you can't really fail at it unless you
buy the wrong stock
or just get excited at the wrong time
and i would like to just spend just a
couple of minutes
uh giving you a little perspective
uh on how you might think about
about uh investments as opposed to
the uh tendency to focus on what's
happening
today or even this minute as you go
through and
to help me in doing that i'd like to go
back through a little
personal history and uh
and we will start
i have here
up here in new york times of march 12
1942 and i'm a little behind on my
reading
and if you go back to that time
it
it was about what
just about three months um
since we got involved in a war which
uh we were losing at that point
uh the newspaper headlines
were filled with bad news
from the pacific and i've taken just a
couple of the headlines
from the days preceding march 11th which
i'll explain
it's kind of a momentous day for me and
so
you can see these headlines we've got
slide 2 up there i believe
and uh
we were in trouble big trouble
in the pacific uh it was only going to
be
a couple months later that the
philippines fell
but here we were getting bad news we
might go to slide
three for march 9th uh
uh i hope you can read the headlines
anyway the price of the paper is three
cents incidentally
um the uh and uh
uh let's see we've got march 10th up
there a slide
i'm i want to get to where there's
advanced technology of slides
i want to make sure i'm showing you the
same thing that i'm seeing in front of
me
so anyway on march 10th
uh when again the news was
bad full clearing path to australia and
it was like
it the stock market
had been reflecting this and i'd been
watching
a stock called city service
preferred stock which had sold at 84
dollars
the previous year it had sold at 55
the year before early in the in january
two months earlier
and now it was down to forty dollars on
march 10th
so that night despite these headlines
i said to my dad i said i think i'd like
to pull the trigger
and i'd like you to uh
buy me three three shares of city
certified
the next day and that was all i had i
mean that was my capital accumulated
uh uh
over the previous five years or
thereabouts and so my dad the next
morning
um bought three shares well let's take a
look at what happened the next day let's
go to the next slide please
and it was not a good day
the stock market the dow jones
industrials broke
100 on the downside now they were down
2.28 as you see but that was
the equivalent of about a 500 point drop
now
so i'm in school wondering what is going
on of course
uh incidentally you'll see on the left
side of the chart
the new york times put the dow jones
industrial average
below all the averages they calculated
they had their own averages which have
since disappeared but the dow jones has
continued
so the next day uh
we can go to the next slide and you will
see
what happened the stock that was in 39
my dad bought my stock
right away in the morning because i'd
asked him to my three shares
and uh so i paid the high for the day
that 38 and a quarter
uh was my tick which is the high for day
and by the end of the day
it was down to 37 uh
which was really kind of characteristic
of my
timing in stocks that was going to
appear in future years
uh um but
uh uh it was on the what was then called
the new york curb exchange then became
the american stock exchange
but things even though the war until the
battle of midway looked very bad and
if you'll turn to the next slide please
you'll see that
the stock did rather well you can see
where i bought at 38 and a quarter
and then the stock went on actually
to eventually be called by the city
service company
for over 200 dollars a share
but this is not a happy story because if
you go to the next
page you will see that i
well as they always say it seemed like a
good idea at the time you know
uh so i sold those i made five dollars
on it it was
it was again typical of behavior
but when you watch you go down to 27
uh you know it looked pretty good to get
that profit well what's the point of all
this well we can leave behind the city
service story
and i would like you to again
imagine yourself back on march
11th of 1942
and as i say things were looking bad in
the european theater as well as what was
going on in in the pacific but
everybody in this country knew
uh america was going to win the war i
mean it
it was you know we'd gotten blindsided
but but
we were we were going to win the war and
and we knew
that the american system had been
working well since 1776. so
if you'll turn to the next slide i'd
like you to imagine
that at that time uh you had invested
ten thousand dollars
and you put that money in an index fund
we didn't have index funds then but but
you
in effect bought the s p 500
now i would like you to think a while
and don't do not change the slide here
for a minute
i'd like you to think about how much
that 10 000
would now be worth if you just had one
basic premise just like in buying a farm
you buy it to hold
throughout your lifetime an independent
and you look to the
output of the farm to determine whether
you made a wise investment
you look to the output of the apartment
house to decide whether you made a wise
investment if you buy an apartment small
apartment house to hold for your life
and let's say instead you decided to put
the ten thousand dollars in
and hold a piece of american business
uh and never look at another
stock quote never listen to another
person give you advice or anything of
the sort
i want you to think how much money you
might have now
and now that you've got a number in your
head let's go to the next slide
and we'll get the answer you'd have 51
million dollars
and you wouldn't have had to do anything
you wouldn't have to understand
accounting
you wouldn't have to look at your
quotations every day like i did that
first day
i'd already lost 3.75 by the time i
came home from school uh all you had to
do
was figure that america was going to do
well over time that we would
overcome the current difficulties
and that if america did well american
business would do
well you didn't have to pick out winning
stocks
you didn't have to pick out a winning
time or anything of the sort
you basically just had to make one
investment decision
in your life and that wasn't the only
time to do it i mean i could go back and
pick other times that
uh would work out even greater gains but
as you listen to the
questions and answers we give today
just remember that the over the
overriding question
is how is american business going to do
over your investing lifetime uh
i would like to make one other comment
because it's
it's a little bit interesting let's
let's say you're taking that ten
thousand dollars
and you listen to the profits of doom
and gloom around you and
and you'll get that constantly
throughout your life
and instead you use the ten thousand
dollars
to buy gold now for your ten thousand
dollars
you would have been able to buy about
300 ounces of gold
and while the businesses were
reinvesting
uh in more plants and new inventions
came along
you would go down every year into your
look in your safe deposit box
and you'd have your three ounce 100
ounces of gold and you could look at it
and you could fondle it and you could i
mean whatever you wanted to do with it
but it didn't produce anything it was
never going to produce anything
and what would you have today you would
have
300 ounces of gold just like you had in
march of 1942
and it would be worth approximately
four hundred thousand dollars
so if you decided to go with a
non-productive asset goal
instead of a productive asset which
actually was
earning more money and reinvesting and
paying dividends and maybe purchasing
stock whatever it might be
you would now have over 100 times
uh the value of what you would have had
with a non-productive asset in other
words for every
dollar you have made in american
business you'd have less than a penny
by of gain by buying in the store value
which people tell you to run to every
time you get scared by the headlines or
something disorder it's
it's just remarkable uh to me that
we have operated in this country with
the greatest tailwind at our back
that you can imagine it's an investor's
i mean you can't really
fail at it unless you buy the wrong
stock
or just get excited at the wrong time
but if you if you owned a cross-section
of america and you put your money in
consistently over the years
there's just there's no comparison
against owning something that's going to
produce nothing and there frankly
there's no comparison
with trying to jump in and out of stocks
and
and pay investment advisors if you'd
followed my advice incidentally
or this retrospective advice which is
always so easy to give
uh if you'd follow that of course you're
there's one problem buddy
your your friendly stock broker would
have starved to death
i mean you know and you could have gone
to the funeral
to atone for their fate but the truth is
you would have been better off doing
this than
than a very very very high percentage
of investment professionals have done or
people have done that are active that
it's it's very hard to move around
successfully
and beat really what can be done uh
with a very relaxed philosophy and you
do not have to be
you do not have to be you do not have to
know as much about
accounting or stock market terminology
or whatever else it may be
or what the fed is going to do next time
and whether it's going to raise rates
three times or four times or two times
none of that counts at all really in a
lifetime of investing what what counts
is
is having a a philosophy that you've
that you stick with that you understand
why you're in it and then you forget
about doing things that you don't know
how to do