Berkshire's Charlie Munger issues warning for US commercial property market
Warren Buffett partner cites ‘bad loans’ as culprit
Commercial real estate rates likely to 'skyrocket' for borrowers: Kirsten Jordan
Real estate agent Kirsten Jordan addresses concerns in the commercial property market on 'Cavuto: Coast to Coast.'
Berkshire Hathaway Vice-Chair Charlie Munger said Monday that a storm is brewing in the U.S. commercial property market.
As property prices fall, Munger said American banks are "full of bad loans."
"It’s not nearly as bad as it was in 2008," he told the Financial Times. "But trouble happens to banking just like trouble happens everywhere else."
WARREN BUFFETT CRITICIZES BITCOIN, SAYS IT 'DOESN'T HAVE ANY INTRINSIC VALUE'
"In the good times you get into bad habits. When bad times come they lose too much," the Berkshire Hathaway executive added as the First Republic Bank saga aired on television behind him, the Financial Times reported.
Banking industry must be mindful of 'too big to bail': Jason Katz
UBS managing director and senior portfolio manager Jason Katz discusses what could happen if a big bank fails after JP Morgan acquires First Republic Bank on 'Varney & Co.'
Berkshire Hathaway has supported other troubled U.S. banks, giving $5 billion to Goldman Sachs in 2008 during the economic recession and a similar total to Bank of America in 2011.
BUFFETT'S BERKSHIRE STOCKS UP ON MORE OCCIDENTAL PETROLEUM SHARES
Munger said, "We’ve had some disappointment in banks, too."
"It’s not that damned easy to run a bank intelligently, there are a lot of temptations to do the wrong thing," he continued. "A lot of real estate isn’t so good anymore, and we have a lot of troubled office buildings, a lot of troubled shopping centers. There’s a lot of agony out there."
Warren Buffett (L), CEO of Berkshire Hathaway, and vice chairman Charlie Munger attend the 2019 annual shareholders meeting in Omaha, Nebraska, May 3, 2019. (JOHANNES EISELE/AFP via Getty Images / Getty Images)
Munger also noted that banks were already pulling back from lending to commercial developers.
"Every bank in the country is way tighter on real estate loans today than they were six months ago," he explained. "They all seem to be too much trouble."
WARREN BUFFETT'S OCCIDENTAL END GAME
Munger told the FT that he had made most of his money from just four investments: Berkshire, retailer Costco, his investment in a fund managed by Li Lu’s Himalaya Capital and Afton Properties, a real estate venture that owns apartment buildings in California and New Jersey.
GET FOX BUSINESS ON THE GO BY CLICKING HERE
According to Forbes estimates, Munger’s wealth is $2.4 billion.