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An old interview with Peter Lynch [PBS]


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http://www.pbs.org/wgbh/pages/frontline/shows/betting/pros/lynch.html

 

Talk about market timing.

 

"The market itself is very volatile. We've had 95 years completed this century. We're in the middle of 1996 and we're close to a 10 percent decline. In the 95 years so far, we've had 53 declines in the market of 10 percent or more. Not 53 down years. The market might have been up 26 finished the year up four, and had a 10 percent correction. So we've had 53 declines in 95 years. That's once every two years. Of the 53, 15 of the 53 have been 25 percent or more. That's a bear market. So 15 in 95 years, about once every six years you're going to have a big decline. Now no one seems to know when there are gonna happen. At least if they know about 'em, they're not telling anybody about 'em. I don't remember anybody predicting the market right more than once, and they predict a lot. So they're gonna happen. If you're in the market, you have to know there's going to be declines. And they're going to cap and every couple of years you're going to get a 10 percent correction. That's a euphemism for losing a lot of money rapidly. That's what a "correction" is called. And a bear market is 20-25-30 percent decline. They're gonna happen. When they're gonna start, no one knows. If you're not ready for that, you shouldn't be in the stock market. I mean stomach is the key organ here. It's not the brain. Do you have the stomach for these kind of declines? And what's your timing like? Is your horizon one year? Is your horizon ten years or 20 years? If you've been lucky enough to save up lots of money and you're about to send one kid to college and your child's starting a year from now, you decide to invest in stocks directly or with a mutual fund with a one-year horizon or a two-year horizon, that's silly. That's just like betting on red or black at the casino. What the market's going to do in one or two years, you don't know. Time is on your side in the stock market. It's on your side. And when stocks go down, if you've got the money, you don't worry about it and you're putting more in, you shouldn't worry about it. You should worry what are stocks going to be 10 years from now, 20 years from now, 30 years from now. I'm very confident."

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I like this one:

So I think it was just looking at different companies and I always thought if you looked at ten companies, you'd find one that's interesting, if you'd look at 20, you'd find two, or if you look at hundred you'll find ten. The person that turns over the most rocks wins the game. And that's always been my philosophy.
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I personally don't understand that philosophy. Well, I can understand it it if you're a professional with billions under management but not if you're a retail investor. If we "know" corrections about about every two years and bear markets happen every six, why would one not become more defensive after a long string of high returns? 

 

According to bespoke from an article from June, "The 1,000-day milestone, notched Sunday, marks the fifth-longest stretch without a correction on the S&P 500’s performance transcript since 1928, according to Bespoke Investment Group. It’s the longest pain-free rally since a 1,127-day run without a 10% drop from July 1984 to August 1987." That puts at roughly 1060 now.

 

http://americasmarkets.usatoday.com/2014/07/01/markets-correction-free-run-tops-1000-days/

 

I'd guess that puts us in the top 3 or 4. Now, granted, with QE we might break the longest and continue for a lot longer but the odds are against it.

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