저자: PeterLynch · 외국인
요약 보기
영상은 Peter Lynch의 투자 원칙을 소개한다. 개인투자자가 기관보다 불리하지 않으며, 본인이 보유 종목을 어린이에게도 2분 내 설명할 수 있어야 한다고 강조한다. 경기·금리 예측은 무의미하고 시장 하락(10% 조정 약 2년마다, 25% 약판 6년마다)은 불가피하므로 기업 펀더멘털 이해가 중요하다. 생활 속 소비 경험(Dunkin Donuts, Tagamet, Chrysler 미니밴 등)에서 종목 기회를 찾을 수 있다고 설명한다. 자막 말미에는 채널 홍보와 교육 목적 고지가 포함된다.
다듬은 글
I'm going to try and, say some words on the things I've used over the years. When I was, amateur, when I ran Magellan. I still use today. I think they make sense. I think they make a lot of sense for investors. And, I frankly think it's a tragedy in America that the small investor has been convinced by the media, the print media, the radio, the television media that they don't have a chance if they don't, the 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 and they buy the belief on this week and next week it's Argentina funded and they get results proportionate to that kind of investing. And that's very bothersome.
I think the public can do extremely well on 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 unusual lows. They push for unusual highs for someone. They can sit back and have their own opinion and know something about the industry.
This is a positive. It's not a negative. So that's what I want to talk about. So, if this content helps you, like the video, subscribe, and turn on notifications so you don't miss what's next. And let us know in the comments which company or topic you'd like us to cover. Your support helps us reach more people who want to understand the markets and invest with confidence.
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And the single single most important thing to me and 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 actually, if you really pressed them down, they'd say, the reason I own this is the sucker's going up.
I mean, 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 ten 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% of people can own stocks. And this is the kind of stock people like to own.
This is the kind of company people adore. Owning is a relatively simple company. And they make a, a very, narrow, easy to understand product. They make a one megabit s ram, CMOs, bipolar risk, floating point data, IO array processor, 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 memory. It has a Unix operating system for Whetstone Mega flop poly silicon emitter a high bandwidth that's very important. Six gigahertz double metalization communication protocol and asynchronous backward compatibility. Peripheral bus architecture for wave interleave memory, a token ring, a change backplane, and it does in 15 nanoseconds a capability.
Now, if you own a piece of crap like that, you will never make money. Never. Somebody will come along with more whetstone. So less wet stones, or a bigger mega flop, or a smaller mega flop. You won't have the foggiest idea what's happened. And people buy this junk all the time. I made money in Dunkin Donuts.
I can understand it. I 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 kind out, 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, I get a mobile travel guide or California. When they go to Europe, they get the Michelin travel guide. People will hear a tip on a 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 in program trading. That is garbage. They didn't do any research. I bought 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 were 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 they 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. Coca Cola, this is very magic. It's a very magic number. If you remember, Coca-Cola is earning 30 times per share. What they did 32 years ago. The stock has gone up 30 fold.
That's why I'm still 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 as 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 it. If anyone predict interest rates, write three times in a row. They'd be a billionaire. It's certainly there's not that many billionaires on the planet. It's very you know, I took AI logic, so I had a syllogism in the study of these when I was at Boston College.
There can't be that many people can take interest rates, because I would be lots of billionaires and no one could predict the economy. I mean, a lot of people in this room 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 don't read, I study if I remember every time we get to 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's going to do. It'd be terrific to know that the Dow Jones Average a year from now would be X. So we're gonna have a full scale recession.
Our interest rate is going to be 12%. That's useful stuff. You never know what the 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 this. Now I have to be I be fair. I'm talking in economics, in the broad scale, predicting the downturn for next year or the upturn or M1 and M2 or three B and all these, all these M's, the I'm talking about economics to me is when you talk about scrap prices, when I own a lot of stocks, I want to know what's happening.
Used car prices, when used car prices are going up. It's a very good indicator. When I want hotel stocks, I want a hotel occupancy. When I want chemical stocks, I know what's half the price of ethylene. These are facts. If alumina inventories go down five straight months, that's relevant. I can deal with that.
Home affordability I want to know about when I own, Fannie Mae or I own a housing stock. These are facts. You can do economic facts, and these economic predictions and economic predictions are a total waste. And, interest rates. Alan Greenspan is a very honest guy. He would tell you that he can't predict interest rates.
He can tell what short rates I'm going to do the next six months. Try and stick them on what the long term rate will be three years from now. They'll say, I don't have any idea. So how are you the investor supposed to take interest rates? If they had a Federal Reserve can't do it. So I think that's, But you should study history and history.
The important thing you learn from what you learn from history is the market goes down. It goes down a lot. The math is simple. There's been 93 years a century. 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.
That means that's a euphemism for losing a lot of money rapidly. We followed a correction and, so 50 declines in 93 years, about once every two years, the market falls 10% of 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% decline.
That's all you need to know. You need to know the market's going to go down sometime. If you're not ready for that. You should own stocks. And it's good when it happens. If you like a stock at 14 it goes to six. That's great. You understand the company. You look at the balance sheet. They're doing fine.
And you're hoping to get to 22 with it. 14 to 22 is terrific. Six. The 22 is exceptional. So you take advantage of these declines. They're going to happen. No one knows when they're going to happen. It would be very people tell you about it after the fact that they predicted it. But they predicted it 53 times.
And so you can take advantage of the volatility market if you understand what your own. So I think that's the key element. Another key element is that you have plenty of time. People are an unbelievable rush to buy a stock. I'll give you 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 ten years and you're very conservative. You're not sure as Walmart can make it. You want to check? You see them operate in small towns you're afraid they can only make in 7 or 8 states.
You want to wait till they go to more states. You keep waiting. You can buy Walmart. Ten years after they went public and made 35 times your money. If you bought it when they went public, you would have made 5 or 10 money. But you're you to wait. Ten years after Walmart went public and made, 30 over 30 times your money.
You could wait three years after Microsoft went public. You make ten times your money if you knew something about software. I know nothing about software. If you just have a software, you would said, these guys have it. I don't care who's going to win Compaq, IBM. I know who's going to win Japanese computers.
I know Microsoft mS-DOS is the right thing. You could have bought Microsoft. Again, I'm repeating myself. Stocks are not a lottery ticket. There's a company behind every stock and you can just watch it. You have plenty of time. People are an amazing rush to purchase a security. They're out of breath when they call up.
You don't need to do this. It's a the you need an edge to make money to. People have incredible edges and they throw them away. I'll give you a quick example of, SmithKline. This is a stock that had tagamet. Now, you didn't have to buy SmithKline when Tagamet was doing clinical trials. You didn't have to buy SmithKline when Tagamet was talked about in the New England Journal of Medicine or the British version, Lancet, you could have bought SmithKline when Tagamet first came out a year after it came out.
Let's say your spouse, your mother, your father, you were a nurse, your druggist, you're writing all these prescriptions. Tagamet was doing an amazing job of curing ulcers, and it was a wonderful pill for the company you to stop taking it. He also came back. See, it wasn't it wasn't a crummy product.
But you took it for a buck and it went away. But it was a great product for the company. But you could have bought it two years after the product was on the market and made 5 or 6 times your money. I mean, all the druggist, all the nurses, all the people, millions of people saw this product and they're not buying oil companies, you know, drilling rigs.
It happens. And then three years later, four years later, Glaxo, even a bigger company, is a huge company. A British company brought Zantac, which was a better at that time and improved product. And you could have seen that take market share do well by Glaxo and triple your money. So you only need a few stocks in your lifetime during your industry.
I think if people if you had worked in the auto industry, let's say you're an auto dealer the last ten years, you would've seen Chrysler come up with the minivan. You see, if you're a Buick dealer, a Toyota, a Honda dealer, you would have seen the Chrysler dealership packed with people. You could have made ten times your money on Chrysler.
A year after the minivan came out. Ford introduced a Taurus Sable, the most successful line of cars the last 20 years. Ford went up seven fold on the Taurus table. So if you're a car dealer, you only need to buy a few stocks every decade. When your lifetime is over. You don't need a lot of five baggers to make a lot of money, starting with $10,000 or $5000.
So in your own industry, you're going to see a lot of stocks. And that's what bothers me. There are good stocks out there looking for you. And people just aren't listening and they're just not watching it. And they have incredible edges. People have big edges over me. They work in the aluminum industry.
I see aluminum industries coming down. Inventory's coming down six straight months. I see demand improving in America today. You know, it's hard to get an EPA permit for a bowling alley, never mind an aluminum smelter. So, you know, when aluminum gets tight, you just can't build seven aluminum smelters.
So 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 north. There's lots of ways to make money in your own industry.
You could be a supplier in the industry. You can be a customer. This thing happens in the paper industry. That happens in the steel industry. It doesn't happen every week. But if you're in your some field, you'll see a turn. You'll see something in the publishing industry. These things come along and it's just mind boggling.
People throw it away. One of the things I find a rule, I buy a couple of rules I want to throw out and I find useful. Excuse me, is a lot of times people buy on the basis the stock is going down. This much. You know how much further are going to go down. I remember when Polaroid went from 130 to 100 people said, here's this great company, great record, but ever gets below 100, you know, just by every share, you know, and it could get below 100.
But people bought on that basis saying, look, it's got 135 to 100. It's not 95. What to buy within a year was 18. And this is kind of with no debt. I mean as a company which is so overpriced it went down, I did the same thing in my, I think my first or second year fidelity Kaiser Industries had gone from $26 a share to 16.
I said, how much lower can I go? It's 16. So I think we bought one of the biggest blocks ever on the New York, on the American Stock Exchange of Kaiser Industries. At 14. I said, you know, it's got for 26 and 16. How much lower can I go? What can I call my mother? And said, mom, you're going to look at this Kaiser Industries?
I mean, how much lower can it go? It's gone from 26 to 10. Well, it went to six. It went to five. It went to four and went to three. And, now I am fortunate to have rapidly I would probably be still caddying or working at the stop and shop, but it happened fast. I was able to just compressed it. And at three I figured out, you know, there's something very wrong here because Kaiser Industries owns 40% of Kaiser Steel, they own 40% of Kaiser Aluminum, they own 32% of Kaiser Cement, they own Kaiser Broadcasting, they own Kaiser Standard Bravo Kaiser engineers, they own Jeep, they own business after business.
And they had no debt. Now, I learned this very early. This might be a breakthrough for some people. It's very hard to go bankrupt if you don't have any debt. It's tricky. Some people can approach that. And so it's a real achievement. But they had no debt and the whole company at three was selling at about 75 million.
At that point, it was equal to buying one Boeing 747. I said, there's something wrong with this company selling for 75 million. I was a little premature at 16, but, I said everything's fine. And eventually this work out and what they did is they gave away all their shares to their shareholders. They passed out shares like I was meant to pass out shares.
And and they passed out the public shares in Kaiser Steel. They sold all the other businesses. And you got about $50 a share. And but if you didn't understand the company, if you're just buying on the fact the stock I got from 26 to 16 and then again to ten, what would you do when went to nine, what would you do?
One went to eight. What would you do? One went to seven. This is the problem that people have is they sell stocks because they didn't know why they bought it. Then it went down and they don't know what to do. Now you flip a coin, you walk around the block, you know, what do you do? It's psychiatrists haven't worked so far.
I've never seen them running in the side of the Psychological Psychiatry Fund. I've never seen this before. The, with the SEC to make it through as a mutual fund. So they haven't seem to help. I've tried prayer that hasn't worked. The, the, So if you don't understand the company, you have this problem when they go down, eventually, they always come back.
This one is, this one doesn't work either. People think, RCA just about get back to 1929 high when General Electric took it over. A lot of double knits never came back for those beauties. Floppy disks, Western Union, the list goes on and on. People saying it'll come back. Well, it doesn't have to come back.
Here's another one you hear all the time. It's $3. How much can I lose? I've had people call me up saying, I'm thinking of buying the stock at three. How much can I lose? Well, again, you may need a piece of paper for this, but if you put, if you. And if you put $20,000 in stock at 50, or your neighbor put 20,000 at fold at 50 into the stock, and you put $20,000 in at three, and it goes to zero, you lose exactly the same amount of money.
Everything. If people say it's three, how much can I lose? Well, if you put $1 million on it, you can lose $1 million. Just the fact is that this is the oh, this may be a reason of research based on the fact the stock is three down from 100, it doesn't mean you should, buy it. And in fact, short sellers, people that really make money in stocks, they're not sure at Walmart, they're not sure Home Depot, they're not sure.
The great companies Johnson Johnson, they short stocks down from 80 to 7. They'd like to shorted at 16 or 22. But they they figured out at seven that this company is going to go to zero. They just haven't blown taps on this thing yet. It's going to zero and they're selling it short seven. They're selling your short at six at five at four at three and two at one and a quarter.
And you know what? I'll sell something short. You need a buyer. So I mean it's the buy the damn thing. Anyone who's buying this thing, it's these people saying it's three. How much lower can it go? Yeah. The, now here's a subject that you probably, all talked about getting close. All right, we'll drop that one off.
Yeah, it's getting very close. So it, everybody has to go somewhere. So, the important thing is you can't get too attached to a stock. You have to understand there's a company behind it. You can't treat this like your grandchildren. You know, you have to deal with the stock and say, I understand the company.
If they deteriorates, if the fundamental slip, you have to say goodbye to it. You have one rule you want to remember is the stock does not know you own it. This is the breaks. It. So don't get you know, you have to understand it and say they're doing well. And as long as they keep doing well. My best stocks have been my fifth, sixth, seventh year I owned them, not my fifth, sixth, seventh day.
So you have to understand that and, stay with it. And then, I'll put you through to my, my long shots, avoid long shots. I bought about 30 long shots in my life. I've never broken even on one. The ones that are really bad were called whisper stocks. And, if Arthur Levitt was here today, I appreciate these stories, but these are the times that somebody calls you up and say, hi, Peter.
How's Carolyn? How are the kids? I'd like to talk to you about, international, believe it. And, and, what? They have this conversation about earnings. Earnings can be very small. It's $3. $1 share. And they keep whispering. I say, what are you talking about? I understand it. And these are now either they're so surrounded by people they can run out by the stock because it's so exciting.
Or they think the SEC is listening in. They'll get a shorter term. You know, they'll get six months in the in a camp rather than two years in the camp. But whisper stocks don't work. The, okay. And then I want to conclude with, there's always something to worry about. If you own stocks is always something to worry about.
You can't get away from, what happens in the 50s. People were worried about, the only reason we got out of the depression was World War two. We got another recession in the early 50s and 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 back then.
You know, the the warheads they had then they couldn't blow up the plane. West Virginia or McLean, Virginia or or Charleston. Now, all these countries and and and Stan, there's nine of these stand countries have come out of Russia. They all have enough warheads to blow the world up. And no worries about when I was a kid, people were building fallout shelters, and we just have this this civil defense drill.
Remember this when in high school and you get under your desk? I never thought even then that was a particularly good thing to do. You know, they blow us to some people would all get under our desk. You know, I you. But in the 50s, people wouldn't buy stocks except for the 80s. The 50s was the best decade, the century of the stock market.
And people wouldn't buy stocks in the 50s. Was the worried about nuclear war, the worried about the depression. Then people remember it all went from 40 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, no higher paid oil's now at ten.
They said it was going to four and we're going to have a depression. And then the Japanese remember the Japanese. We're going to own the world. Remember that one. And we're gonna have depression. And then about two years later, we're all worried about Japan collapsing. And this the most absurd thing I've ever heard.
This a company with a 20% savings rate, incredible workforce productivity. And people are saying we're gonna have depression booster pandemic collapse. And they had, you know, on their prayer list, they lowered Mother Theresa and crippled children. And they're praying for Japan. And I don't know, you know, it's unbelievable.
I mean, it's 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 other countries. So and all the other countries and all these said they were not going to pay it back. And we're going to have to always answer, we're gonna have a depression or the Great Depression.
We have the Great Depression. I never could understand that adjective in front of depression, but at the or the Great Depression or the big one, the big ones coming, but all these countries and now I understand these are called the. Then they're called less developed countries. Now we come under developed countries.
Those are all wrong turns. I was an absolute correct. You have to call these emerging countries. You can't use less developed or underdeveloped assets in fact, the other day I heard the politically correct term for something that's overweight is laterally challenged. That's yeah. Yeah, that's a 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. If you can add they'd get reasonably close to 16. That's the only level of math you need to know. You don't know what need the area under the curve. Remember that quadratic equation and an integral calculus and the area under the curve?
I mean whoever cared was under the damn curve. I mean yeah, but you had to study this. You don't need this in stock market. So all you have to know is you're going to see it's always going to be scary. It's going to be always something to worry about. And you just have to forget all, cut it all out and own good companies or own turnarounds.
Study and you'll do well. And that's all there is. And I'm ready for questions. When managing a portfolio. So do you pay much attention to the activities of Congress and the regulators? Did Ed Markey put this one up? I'm not sure. I spent zero time, thinking about what's happening down here in Washington.
And I, spend a little time thinking, what's going on, Russia or China? I just deal with facts when the economy's going down, when when economy is going the wrong way. I can deal with that. This whole health, care reform bill drove a lot of drug stocks down to low levels. And I could say to myself, well, 60% of Johnson Johnson's earnings are outside the United States.
Their pharmaceutical drug business is all in patent. Nothing's coming off patent. They only have 5% of sales from one product, which is Tylenol, which is already an over-the-counter drug and is growing overseas. I said, why is it stuck on from 58 to 36? And these and these companies are already dealing in Japan and overseas with, you already have, the government controlling pharmaceutical prices.
They've dealt with it. So I deal with facts. They might this year, I thought, was very likely you'd have a bill passed on health care. It didn't happen. They drove the stocks down, but I think the stocks would rebound in anyway. You know, if the health care bill was passed. So I don't deal with what's happening in Congress or what's going to happen in the future.
I just deal with what's happening in the economy and what's happening to companies. I call how useful is the financial reporting in the general daily press to you, and how useful should it be to investors in general? Okay. It has improved dramatically, not just in the press, but also company reporting.
Ten years ago, companies didn't have interim balance sheets. It's hard to imagine they only gave that balance sheet to you once a year. Now they show you quarterly what's happened. Their inventories without receivables. And now in in the major newspapers they'll even show types of funds there. Now, I think there's 2500 companies.
The New York Stock Exchange is over 5000 different mutual funds. So there's twice as many mutual funds as our stocks, at least in the paper. That explains what kind of fund this fund is. So I think reporting has improved the report earnings. But again I think if you own auto stocks you shouldn't be reading the financial part of the newspaper on Wednesday, the local newspaper Tuesday.
Some places are on Saturday. They have a whole four pages on automobiles. They talk about new models and they say, this one stinks and this one's outstanding. They really do. You want auto stocks? That's the part newspaper you shouldn't be calling your broker four times a day to get stock quotes. It doesn't work.
Getting up in the morning to look to see how you started yesterday is not useful. It's all this stuff. It's just a waste of time. If you're adding a bunch of stocks are worth absolute waste of time, you should be looking at the company when you get the quarterly reports, you should be if you're at the mall, major, if you're in the if you're in the retailing industry or if you're a restaurant industry, you were seeing Taco Bell.
You were seeing McDonald's, you were seeing toys R us. I mean, you were seeing all these companies do terrifically well. You're seeing Bombay, you're seeing Tandy with RadioShack, and you're seeing RadioShack roll across the country. Pretty soon there were, you know, 25 RadioShack and every major city.
And you said there's not much room for them to go, but they had a 20 year great run. That's what you're dealing with. You're not dealing with the minutia of today. You're dealing. What's this country doing two years, three years, four years, five years from now. And if you're dealing with a cyclical and business is turning around, you wait for signs that business is slowing down.
When you see it, you move on to something else. Are you concerned about the volatility in the financial markets today? Do you think something needs to be done to reduce it? I love volatility. I think I remember when, in 19, 72, the market went from down dramatically and Taco Bell went from 14 to 1. They had no debt, they never had a restaurant closed.
And, I started buying at seven, but I kept on to it and it went to one and, it was the largest position in Magellan in 1978 when it's bought out from by $42 by Pepsi-Cola, I think would have gone to 400 if they did buy it out. I think volatility is terrific. I think it is very I think these collars are very important.
I don't think the market going up 80 points one day and down 80 the next, is a good thing for the public. I think that's not a very good thing. But I think all of these collars and all these other things to keep the volatility down each day is important. But the market's going to go up and down of that.
Human nature hasn't changed a lot in 25,000 years. And some about to out of left field. And the market will go down or the market will go up. So volatile 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, if they don't understand, they only can own mutual funds on mutual funds and keep adding to it over.
Basic corporate profits have grown about 8% a year historically, so corporate profits double about every nine years. The stock market ought to double about every nine years. So I think the next market's about 3800 today, 3700. I'm pretty convinced the next 3800 points will be up, won't be down the next five or points in next 600 points.
I know which way they go. So the market ought to double in the next 8 or 9 years, run double again in the 8 or 9 years after that, because profits will go up 8% a year. And stocks will fall. That's all there is to it. We're in the month of October. Beware of the month of October, the witching month for the stock market.
What do you see? As the outlook for this month? And when do you think the Dow will hit 4000? That the, October has always been a special month? I remember in 1987, I was very, you know, I was very convinced the market was in it was not in trouble. And I didn't worry about things. And, Karen, I planned this great, golf vacation to Ireland, and we're going to this one course, and they said, a little house, and there's another go all along the west coast of Ireland, play golf.
And we left on a Thursday night and, the market went down 55 points a day, which was not too good. And, the next day we got to Ireland because the time difference, we'd complete our day. And I got back to hotel and I called in the market going down 112 on Friday. I said to Carolyn, you know, I think if the if the market goes down on Monday, you know, we're going to have to go back and, and so we must we stayed there for the weekend and, and on Monday, the market went down 500 points and my fund went from, I think 12 billion to 8 billion.
And, thank you for your attention, you know, and, to working days. You know, I said that at the end of this week at the, have no funds now, there wasn't a lot I could do. I mean, here I was on Monday because the market, didn't open, you know, by 12:00 it was in Ireland. It was still, 7:00 in New York.
So we did spend that day, and we, we, we played a round of golf the morning, and we went somewhere and so watch the market, deteriorate and, and, I did come back. There wasn't nothing I could do. I mean, just, nothing I do about it. It, but I think my shareholders, they call up and they said, well, what's Lynch doing?
They said, well, he's on the sixth hole and he's, you know, he's even par up to now, but he's in a trap. This could be, this could be a triple bogey here. This could be a could be a big inning. And, I don't I don't think that's exactly what they want to hear. That. So I could do something about this damn thing.
So I came back home and, suddenly everybody else and and, fortunately, I was very consistent. My, the market went down when I ran Magellan on 13 years. The market went down nine times, and every time the market went down, Magellan went down or was 99. And, you know, because it's very it's very important is another one of these numbers you ought to write down.
If you put $1,000 in a stock, all you can lose is a thousand. I've done that several times. And, but if you're right, you can make 5000, 10,000, 20,000. So this is you don't have to write 1 or 2 times. You can be right. One out of four, it's like ten 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 terrible tragedy. So you can make more money on the upside. So I just I just wrote those out and I will now flip a coin to tell you where the market will go to 4000 this year or next year. Heads means it goes up is a two headed coin.
The market will go up in the next year. That's it. That's all I ever know about the stock market. This questioner intends to put $1,000 yearly into my four year old daughter's education fund. Where should I put it? That's one. The other just covers everybody else. What are you what are some of your current mark market favorites and why?
Well, on the first one and this is this is important whether you're investing for a four year old, a 14 year old or 74 year old, you have to say, what am I going to do when the market goes down? Because I've had audiences like this, larger audiences, I'll say, how many people in the room are short term investors?
I've never had anybody ever raise their hand. I mean, everybody in the world is a long term investor until the market goes down like a 90. I remember 99 1990 was so much scarier than 87, 87. The market just fell down. And you call up companies that our business is terrific or about to announce a stock buyback or already buyback.
Wrestling business is great and we can't figure this out. In 1990 you had to wait, invaded. You had, the banking system really on the ropes. I mean, really close. You call up a company and said the business was slowing down. We sent 500,000 troops to Saudi, and, we were about to fight what people thought was the, remember, this was the fourth largest army in the world.
They were the toughest army in the world. And we were. This is gonna be a terrible war, and we ought to sit them out. Remember the three big theories? A lot of people in this city saying we had to wait them out. You know, we'd still be waiting there 120 degrees and our 5000 people. I mean, I think Bush made an incredibly, brave decision.
But on the information he was getting to go in there and, knock them out or which they'll be there. But that was an ugly time. And, that was very scary. And the public stood up what some people learned from 87. And they stood throughout that and said, I'm confident about the next five, ten, 15 years of this country.
And they hung in there. So I would say, if you want to buy a small growth fund or you want to buy a balanced fund, that's part bonds or part stocks, you put so much money in, but more and every year you'll be very pleased. And ten, 20, 30 years stocks will beat the hell out of money markets. They're going to beat the hell out of bonds.
No group of you think of it any corporations McDonald's and these great companies Marriott, you name it, they've never got together and said, gee, you know, we're really doing well. Why don't we raise the coupon on our bonds? You know, it's because bond holders have been really loyal. No, no. You know, we've been given 8%.
Why don't we raise it to nine? You know, what? Companies like automatic data processing. They do payroll. It's an amazing, prosaic company. 32 years of higher earnings, 32 years. A double digit earnings growth. We've had recessions. We've had wars. That changes in Congress, changes in the Supreme Court 32 years about Bernanke.
So I mean, that's what you relying on Johnson Johnson 30 years. Our parents. But these are general parts 42 years of up earnings Emerson Electric 38 years. Our finance. You don't see companies like this in other parts of the world. So I think that's what you buy when you buy a fund. You're buying a bunch of good companies.
And the question was, when I get, just short of stocks, stocks, I that's what I think. I think the financial area has been, referred heavily in the, stock market. I think that's an attractive area, stocks like chemical or travelers or Citicorp or Bank of Boston or Fleet or Shawmut, Fannie Mae, Freddie Mac, these stocks have all come down.
Their business is terrific. They've improved their balance sheets. They're selling at multiples half or one third lower than the general market. I think the cyclicals I think we have a chance for cyclicals for a first time in a long time. The the steels the paper is the aluminum is the chemicals. I mean they're it's their turn to come to the plate and I there's going to be a good time the next we seen we have an economy recovering and, Latin America, Brazil is turning around.
These are facts again. You hear these facts. These countries are really India. I've been visited India. Things are really improving in India. Europe had the worst recession since the depression. There's 18 million people out of work, 18 million people out of work in Western Europe right now. And the economy's starting to slowly turn Japan is bottom.
So I think you're going to see a demand. And commodity prices have been aluminum prices got to 30 year low. Now the ingot is almost doubled. You're going to see the same thing with line board. So you're going to see a very good time for cyclical stocks. And I think the auto stocks are also extremely cheap at 4 or 5 times earnings I think I think the comments me my opinion from the companies I talked to in the business I look at, things are not off the trend line.
These are not extraordinary times. Housing is very affordable. It's affordable. It was two years ago, but a 20 year basis. Housing is very affordable. Automobiles are very affordable. Consumer durables are very affordable. I think people are going to, and we've added, as you know, I just don't understand when people we hear the job growth, we've added, and the recession, we lost 1.8 million jobs, and now we've added back 5.8 million, 4.5 million in the last, 19 months.
So we lost 1.8. We've added 5.8 back for 4 million to the good tough part of it is we dropped about 600,000 manufacturing jobs, and we've only brought back 100,000 manufacturing jobs. But there are a lot more people working. And I think that trend is gonna continue. And the decade of the 80s, I think this is key.
The decade, the 80s, you only this one you hear from the press is what you hear from TV. The decade, the 80s, the 500 largest companies eliminated 3 million jobs, 3 million jobs. But there was 2.1 million businesses started in the 1980s. If they just have ten people each, it's 21 million jobs. It's an incredible job machine we have in America.
So that's what happened. The 80s, these 2.1 million businesses created all the jobs and the decade of the 90s, the top fiber companies going to eliminate another 3 million people. And all you ever hear about is company X lays off 5000 people in Hartford, company wireless of 5000 B in Rochester. And somebody doesn't buy a sofa in Scottsdale, Arizona.
So reading their newspaper about all the layoffs in the northeast, I mean, that's the nature. These companies have to do it to stay up, stay competitive. That's our business. And we've had in the last two and a half years kind of phenomenal. This has been a great thing for our country. We've had 1750 companies from public.
They've raised over $100 billion. There's only 2500 companies in your side chain, 7050 companies. There's a lot. They're going to put this in research and development. They're going to put it into into more plant, more efficient equipment. It's a fantastic thing for these companies. So I think the situation is excellent.
The banking system, for the first time since the early 50s, a lot of people follow the banking industry, the banking system. Today, it's more investments on the left side, the balance sheet. You talk about the the government saying on the mortgage backed securities they own, then they have loans first time ever since 1951, and they're only making 50, 20, 30 basis points and said love to make loans bank system as a high speed assets and 45 years the banking system is ready to go.
There's lots of liquidity around. I don't know why some people are so depressed about people getting hired all the time. I can't quite figure this out. I that I don't know, I have never met a banker and anybody in business that likes recessions. I've yet to find these people, you know, so I think I think it's very good.
The economy's doing well. Speaking of banks, are you concerned about banks being, allowed to offer mutual funds and the confusion that creates among investors over whether, bank deposits are insured or not insured or how much is insured? The whole question of deregulation. Okay. No, I think it's I think it's very positive the banks or the allowed to sell mutual funds, because they'll probably sell a lot of fidelity mutual funds that so that's a very important now.
But seriously, I think it's very important that people understand when they own a bond fund, that bonds can go up and down, bonds are just about as evolved to the stocks. And if they own a 30 year bond fund that you can lose 25, 30% of your money very fast. You know, the government bonds, people have to understand this is an incredible rate of illiteracy.
And in, in our public. And all they ever hear about is what happened today to Bristol-Myers going up 2 or $3. What happened? The Dow Jones, they don't get to learn anything about America. And people at some point in their career presented their near retirement. They're given $455,000 because it's an early retirement.
They have no experience. They don't know what a bond is. They don't know what stocks are. They have to make a decision in 30 or 60 days or they have a big tax consequence. These people have had no experience learning about the stock market. It's a tragedy. So I think anything we can do to educate the public, if you can convince people that they understand the value to stock market, I'm not saying anybody should buy a stock.
I'm just saying if you buy a if you purchase a stock, you ought to do certain things. You purchase a stock and do certain things. You will do better. You're not ready to do those things. You should keep your money in the bank, keep your money in a money market fund. Some people aren't gonna do the homework.
They don't have the stomach for it. They should stay out. They're not doing very any good by taking half their life savings and putting the stock market early. They've they've been lucky enough to save 50,000, $60,000, send their kids to college, and one's going to start the year and they're going to take all that money and put it on a mutual fund with a one year horizon that's doing no one any good.
So I think the more whether it's the banks explain it, the brokers that explain it, anybody that goes and we're working on this at the SEC, the SEC working very hard on this to explain to people the nature of these products. If they understand them, they'll do better with it. More information. The Maria Fidelity's launching a major study.
The at the end of this year on retirement. We're going to do it. Over 1600 people, over 300 experts. We put a major study on, explain to people about nature, retirement and how they can best understand how they should invest their assets. We're not gonna mention fidelity at all. Of course, it may be subliminal in it, but, but we're trying to help in it.
The more we can do with this. And there's been a credible push by the SEC to do this. I think it's a very positive element. What do you think of the SEC proposal to require mutual funds to adopt a quantitative rating scale for riskiness, number one? And what effect? Do you feel that the new, shareholder rights proposals for more open disclosure and communication are having on companies and the markets?
On the second I, I'm not too familiar with the first one. On the second one, I think you have to be careful within crossing the bridge on on how much we get involved in managing companies. I think there should be disclosure of what people are getting paid. There should be disclosure, how many shares they own.
But I don't think we should be deciding when they should make this acquisition or whether they should expand this plant. When you get too involved and run a company and it's very complex. And a lot of great companies have made a lot of decisions you haven't heard about because they decided not to do something.
Some of the best decisions they didn't do is to not do something. If they're under all this pressure from shareholders, of what to do and what not to do, they're going to take their eye off the ball and they're not going to be able to run the business. And companies are doing well because they look the companies do well.
Look out five, six, seven years. And some decisions they make may not be the right thing for the next year. The more and more we concentrate on what they're doing and we keep commenting on as outsiders, it's going to be run by an enormous committee and we'll get committee results. So I don't think that's going to help anybody.
But disclosure of relevant facts, of how many options people have or the options at the market, what they're, what they're being paid. I think that's important how many shares they own, what the company is doing. I think this they used to have a letter. I mean, it's it's not that recently that you have comments by the chief executive at the Stop and Report.
They never used to make that. There's a letter saying what happened. I mean, it really is a very valuable piece of information. You don't realize this company spent a lot of time and this is a very serious document. I think it's very helpful. The shareholders, the quarterly shareholder reports are excellent.
And also, I've stressed everybody in America can get a hold of a company. It's not Fidelity and Putnam and Dreyfus. You can get a hold of a company. If you own 100 shares, you're going to get part time. It's something I'll talk to you about it then. If people don't take advantage of that, these companies are willing to talk on this quantitative and qualitative risk ratings.
I think if it could be done, I think it might be possible. Look confused on it. I'm not that up to date on it, but I think people should understand, you know, the certain stock funds, emerging growth funds and invest in companies have 50 million or sales very small, a much more volatile than when you're buying major quality blue chip growth companies, and that long term bonds are more valuable than medium term bonds, which are more volatile than one year bonds.
I think these are things that should be explained to people. People should get them in you like you get it. Howard Johnson's how do you view Fannie Mae's stock and options today? Okay. Well, I think, I brought it to Freddie Mac, too. I think both these companies, you know, have a great business. And I always look at it, the stock market, I think of it more.
If people study chess, this would be not a good game to study for the stock market. He's in chess. An outstanding player will be a good player 1000 times in a row. Everything's in front of you. All the moves are known. It's all technique. In poker or in bridge. There's a lot of uncertainties. It's a lot of things you don't know.
You can play a hand exactly right and lose, as you say. If I played it right, if I do it again over a night, over a month, that's the stock market. Summarize much closer to poker than it is to, than any other game. And, I think that's what's what's an important thing to know. And what the hell was a question of a candidate?
Fannie Mae, it's been sort of like a 27 card stud poker game. You know what? The trouble cards keep getting turned over, like, we're not doing so well in Houston. And, this is 10 or 12 years ago. And and with these 5% downs that a lot of people had in mortgages and, and people move there for jobs. And the job they brought their spouse along that and the job left.
They had no ties to those communities. And they they left on Oklahoma and Alaska. So in that card turnover was kind of ugly. And then, they were losing $1 million a day. That was easy to remember. That wasn't too pleasant. And what they, finally figured out was we have a very good business for extremely low cost.
If we can match our, liabilities and our assets, make a very small spread. But we have very low costs. We can have a pretty good business. And then a card would come over, like real estate prices start to go down in California. They start to go down the northeast. And then you had to say, well, I have to keep checking to see what foreclosures would be like.
And, you you must own. That was the only thing that's wrong. Right. So all these things, if you keep watching the story every year, you get a chance to buy this again. You something will come up. People are worried that rates are going to go down. So stock went down. These rates are going down. And then and then now it's gone up.
The stocks go down. These rates gone up. And Freddie Mac and Fannie Mae are still doing great. And I think they're going to be terrific stocks I mean they're going to go and actually quadruple. But I think they're about 25% undervalued now. And they could be good stocks over five. You if the real secret of your success is following your daughters to the shopping mall for shopping for stock tips, what do we bachelors do?
Well I think I think on the weekend, I think one of the reasons people, get so depressed is they get away from children on the weekend. They read all these magazines, they read the newspapers, and they can become economist. And they get so depressed. I mean, they're they're bullish if they take their lunch to work on Monday, you know, and I think, I think you need to rent a 12 year old on the weekend just to he's they don't know about the problem of the ozone layer disappearing and all the problems of, you know, all these terrible things that we think about all the time you get so depressed about and how second baseman and shortstops that getting paid $4 million and they can't throw it to first base on a bounce, you know, you know, so I think you need to find a 12 year old and random for the weekend.
And following this boy or girl around and see where they shop in. And our kids, love Body Shop, you know, and I bought it and, I think it's a good stock. And my, our oldest daughter, Mary, liked Ann Taylor, and she had a, she had a dress up to go to work at a, she was working a summer in a consulting firm, and she thought Taylor's prices were good and the quality was good.
And and it was a good it was a great stock and my wife, Carolyn, who was, till we had these three kids, she's has an extremely good shop and she almost got a black belt in shopping. She, she, she didn't fit it because of the children. She quite finished that. But she's a very good shopper, and she, you know, she's give me some great tips, too.
So, I think you either have to use your spouse, so you have to go out on your own. I have this biggest position. My son one time was Hanes, which owned legs and, was a huge stock. And it was bought eventually by, Consolidated Foods. And it was the best division of solid foods. Where's my biggest position?
Near monopoly on his legs and legs is a really big. And I knew somebody would come along with a new product. And, he, And it was Kaiser Roth introduced. No nonsense. I was worried that this thing was better and I couldn't quite figure out what was going on. So I went to the supermarket. I bought 62 pairs of no nonsense, different colors, different shapes, different levels, a one of a kind of house I had home.
I was my first got back, but I brought it in. I brought to the office, I passed out anybody, male or female, even one of these things. Just take them on and tell me how it is. And they came back in about three weeks. I said, it's not as good. And that's what researches, that's all it was. And I held on to, Heinz and the stock was a huge stock.
So that's what it's about. Thank you. So, if this video brought you more clarity about your money, like it, subscribe, and turn on notifications so the next lessons reach you. And tell me in the comments what you want me to cover next. ComLucro Investor is the investing branch of the ComLucro family.
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