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they have nordictracks but they won't they will not catch these people if they whisper in the phone and these are always these long shots you know these are stocks that are going to uh grow hair and uh make your kid have better spelling and your breasts can improve and you won't have to iron your pants you know it's one of those stocks and they always do everything for you but they're missing they don't have any sales yet you know that's the missing element of the story the story is sensational there's no prophecy no sales yet but my god if this works if this works it's going to be the next zero auction and uh and it's going to help burn space and everything it's a very very good deal now this is not a long shot this is a no shot you have to separate these out i've tried 30 of these i have never broken even on a long shot never i've made 25 30 times my money in some stocks i never thought about sallie mae or mbia or fannie mae or some of the banks or stop and shop i'd make 20 tons of money 30 times money i had no idea i thought the stocks are going north i had no idea you look back 10 years later you say my god i made a lot of money in this thing but once i went into thinking i could make four times my money i've never broken even so don't do the long shot guys they don't work the they simply don't work uh and again if a stock's three and it has huge potential write down the story take the stock symbol if it's going to 300 it's okay to buy it at 15.
check in later check a year later see if it's still listed you can still get a quote on it see if they sell the orange yet but if it's going write the story down some of these work i haven't heard yet but maybe they will work but it's worth tuning in six months later don't buy it then it's uh importance of management uh management's the single most important thing in a company but for an outsider to know great management versus good management for terrific management versus average management tough to do tough to do because you only get an hour at people sometimes a half an hour and uh how do you know what decisions they didn't make a lot of great companies have been made because the company didn't make an acquisition they didn't get rid of the division they don't want the report we didn't get rid of the tubing division you know you don't hear about that somebody said made a brilliant decision we're going to hold on to that thing we're going to fix it and it's doing great now they might be doing great because some management eight years ago did it right or some did something right five years ago that person isn't there anymore or they didn't make any acquisitions or they expanded at the right time so knowing what management what they can add to it's the single most important thing very hard to measure i've always said i like to accompany any fool can run because eventually one will and you really want to do that when i bought toys r us they had the formula right any four people in this room and me could have run toys r us we wouldn't done as well as they did they're spectacular but for the next 15 years we had no competition we had a great formula we could enroll with it they probably would have done three times as good they were the frosting on the cake but they had the form they're right no competition the department stores know what they're doing there's no copycats and they were going to just roll the next 25 years same with circuit city so i want the story to be solid if management can add anything on top of it that's great i want to buy the story assume management leaves the next day and they're replaced by the next generation that's fine with me if manager can add something to it that's great i'm not going to buy it because people say they have great management because you'll notice great management is always attached to stock's been up the last eight years ever notice that because i looked at reynolds medals i used to follow reynolds minnows the stock has had the same person runner for like 30 years when this aluminum was tight they say rounds metals has great management aluminum going over supplies these people are idiots then aluminum get tight they say these people are terrific i mean it all to do with the price of aluminum and they keep rating the management by how the stock's doing it's very hard to measure management it'd be wonderful to do if you could spend months with them really see them in action then you know but you don't really get that chance be flexible people have all these biases all these prejudices they want to buy high growth industries they won't buy financial companies they won't buy savings and loans they won't buy uh companies that start with a letter r i mean you know there's all these rules they all hurt you there are great stocks everywhere stocks that are near bankruptcy stocks in bankruptcies stocks about to go on bankruptcy there are companies on the new high lists that are attracted this comes a new low list they're all over the place they're in growth industries non-growth industries don't cut yourself off to one segment people have way too many prejudices too many biases and i always thought of it i don't know women in the audience see this many times but i always thought these buy lists at some institutions we don't have this the fidelity they was biased i think k-mart got on on some of these companies buy this three years ago you know with the microsoft may get on it about 12 years from now but they they have these buy lists and i always thought the buy list is uh you know you buy a new shirt you ever look in the pocket and you get inspected by six or inspected by eight you ever see those numbers i mean i always wondered about that i always think of those buy lists at those institutions i see that inspected by six and inspected by eight in fact i'm absolutely somebody call me i could do any time of day has anybody ever got a shirt inspected by one i mean do they retire these numbers they have a meeting i've never had assurance but by one or by two i think they must put the they raise their numbers in a meeting up to the rafters but i always think every time i get that number in the shirt i think of these people working off the buy list of rapidly growing companies only they have unit growth rate of x or 6x or whatever numbers it doesn't work uh the another thing about it is is math and the kind of math you need to do this i don't use a computer i don't have a computer uh i really was doing great math i was i remember seven times seven was 41 and nine times nine is 81 and you know 12 times 12 i think it was 144 so it was some big number i got that one down cold i said this is great i love this stuff and the barge left st louis going at eight miles an hour and the train left pittsburgh and huh this stuff is easy i remember one day i think it was in ninth grade it was a grim day somebody introduced cosign that day i mean remember cosine i mean is it has anybody used cosine the last couple years i mean yeah let's have a show hands how many of you have used cosine in the last six months but i remember tangent and cotangent why would you want to have a tangent then where the area under the curve i mean remember that crazy your calculus area under the curve i mean what the hell would you want to measure on the curve for you know the uh that is such garbage you know you don't need this for the stock market if you can measure if you can add eight and eight and get fairly close to 16 that's all you need you know you say 400 million in debt no equity no cash losing money forget it you know they get 300 million in cash no debt 200 million in net worth they're losing 10 million a quarter but they'll be around that's all you need you have to get that's all you need that does is not that hard if you made through fifth grade math you can handle this stuff and i had a roommate in the army and uh it uh it's a story i always remember he was talking about he went to this very good school in uh in the south that i won't tell you the name of it but it's in atlanta and rhymes with roger wreck the uh and they had this uh my hero uh at this school uh was a very good football player this is this is my friend my roommate tell me the story about this guy as a freshman this great school and he'd go the line of scrimmage and they changed the play he couldn't figure this out you know i don't know if you realize how complicated football is half the plays are changed the line of scrimmage is about 300 plays you go there i think it's a run to the right it turns out it's a screen pass to the left or it's a draw it's all the blocking assignments have changed all the passing's different you can do you have to instantly think oh new play what do i do in this new play just like that and do it he could not handle these deals just give me the ball i'll tote it and he'd go for about eight yards he was really good at this now this is not why he's my hero the reason my hero in a classroom about this size is freshman year he asked the question does x always equal seven now he he never made it to the second semester he never he never made it to the varsity he never made the nfl because he that damn x he never could figure out x you know the uh now i always thought if you win they could they could resolve with hell x evil you know they could say give us 247 and a quarter you know they just finally resolve what x was we could save all this time and do something useful you know you don't need it in the stock market okay now we'll get to the important stuff there's always something to worry about this is the difference this is what happens in the stock market because see everybody's got the brain power to do well in stock market question is where they have the stomach for it that's the key organ in the body there's always something to worry about i grew up i went to school grew up with a kid in the 50s in the decade of the 50s there's this big theory that the depression was caused by stock market crash totally wrong less than one percent of americans owned stocks in 29 we had this big time recession in fact it was a depression that's what it wasn't caused by the stock market with the economy went down the federal reserve raised interest rates and we had a big-time depression in fact we had several depressions like that from 1850 on we had this is only one of about eight depression since 1850 but people in the people thought the only reason we got the depression was world war ii and they said once we get back next time every session we're gonna have a depression and it's gonna be a great depression i never understood that adjective in front of depression you might be crummy depression or bad depression but it was a great depression i never quite quite understood that one the uh so people weren't buying stuck in the 50s because they thought that another great depression is going to happen in addition people were very scared about nuclear warheads and nuclear war in the 50s people building fallout shelters stocking canned goods there's something about going to vermont building a fall shelter putting canned goods in it that you don't buy minnesota mining or you don't buy useful god i may just the syllogism just doesn't work out that you buying uh lots of water buying a shotgun buying frozen food that will stay in the freezer with your own generator and you're looking at growth stocks doesn't seem to work out that way you know and i remember in the 50s i mean i remember literally in classes i was in elementary school in the 50s and they'd come in that have one of these airaid drills somebody yell a hat and come on they blow a whistle and you get under your desk even then i says i don't think this can do a lot of good you know yeah but people were worried about a depression in nuclear war in the 50s and then i mean the warheads they couldn't do much damage back in the 50s now one of these stan countries you know these kakistan and zakistan all these stan guys that have spun off these these freeman billing spin-offs from them so doing the uh the uh they didn't lead it was a co-deal with somebody else saying goldman sachs they're on the left side of them the uh uh every one of these little countries has enough warheads to blow the world up 88 times right who's built a fallout shelter you know we stopped worrying about it i mean there's always something to worry about in the 50s it was depression and nuclear war the 50s was the best decade this century the stock market except for the 80s only slightly better these are only slightly better people they expect a lot we don't okay it wasn't a great uh decade they just didn't expect much we made it through and uh stock market was terrific uh do you remember when oil went from four to forty remember that period oil went from four to forty and the export said it was gonna go to 100 and all the countries of the world gonna go bankrupt and then and the big banks go bankrupt and we're gonna have a great depression and the stock markets go down and you're going to wind up selling pencils and apples you know the uh well i'm going to oil went from 4 to 40 and the experts said it was going to go 100.
within 2 years oil was at 14 the experts now much higher paid at this point are saying it's going to go to 4 and we have a depression and people believe it again you know the uh i remember when the money supply was going too fast they said we're gonna have a depression that was going too slow we have a depression remember the ldc debt remember the ldc did all the banks our banks are very smart they lend all their net worth to zimbabwe and botswana and bova salah and all these countries chile a lot of countries they can't pronounce this is chase manhattan and chemical it manufactures hanover these countries weren't doing so well then they were called undeveloped countries or less developed countries now you have to call them emerging countries it's not politically correct to call anybody an undeveloped country it's like i just found out the other day that the term for somebody that's overweight is laterally challenged you have to say i was laterally challenged yeah but these are ldc debt they're all going to go bankrupt and we're going to have a depression uh then the mideast was going on the world around that one the middle east around the world they weren't going to buy our bonds and market crashing would have depression then japan was going to work man that one japan was kept all the assets and they weren't gonna buy our bonds and we're gonna have depression within three years the nikai dial had gone from forty thousand to sixteen thousand the banking system was in trouble and people said japan was going to collapse and we're gonna have a depression i mean people on their prayer list the other day they eliminate crippled children mother teresa they're praying for japan i mean you know it's a country with a 15 savings rate you know it's some bizarre you know commercial real estate global warming uh you know and i think it's the older you get the more nervous you get about these things i think it's very valuable i think while younger people are better investors is they're not worried they haven't heard about all these crises and they're with children i think if you don't have any kids you ought to rent some kids for the weekend get a seven-year-old and ask him if he knows about the money supply you know how fast he's grown asking he knows about the shape of the yield curve is the wrong shape of the yield curve or that we're 48.3 months into the economic recovery and the average recovery is less 52.3 bugs you know ask an eight-year-old if they know about that eight-year-olds have a very high expectation about the next 20 years that's what you need to do the more you get away from eight year olds the more you wait for 11 goals the more you start reading these crazy things you read over the weekend the uh in fact from 1955 to 1985 the stock market uh went up a grand total of a thousand points but it was down 800 on mondays so it's down it was there for up 1800 on non-mondays it wasn't an accident the stock market went down october the 19th 87 was a monday people of the weekend become economists and portfolio strategists
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