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Since the last market crash in 2008, the stock market has been booming. The next decade we may not see the same returns, Charlie Munger certainly doesn't think so. Let's dig deeper into his stock market predictions for the next decade (2021-2031).

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One of the things that we all know about Charlie Munger is he’s not afraid to express his opinion. If he has something on his mind, something that he wants to tell you, he won’t mince words, he’ll say it upfront… So he got asked recently what his thoughts were on the stock market returns over the next decade. Here’s what he said…

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Ok, I want to try and explain that for those who don’t fully understand what he’s talking about. The first thing that he mentions is the fact that everyone’s looking to invest in the stock market…

What’s happened over the past decade in stocks we’ve seen unprecedented growth. Since the end of the last market crash 11 years ago, the stock market is up over 400%. Aka over 5 times in price…

Now what this does is it makes everyone flock into the market. What you put your money in a decade ago and now you have 5 times the amount? I want to do the same. And then what happens is you get the cook, the cleaner, the sports coach, they all want to put their money in the stock market and prices get higher and higher.

It’s kind of similar as to what was going on in the 1920’s in the stock market. So the 1920’s was known as the roaring 20’s. Back then the Ford Model T’s were being sold, the economy was firing and everyone wanted to invest…

And they made a lot of money with this, that was until 1929 came along. The market was clearly overpriced, people realized they didn’t understand their investments and it crashed. It only recovered 30 years later in 1959…


And that’s the thing, a lot of people who are currently in the stock market, don’t know a thing about market history, about previous lost decades in the market, or anything like that. All they see is their neighbors and friends getting rich through investing, so they want to join in on the party.

But as Munger thinks there’s only so long, that the party can go on. As much as we would like to believe, you can’t just keep making infinite returns in the market, eventually things have to simmer down. And if you look at history you will see that. You will see periods where the market went boom. And you’ll see periods just like from 1929 to 1959 where the market went no where…

The other thing I don’t know if you picked it up, was that Munger said “I think the returns will go down. Real Returns will be lower”.

So why did he specifically point out real returns? In-fact what I should probably ask you first is do you know what real returns are? Real return is what is earned on an investment after accounting for taxes and inflation. Real returns are lower than nominal returns, which do not subtract taxes and inflation.

So Munger has put a specific focus in that inflation and or taxes are probably going to be higher over the next decade.

Let’s start by looking at taxes…Unless you’ve been living under a rock, I’m sure you guys know we have a new president in 2021. His name is Joe Biden who has taken over from Donald Trump.

Now Trump was not a big fan of the old taxes. In-fact one of the major moves that he made when he came to power was to majorly cut taxes. Especially the corporate tax rate which he lowered from 35% to 15%... Biden is going to be doing the opposite, raising taxes, particularly on the wealthy, on corporations and and on estates aka higher taxes for investors and businesses…

So that’s something that we’re going to have to watch out for over the next decade, higher taxes. But arguably even more important than this is inflation…

For those who don’t know inflation is simply the rise in the prices of goods and services. For example did you grandma ever tell you of how she used to buy a loaf of bread for 10 cents and now it’s a rip off it’s $3. Why’s that the case, it’s inflation. The increase of prices…


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