Peter Lynch - Never own a stock if ..

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01. the single 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 don't actually if 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 and 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 and this is the kind of stock people like to own this is the kind of company people adore owning it's a relatively simple company they make a very narrow easy to understand product they make a one megabit sram cmos bipolar risk floating point data io array processor with an optimizing compiler a 16 dual port memory a double diffused metal oxide semiconductor monolithic logic chip for the plasma matrix vacuum fluorescent display it has a 16 bit dual memory it has a unix operating system four whetstone megaflop poly silicone emitter a high bandwidth that's very important six gigahertz double metallization communication protocol and asynchronous backward compatibility peripheral bus architecture four wave interleaved memory a token ring interchange backplane and it does in 15 nanoseconds of capability now if you don't want a piece of crap like that you will never make money never somebody will come along with more wet stones or less wet stones or a bigger mega flop or a smaller megaflop you won't have the farthest idea what's happening and people buy this junk all the time 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 were still there i didn't have to worry about low price korean imports i mean i just didn't know you know i can understand it and you laugh 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 and it bothers me that people are very careful the money the public when they buy a refrigerator they get a consumer reports they buy a microwave oven they do that they ask people what's the best kind of radar range or what kind of car to buy they do research on apartments when they go to when they go on a trip to wyoming they get the mobile travel guide or california when they go to europe they get the michelin travel guide people will hear a tip on the bus on some stock and they'll put half their life savings in it before sunset and they wonder why they lose money in the stock market and when they lose money they blame it on the institutions and program training that is garbage they didn't do any research they put a piece of junk they didn't look at the balance sheet and that's what you get for it and that's what we're being driven to and it's self-fulfilling the public does terrible investing and they say they don't have a chance it's because that's the way there's that's the way they're acting i'm trying to convince people there is a method there are reasons for stocks that go up uh coca-cola this is very magic it's a very magic number easy to remember 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 if a company does well the stock does well it's not that complicated people get too carried away and first of all they try and predict the stock market that is a total waste of time no one can predict the stock market they try to predict interest rates i mean this is a if anyone predict interest rates right three times in a row they'd be a billionaire concern there's not that many billionaires on the planet it's very you know i took i had logic so i had a syllogism and uh studied these when i was at boston college they can't be that many people who can bring interest rates because there'd be lots of billionaires and no one can predict the economy right a lot of people this room were around in 1981 and 82 when we had a 20 prime rate with double digit inflation double digit unemployment i don't remember anybody telling me in 1981 about it i didn't read i studied all stuff i remember every time we got the worst recession since the depression so what i'm trying to tell you it'd be very useful to know what the stock market is going to do it'd be terrific to know that the dow jones average year for now would be x then we're going to have a full scale recession our interest rate is going to be 12 that's useful stuff you never know it though you just don't get to learn it so i've always said if you spend 14 minutes a year in economics you've wasted 12 minutes and i i really believe that