealth! It’s clearly not my fault, it’s the market that’s messed up!”

Click here for the article.