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what I'm going to try and do today briefly is I don't know what I'm supposed to do with this gavel I've never had one of these things yeah the uh I'm gonna try and uh say some words on the things I've used over the years uh when I was a amateur when I ran a gel and I still use today I think they make sense I think they make a lot of sense for investors and uh I frankly think it's a tragedy in America that the small investor has been convinced by the media the print media the radio television media that they don't have a chance that they don't the big institutions with all the 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 Chile fund this week and next week it's the Argentina fund and and they get results proportioned 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 them unusual highs for someone they can sit back and have their own opinion know something about the industry this is a positive it's not enigma so that's what I want to talk about and 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 are actually if you really press them down to say the reason I own this is the suckers 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 10 year old and two minutes or less while you're on 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 these are relatively simple company and they make a very narrow easy to understand product they make a one megabit SRAM CMOS bipolar risk floating Point data i o 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 for Whetstone Mega flop poly silicone emitter A high bandwidth that's very important six gigahertz double metalization communication protocol and asynchronous backward compatibility peripheral bus architecture four-way window lead memory a token ring interchange backplane and it does in 15 nanoseconds of capability now if you own a piece of crap like that you will never make money never somebody will come along with more wet Stones the less wet stones or bigger Mega flop or a small Omega 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 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 their money the public when they buy a refrigerator they get to consume reports they buy micro above and 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 a mobile travel guide or California when they go to Europe they get the Michelin travel guide people 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 Trading that is garbage they didn't do any research they 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'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 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 it if anybody predict interest rates right three times in a row they'd be a billionaire concerned there's not that many billionaires on the planet it's very you know I took I had Logics I had a syllogism in the study of these when I was a Boston College they can't be that many people who can break interest rates because there'd be lots of billionaires and no one can predict the economy I had a lot of people in this room were around in 1981 and 82.
and 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 this stuff I remember anybody telling 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 that we're gonna 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 on economics you've wasted 12 minutes and I I I really believe that now I have to be I'd be fair I'm talking about economics in the broad scale predicting the downturn for next year or the upturn or M1 and m23b and all these all these M's the uh I'm talking about economics to me is when you talk about scrap prices when I own Auto stocks I want to know what's happening to use car prices when used car prices going up it's a very good indicator when I own hotel stocks I'm on Hotel occupancies well no chemical stocks I don't know what's happened the price of ethylene these are facts if a loan inventories go down five straight months that's relevant I can deal with that home affordability I want to know about when I own uh Fannie Mae or I own a housing stock these are facts you can they're economic facts in this economic predictions and economic predictions are a total waste and uh 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 are 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 investors supposed to predict interest rates if they had a Federal Reserve can't do it so I think that's uh but you should study history and history is 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 market said 50 declines of 10 or more so 50 declines in 93 years about once every two years the market Falls 10 percent we call that a correction that means that's a euphemism for losing a lot of money rapidly we call it a correction and uh uh so 50 declines in 93 years about once every two years of Market Falls 10 percent of those 50 declines 15 have been 25 percent 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 gonna go down sometimes if you're not ready for that you shouldn't 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 and they're doing fine you're hoping to get to 22 with it 14 to 22 is terrific six to 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 fact that they predicted it but they predicted it 53 times and uh so you can take advantage of the volatility Market if you understand what you own
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