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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 markets had 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 the market Falls 10 percent are 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 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 they're doing fine you're hoping to get to 22 with it 14 to 22 is terrific 6-22 is exceptional so you take advantage of these things 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 uh so you can take advantage of the volatility Market if you understand what you're on one of the things I find a rule i i a couple rules I want to throw and I find use Excuse me is a lot of times people buy on the basis the stock has gone down this much you know how much further going to go down I remember when Polaroid went from 130 to 100 people said here's this great company great record but never gets below 100 you know just buy every share you know and it did get below 100 a lot of people bought on that base and say look it's got 135 to 100.
it's not 95 what a buy within a year it was 18. and this is coming with no debt I mean it was just so overpriced it went down uh I did the same thing in my uh I think my first or second year Fidelity Kaiser Industries had gone from 26 this year to 16. I said how much lower can it go it's 16. so I think we bought one of the biggest blocks ever on the New York on the American Stock Exchange advisor Industries at 14.
I said you know it's gone from 26 to 16 how much longer can I go what can I call my mother and said mom you're going to uh look at the skies or Industries I mean how much lower can it go it's been from 26 to 10. six it went to five it went four and went to three and uh I am fortunate this happened rapidly or I would probably be still cattying working at the Stop and Shop but it happened fast I was able to say it was compressed 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 Kai's aluminum they own 32 percent of kinds of cement you know Kaiser broadcast and you know Kaiser sand and gravel Cosmo 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 it's a real achievement they had no debt and the whole company at three was selling at about 75 million that point it was equal to buying one Boeing 747 I said there's something wrong with this company signed for 75 million I was a little premature at 16 but uh I said everything's fine and eventually this will work out and they what they did is they gave away all their shares to their shareholds they passed out shares and kind of cement they passed our chairs in Casa aluminum they passed out the public shares and cars of Steel they sold all the other businesses 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 had gone from 26 to 16 and then it got into 10.
what would you do when it went to nine what would you do when I went to eight what would you do when 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 if you flip a coin if you walk around the block you know what do you do are you concerned about the volatility in the financial markets today do you think something needs to be done to reduce it I I love volatility I I think I remember when uh in 1972 the market went from uh down dramatically and Taco Bell went from 14 to 1.
they had no debt they never had a restaurant closed and uh I started buying at seven but I kept on to it and it went to one and uh it was the largest position in Magellan in 1978 when it was bought out for by forty two dollars by Pepsi Cola I think it would have gone to 400 if they'd buy it out I think volatility is terrific I think it is very I think these calls are very important I don't think the market going up 80 points one day and down 80 the next uh is a good thing for the public I think that's not a very good thing but I think all these callers 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 the human nature hasn't changed a lot in 25 000 years and some event will come out of left field and um the market will go down or Mark will go up so I volatility 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 own they can own mutual funds try and feral mutual funds they own and keep adding to it over basic corporate profits have grown about eight percent 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 marks about 3 800 today 3 700.
I'm pretty convinced the next 3 800 points will be up it won't be down the next 500 points the next 600 points I know which way they're going so the market ought to double in the next eight or nine years it ought to double again in the 89 years after that because profits will go up eight percent a year and and stocks will follow that's all there is to it October has always been a special month I remember in 1987.
I was very uh you know I was very convinced that Mark was a note it was not not in trouble and I didn't worry about things and Carol and I had planned this great golf vacation to Ireland and we're gonna visit one chorus in the same 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 that day which was not too good and the next day we got to Ireland because the time difference we completed our day and I get back to the hotel and they called in the market had gone down 112 on Friday I said to Carolyn uh you know I think if the if the market goes down on Monday uh you know we're gonna have to go back and uh and so we might as well we stay there for the weekend and uh and on Monday the market went down 508 points and my fund went from I think 12 billion to 8 billion and uh that gets your attention you know it's two working days you know I said by the end of this week I'd be uh have no fun 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 o'clock it was in Ireland it was still uh seven o'clock in New York so we did spend that day and we we did we played around golf the more and then we went somewhere and sort of watched the market to deteriorate and uh and uh I did come back there wasn't nothing I could do I mean just nothing I do about it but I think my shareholders they called up and they said what's Lynch doing they said well he's on the sixth hole and he's uh you know he's even parked now but he's in a trap this could be you know this could be a triple bogey here this could be a could be a big inning and uh I don't think I don't think that's exactly what they want to hear though so I could do something about this thing so I came back home and sucked with everybody else and and uh fortunately uh I was very consistent uh my uh the market went down when I ran Magellan on 13 years the market went down nine times and every time Mark went down Magellan went down I was nine for nine and uh you know because it's great it's very important it's another one of these numbers you got to write down if you put a thousand dollars in a stock all you can lose is a thousand I've done that several times and uh but if you're right you can make five thousand ten thousand forty thousand so this business you don't have to be right one or two times you can be right one out of four it's a long time the 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 it's a terrible tragedy so you can make more money on the upside so I just I just roll those out and I'll Now flip a coin to tell you where the market will go to 4 000.
this year or next year hits means it goes up is a two-headed coin uh the market will go up in the next year that's all I ever know about the stock you'll be very pleased in 10 20 30 years stocks will beat the hell out of money markets they can beat the hell out of bonds 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 and 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
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