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i frankly think it's a tragedy in america that the small investor has been convinced by the media that they don't have a chance big institutions with all their computers and all their degrees and all their money have all the edges and it just isn't true at all and when they're convinced when this happens when this occurs people act accordingly they when they believe it they buy stocks for a week and they buy options they buy the chile fund this week and next week it's the argentina fund and they get results proportionate to that kind of investing and that's very bothersome i think the public can do extremely well in the stock market on their own i think the fact that institutions dominate the market today is a positive for small investors these institutions push stocks on usual lows they push unusual highs for someone they can sit back and have their own opinion know something about industry this is a positive not enabler the single most important thing to me in the stock market for anyone is to know what you own i'm amazed how many people own stocks they would not be able to tell you why they own it they couldn't say in a minute or less why they only actually you really press them down they'd say the reason i own this is the suckers going up and that's the only reason that's the only reason they own it and if you can't explain i'm serious you can't explain to a 10 year old in two minutes or less why you own a stock you shouldn't own it and that's true i think about 80 percent of people that own stocks i made money in dunkin donuts i can understand it i uh when there was recessions i didn't have to worry about what was happening i could go there and people still there i didn't have to worry about low price grant imports i made 10 or 15 times my money in dunkin donuts those are the kind of stocks i can understand if you don't understand it doesn't work this is the single biggest principle you need an edge to make money too people have incredible edges and they throw them away i'll give you a quick example of smith klein we didn't know what smith blind when tag met first came out a year after came out let's say your spouse your mother your father you're a nurse you're drugged you're writing all these prescriptions tagamet was doing an amazing job of curing ulcers bought it two years after the product was on the market and made five or six times your money i mean all the drugs all the nurses all the people millions of people saw this product and they're out buying oil companies you know we're drilling them it happens and then three years later four years later black so even a bigger company's a huge company british company brought zantac which was a better at that time an improved product and you could have seen that take market share do well you bought blacks don't triple your money so you only need a few stocks in your lifetime you're in your industry i think of people if you've worked in the auto industry let's say you're an auto dealer the last 10 years you would've seen chrysler come up in the minivan you've seen if you're a buick dealer a toyota deal honda dealer you would have seen the chrysler dealership packed with people you could have made 10 times your money on chrysler a year after the minivan came out so if you're a car dealer you only need to buy a few stocks every decade when your lifetime's over you don't need a lot of five baggers to make a lot of money starting with ten thousand dollars or five thousand dollars so when when you see this coming you can say wait a second i can make some money when an industry goes from terrible to mediocre the stock goes north when it goes from mediocre to good the stock goes north and it goes from good to terrific the stock goes there's lots of ways to make money in your own industry you could be a supplier in the industry you'd be a customer this thing thing happens in the paper industry it happens in the steel industry it doesn't happen every week but if you're you're some field you'll see a turn you'll see something in the publishing industry these things come along and it's just my vlog people throw it away another key element is that you have plenty of time people are an unbelievable rush to buy a stock i'll give an example of a well-known company walmart went public in october of 1970 1970 went public already had a great record it had 15 years performance great balance sheet you could have waited 10 years saying you're a very conservative investor you're not sure that walmart can make it you want to check see them operate in small towns you're afraid they can only make it in seven or eight states you want to wait for legal more states you keep waiting you can about walmart 10 years after they went public and made 35 times your money you bought it when they went public you would have made 500 times your money but you can wait 10 years after walmart went public and made uh 30 over 30 times your money you could wait three years after microsoft went public made 10 times if you knew something about software i know nothing about software if you know someone software you would say these guys haven't i don't care who's gonna win compact ibm i don't know who's gonna win japanese computers i know microsoft msdos is the right thing you could buy microsoft you can just watch it you have plenty of time people are in an amazing rush to purchase the security they're out of breath when they call up you don't need to do this study history and history is the important thing you learn from what you learn from history as the market goes down it goes down a lot the math is simple there's been 93 years of central this is easy to do the markets had 50 declines of 10 or more so 50 declines in 93 years but once every two years the market falls 10 we call that a correction all those 50 declines 15 have been 25 or more that's known as a bear market we've had 15 declines in 93 years so every six years the market's gonna have a 25 percent decline that's all you need to know you need to know the market's gonna go down something if you're not ready for that you shouldn't own stocks and it's good when it happens if you like a sock at 14 that goes to six that's great you understand the company you look at the balance sheet they're doing fine you're hoping to get to 22 with it 14 to 22 is terrific 6 to 22 is exceptional so you take advantages they're going to happen no one knows when they're going to happen people tell you about it after fact that they particularly they predicted it 53 times and uh so you can take advantage of the volatility market if you understand what you own i love volatility i think i remember when uh 1972 the market went from uh uh down dramatically and taco bell went from 14 to one they had no debt they never had a restaurant close and i started buying at seven and i kept on to it and it went to one and uh it was the largest position magellan in 1978 was bought out by 42 dollars by pepsi cola i think would have gone to 400 if they could buy it out i think volatility volatility's terrific i think it is very i think these calls are very important i don't think the market going up 80 points one day and down 80 the next uh is a good thing for the public i think that's not a very good thing but i think all these callers and all these other things to keep the volatility down each day is important but the market's going to go up and down well the human nature hasn't changed a lot in 25 000 years and some of them will come out of left field and uh the market will go down or the market will go up so volatility will occur and markets will continue to have these ups and downs i think that's a great opportunity if people can understand what they own basically corporate profits have grown about eight percent a year historically so corporate profits double about every nine years the stock market ought to double about every nine years so go up eight percent a year and and stocks will follow that's all there is to it there's always something to worry about uh if you own stocks there's always something where you can't get away only reason we got out of the depression was world war ii we got another recession in the early 50s he said we're going to go right back into a depression people worried about a depression in the 50s and they worried about nuclear war when oil went from 4 to 40 and it was going to go to 100 and we're gonna have a depression remember that one well about three years later the same experts now higher paid oil is now at ten they said it was going to four and we're going to have a depression and then the japanese were not the japanese we're gonna own the world remember that one and then we're gonna have a depression and then about two years later we're all worried about japan collapse it's unbelievable i mean the ldc debt remember the ldc debt remember that one all these countries all chase had lent their net worth to brazil chile peru and all these countries and all the other countries and ld said they're not going to pay it back and we're going to have a depression always ends and we're going to have a depression or the great depression we have the great depression or the big one the big one's coming so they're always something to worry about and the key organ in your body in the stock market is your stomach it's not the brain it's always gonna be scary it's gonna be always something to worry about you just have to forget all that cut it all out and own good companies our own turnarounds study them and you'll do well stocks will beat the hell out of money markets you can beat the hell out of bonds no group of you think of it every corporations mcdonald's and these great companies marriott you name it they've never got together and said geez you know we're really doing well why don't we raise the coupon in our bonds those bondholders are really loyal no no you know we've been given eight percent why don't we raise it to nine you know uh but companies like automatic data processing maybe payroll's amazing jose company 32 years of higher earnings 32 years of double decision earnings we've had recessions we've had wars changes in congress changes in the supreme court 32 years about burning so and that's what you're relying on johnson johnson 30 years our burns and these are general parts 42 years of operations emerson electric 38 years our friends you don't see companies like this in other parts of the world i'm trying to convince people there is a method there are reasons for stocks that go up uh coca-cola is earning 30 times per share what they did 32 years ago the stock has gone up 30-fold bethlehem steel is earning less than they did 30 years ago the stock is half its price of 30 years ago stocks are not lottery tickets there's a company behind every stock the company does well the stock does well it's not that complicated people get too carried away i was very consistent the market went down when i ran magellan on 13 years the market went down nine times and every time the mark went down the gentleman went down it was nine to nine and uh you know because it's very important it's another one of these numbers you gotta write down if you put a thousand dollars in a stock all you can lose is a thousand i've done that several times and uh but if you're right you can make five thousand ten thousand forty thousand so this business you don't have to be right one out two times you can be right one out of four the times you're right you know the company's doing well you know they're doing a great job and you add to it or at least you don't sell it which is a terrible tragedy you
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