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up as buy what you know. And there's some truth to that, and it's also often way over simplified. Can you explain what you did mean by that and then what you didn't mean? Well, I It bothers me that people are very dangerous when they invest. This word play the market, that's a dangerous term. But if you do some work, do some research, know what you own, look at the research look at the balance sheet.
You If you can add eight and eight, you get fairly close to 16. You find out this company has lots of debt, no cash, they're in trouble. Shouldn't own it. So, a little bit of research So, people are carefully buy a refrigerator, carefully take a vacation. And they they'll put five, ten thousand dollars in some stock they hear on the bus or at a party.
That's dangerous. So, when you say buy what you know, you also thought that the regular investor might be able to get an an inside advantage by sticking to an industry he's a familiar with or seeing something that she realizes is a great product. I'm Imagine if you were in a mall the last 50 years. You would have seen Gap when it was hot.
You would have seen Limited when it was hot. You would have seen when it was not hot. You would have seen when they were selling People weren't excited about Gap anymore. Or Then you do some research. You say, "Well, gee, there's a lot of Limited stores, but we're only at 20." You know, then go to 400.
So, you you you see a company. I did really well with Dunkin' Donuts. It's a local company. I did well with Stop & Shop. You But people could see that there's a really People are showing up. Or guess what? The Sunglass Hut, no one's there anymore. So, I mean, that's research. That's fundamentals. So, in
But then you don't leave the mall though and buy that day. You have to do some more work. That's the important point. Yeah. So, today, uh there's so much information everywhere, information overload. Does that make it harder for active investors? The indexers say, "Everyone's got access to the same information at the same time.
You can't beat the market." Well, the way you beat the index is you you avoid the stocks that go down. You avoid the steel companies and the oil companies and Sears and Penney and the where the companies are deteriorating. I mean, companies are dynamic. The the behind every stock, there's a company.
These are not lottery tickets. So we you're trying to find the companies within the S&P 500 that are doing better, they're going from crappy to semi-crappy to good. That might take a couple years. Or they're going to grow for a long time. And you're trying to avoid the companies that are going south.
That's how you beat them. Or you find some companies outside the S&P 500 that are that are great companies. CarMax was not in the S&P 500. They went up 200-fold. There's a lot of companies that enter and a lot of them are great performers before they go in. Now a lot of people when they're lucky enough or smart enough to get a company that's going up, they then they take their profits.
And then you made the case in a book that you should actually hang in there with the really great stocks and you even got a call from Warren Buffett as a result. Yeah, 1989 I'm at home, the phone rings and those were my friends but one of my daughters, I think it was 6-year-old Annie picked up and said she kissed there's a Mr.
Buffett on the line. I said this got to be a joke. I pick it up and this Warren Buffett I'm from Omaha, Nebraska. You know, I read your book My Airplane Story in two weeks can I use a line? He said that all in about 7 seconds. And I said, "That's great. I'd love to do it. What's you know, what's the line?" He said, "I love this.
I've been waiting to do this. When you sell your great companies and add to the losers, it's like watering the weeds and cutting the flowers." He said, "I want to put it in." He said, "If you ever come to Nebraska, don't call me. You'll you'll be mud all over Nebraska." So did he call him? Oh yeah, I said several times we played bridge together.
We've had several meetings. Great guy. Another point you've made and this is I think particularly relevant 10 years into a bull market is that I think you said that more money has been lost anticipating a downturn than actually in the downturn. Can you explain? Well, obviously the markets markets have gone up 10-fold since I started running Magellan.
So you make more money on the upside. The market's going to be a lot higher 10 years from now, 20 years from now, 30 years from now. Trying to predict the market is really a waste. I don't know what's going to do. It can go down. When I ran Magellan 13 years, the client 10% or more nine times the market.
I had a perfect record. I went down more than 10% every time. Whenever the market went down, I went down more. But, over the long term, the upside is more than the downside. So, you're going to say to yourself, "Do I need the money in the next month? Do I need the money in the next year? Do I have kids going to college?
Do I have a wedding coming up?" Then you're a bad investor. If you If you If you can keep putting money in, you have 5, 10, 15, 20, 25 year, you should do well. One thing we're thinking a lot about at Barron's is the secular changes we're seeing in the market, where there's so much disruption that we wonder if certain industries, they may be cheap and they may just keep on getting cheaper.
I mean, retail would be an obvious one in some cases, victims of Amazon. But, even the auto industry, very low price-earnings multiples. Maybe the market sees something. How do you think secular changes is moving more rapidly now than it did in the '80s when you were running money? No, I saw the textile industry deteriorate.
I I was recommending all those stocks on the way down. I saw the shoe industry go away. Industries are Industries can go from terrific to terrible. There's a great expression in textile industry that helped me a lot. Textile industry, yeah. It's always darkest before pitch black. Just when you think things are terrible, they get terrible squared.
I mean, so just because the industry is getting bad, that's not a reason to invest. Wait for things to get better. Because again, some of you might be involved in steel. You might be involved in coal. You might be involved in iron ore. They might be involved in plastics. They'll see it aluminum pick up before I do.
So, you might That's a cyclical turnaround. That might last two or three years. You might see it way before Wall Street sees it. One broad area that you've recently said might be interesting is energy. And it's very unloved on Wall Street right now. What do you see in there? Well, the difference between a glut right now and a shortage is like 1 million barrels a day.
You know, the world consumes 100 million barrels a day. 1 million each way. So, if the economy stays okay, and these shale wells, you do 1,000 barrels a day the first month. Year later, they're 300. Wow. And then they're 150. Big drop-off. It's a real treadmill. And right now, there's, you know, private equity money, there's no IPOs, there's no bond market, the banks want out, private equity wants out.
Shale's going to slow down. So, these people that think that shale's going to keep growing two, three million barrels a day, we've gone from five million barrels in the US producing to 12 and a half. People think that's going to continue. I don't believe it will. Peter Lynch, thank you very
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