Peter Lynch Investment Principles - Know What You Own & The Stock Market

Lynch's first and most important principle: Know what you own. He criticizes investors who can't describe their stock to an 11-year-old in two minutes or less - only reason they have is 'the sucker's going up.' Mocks complex tech stocks with 'one megabit SRAM CMOS bipolar RISK floating point data IO array processor' - says you'll never make money in stocks like that. Prefers simple businesses like Dunkin Donuts, Stop & Shop, CVS. Highlights Sallie Mae (Student Loan Marketing) - great simple story from 1983 road show, only 100 people looked at it, nobody would buy because 'imagine loaning money to students.' Simple stories are where money is made.

Lynch's second major principle: predicting economy, interest rates, and stock market is futile. Would love to know when recession coming or interest rates going up, but you don't get next year's Wall Street Journal. Recalls 1982: 20% prime rate, 15% long governments, double-digit unemployment and inflation - nobody predicted that in 1980. Then from 1983-1990, every year experts predicted recession 'next year' - all wrong. October 1987 something happened (market lost 7 in a row). Famous quote: 'If you spend 13 minutes a year on economics, you've wasted 10 minutes.' All you need to know: stock market goes up and it goes down. He deals with facts - inventories, copper prices, room occupancy, freight car loadings - not predictions about future.

Lynch counters urgency mentality: 'People are so insistent they have to buy a stock. I haven't found a stock yet today, I got to find a stock before sunset.' You could buy Walmart 10 years after going public - very careful investor who waited to see if company could make it. 10 years after IPO, Walmart only in 15% of United States (1-5). Could say 'why can't they go to 17%, 19%, 26%?' All they did for next three decades was roll it out. Buy at IPO: 500 times your money. Wait 10 years: 30 times your money. Point: you have plenty of time in this business. Same applies to Stop & Shop, Sallie Mae.

First dangerous thing people say: 'If it's gone down this much already, can't go any lower.' Polaroid went from 140 to under 100 - people said 'back up the truck, buy it under 100.' Broke 100, people bought it, within 9 months was at 18. Saw same with Avon Products. Lynch's personal story: Kaiser Industries, new analyst at Fidelity. Stock went 29 to 17. Fidelity bought largest block ever on American Exchange at 15 and 3/4. He called his mother: 'It's gone from 29 to 10, how much lower can it go?' Went to 9, 8, 7, 6, 5, 4. Fortunately happened rapidly or he'd be 'working at Stop & Shop bagging behind the lines.' Had to check fundamentals - they owned 45% Kaiser Aluminum, 59% Kaiser Steel, 38% cement, all of Kaiser Electronics, 7 TV stations, Jeep, Kaiser Fiberglass, gravel, other Kaisers, and NO DEBT. Stock was 4. 'No one's ever gone bankrupt without debt.' Within 3 years gave out shares, got $55/share. Taco Bell went 14 to 1 in 1974 with no debt, making 60 cents/share.

Corollary even more dangerous: 'If it's gone this high already, how can it possibly go higher?' Philip Morris adjusted for splits sold for 12 cents in 1951. Goes to 60 cents in 1961 - up fivefold. People say 'how much higher can this go?' They missed the power of Marlboro, missed there's 220 countries in world, missed the cash flow of the company, missed everything. This stock was a 100-bagger AFTER going up fivefold. People sold just saying 'how much higher can it go, can't go any higher.' Did the same with Home Depot, Toys R Us. Very dangerous to use that reasoning.

People say 'eventually they always come back' - not true. RCA just about got back to 1929 price when backed out by GE. Manville never came back. International Harvester even with name change and adjusted for splits doesn't get all the way back yet. Western Union. Double knits, floppy disks - they don't have to come back. The assumption that stocks 'eventually always come back' is false.

Lynch on 'It's three dollars, how much can I lose?' - calls this a great dangerous one. Sets up scenario: neighbor buys $10,000 of stock at $50, stock now $3, you put $25,000 in at $3. If it goes to zero, who loses the most? 'A lot of people cannot answer this question.' If you put a billion in at $3, you can lose a billion. They blow taps in lots of companies every year - stocks can go to zero. The low price doesn't mean low risk.

Dangerous saying: 'It's always darkest before the dawn. Business is terrible, ought to buy the group.' Freight car deliveries: 1979 had 96,000 delivered, two years later fell to 45,000 (lowest in 23 years). People said business is awful, horrible, pathetic. Then fell to 25,000. '15 opportunities to lose money, 15 suppliers of freight cars.' Last year shipped 7,000 - business continued to be miserable. Energy services industry even worse: 1982 had 11,000 oil rigs drilling, fell to 6,000 by 1983, lower in 84. Hundreds of companies - muds, down-hole stuff, fracturing, measuring, chambers, lots of opportunities to lose. Recount was only 1,000 three years ago (from 11,000 eight years prior). Industry really turned about two years ago. Just saying business can't get worse doesn't work. Lynch followed textile industry - JP Stevens founded 18th century, West Point Pepperell 18th century, Burlington 1904. Great expression in textile industry: 'It's always darkest before pitch black.' Business can get considerably more terrible - 'terrible to the power of six.'

People buy stock at 10, falls to 6, say 'if it gets back to 10 I'll sell.' That's about a 66% return - if you think it's going back to 10, you ought to buy more, not sell. 'Never put down a round number. I think for the next 26 years it'll go between 5 and 9 and a quarter, never get to 10.' Maybe put 9 and an eighth or 8 and three quarters. Key rule: THE STOCK DOESN'T KNOW YOU OWN IT. You could be a miserable person, never helped anybody, never done anything right, had 67 spouses - if you owned Coca-Cola last 50 years it's gone up 300-fold, you'd be greatest human in world. Help Special Olympics, help mentally challenged, help poor people, help AIDS people - if you own Bethlehem Steel it's lower than 30 years ago. It's not your fault, don't take it personally. But people treat stocks like grandchildren or a puppy - think the stock knows who you are. It doesn't work that way.

Saying 'I own conservative stocks, I don't have to worry' is dangerous. Con Ed fell 80% then tripled. Public Service Indiana went down 90%. Gulf States Utilities, Long Island Lighting. 'Quality' Texas banks went to zero. Quality New England banks went to zero. These are companies around for 150 years, 120 years. Don't inherit a stock and think you can't sell. People say 'my mother said on her deathbed don't sell the Long Island Lighting.' Imagines talking on deathbed about Long Island Lighting. 'Your mother would have noticed little plant that was $6 billion over budget, no one wanted it, wasn't working, and Long Island stopped growing. Maybe she would have turfed at 22 or gotten out at 18. She wouldn't let it go to 4.' Just because you inherit so-called conservative stock like Eastman Kodak (fell 75%), IBM (fell 75%) - don't tell anybody you own a conservative stock. Companies are very dynamic.

Very dangerous: 'Look at all the money I've lost I didn't buy it.' People constantly say didn't own Blockbuster, didn't own Home Depot, didn't own Toys R Us. Lynch in one of his books listed 13 years of Magellan: about 200 stocks A through L on NYSE that went up tenfold or more that he DIDN'T own while running Magellan. He had lots of stocks, was able to do okay with Magellan anyway. People worry all the time about missing Microsoft, missing Western Digital, missing United Airlines. They spend time worrying about stocks they missed. CANNOT LOSE MONEY IN A STOCK YOU DON'T OWN. That's a variable. Only way to lose money: buy stock, have it go down, and sell it. People have spouse cut out the C's from newspaper because looking at A's and B's depresses them. 'Microsoft's up 3, I was going to buy 1,000 shares, I lost $3,000 on Microsoft last night while I was sleeping.' Same with National Semiconductor. 'Blockbuster finally went away - that was early in alphabet, people would always be looking at how much they lost in Blockbuster.'

Lynch on 'I missed that one, I'll catch the next one' - usually doesn't work. Toys R Us had lots of copycats - Trial World, Lionel. Copycats from Home Depot. Buying the next of something usually doesn't work. It's very bad. 'It's like buying on dips. I think it's always better to buy FROM dips.' Technical stock market term explanation: 'dip' is always used plural - 'buy from dips.' Never heard singular 'he's a dip, she's a dip' - usually only plural 'dips.' Gender non-specific, usually plural, never used singular.

Lynch convinced people do this constantly: buy stock at 10, buy a little bit, goes to 13. Now say they don't know anything more about it than when it was 10, have no idea what company does, but stock's at 13 so they take a second mortgage on the house and buy at 13. 'Best thing could happen: stock go directly from 10 to 4 for these folks because it's going to go to 4 eventually, but it goes to 13 in the middle.' They're convinced now, bought 100 shares at 10, now buy 20,000 shares at 13. All that happened: stock went from 10 to 13, it went up. Average movement of stock on NYSE this century between high and low has been 50%. Average stock starts year at 20, sometime during year sold at 16, sometime sold at 24, might finish at 21 or 19. Average range 50% in 12 months between high and low. So stocks go up and down a lot within a year. Saying stock is going up means you're right doesn't mean a damn thing.

Lynch on avoiding long shots: has technical term 'whisper stocks.' Somebody calls, asks about family, then whispers about International Blivet. Won't catch these people even in places with Nordic tracks where they make big rocks into small rocks - won't catch them if they whisper on phone. Always these long shots - stocks that will grow hair, make kid spell better, improve breasts, won't have to iron pants - 'one of those stocks that do everything for you.' Missing element: they don't have any sales yet. 'Story is sensational, no prophecy, no sales yet, but if this works it's going to be next Xerox, help murder in space.' This is not a long shot, this is a NO SHOT. Lynch has tried 30 of these, never broken even on a long shot. Never. But made 25-30 times money on stocks he never thought about - Sallie Mae, MBIA, Fannie Mae, banks, Stop & Shop. Thought stocks were going north, had no idea, 10 years later made lot of money. Once went in thinking could make 4X money, never broken even. Don't do long shots, they don't work.

Lynch continues on long shots: if stock is $3 and has huge potential, write down the story, take the stock symbol. If it's going to $300, it's okay to buy it at $15. Check in later, check a year later, see if it's still listed so you can get a quote on it. See if they're selling the earnings yet. If it's going to $300, write the story down. 'Some of these work - I haven't heard yet but maybe they will work. But it's worth tuning in six months later. Don't buy it then.' Practical advice for handling long shot pitches without falling for them too early.

Management is single most important thing in a company, but for outsider to know great vs good vs terrific vs average management - tough to do. Only get hour with people, sometimes half hour. How do you know what decisions they DIDN'T make? A lot of great companies made because they didn't make an acquisition, didn't get rid of division. 'They didn't get rid of tubing division - you don't hear about that.' Someone made brilliant decision to hold on, fix it, doing great now. Might be doing great because some management 8 years ago did something right, 5 years ago, that person isn't there anymore. Or they didn't make any acquisitions, or expanded at right time. Knowing what management can add - very hard to measure. Lynch wants company any fool can run 'because eventually one will.' When bought Toys R Us, they had formula right. 'Any four people in this room and me could have run Toys R Us. Wouldn't have done as well as they did - they're spectacular - but for next 15 years with no competition we had great formula, could have rolled with it. They probably would have done 3X as good - they were frosting on cake but had the formula right, no competition, department stores don't know what they're doing, no copycats.' Same with Circuit City. Wants story to be solid. If management can add anything on top, that's great. Wants to buy the story assuming management leaves next day and replaced by next generation. 'That's fine with me. If management can add something, that's great. Not going to buy it because people say they have great management.' Notice great management always attached to stocks up last 8 years. Reynolds Metals had same person running for 30 years - when aluminum was tight they'd say great management, when aluminum going on backorders say these people are idiots, then aluminum gets tight say they're terrific. 'It all had to do with price of aluminum. They keep writing management by how stock's doing.' Very hard to measure management. Would be wonderful if you could spend months with them, really see them in action, then you'd know. But don't really get that chance.

People have all these biases, all these prejudices. Want to buy high growth industries, won't buy financial companies, won't buy savings and loans, won't buy companies that start with letter R. 'All these rules - they all hurt you.' Great stocks everywhere. Stocks near bankruptcy, stocks IN bankruptcy, stocks about to go into bankruptcy. Companies on new high list that are attractive, companies on new low list. They're all over the place - in growth industries, non-growth industries. Don't cut yourself off to one segment. People have way too many prejudices, too many biases. Lynch always thought of buy lists at some institutions (not Fidelity) - biased. Thinks Kmart got on some buy lists 3 years ago, Microsoft may get on it about 12 years from now. 'Buy lists - you ever look in pocket of new shirt, see inspected by 6 or inspected by 8?' Wonders: 'Has anybody ever got a shirt inspected by 1? Do they retire these numbers, have a meeting?' Never had shirt inspected by 1 or 2. 'Think they must put the raised numbers in a meeting up to the rafters. Every time I get that number in shirt I think of these people working off a buy list of rapidly growing companies only, they have unit growth rate of X or 6X or whatever numbers. It doesn't work.'

Lynch on math: doesn't use a computer, doesn't have a computer. Really was doing great at math - 7x7=41... wait, 49, and 9x9=81, 12x12=144. 'This is great, I love this stuff. Barge left St. Louis going 8 miles an hour, train left Pittsburgh - this stuff is easy.' Remembers one day, thinks ninth grade, 'grim day - somebody introduced cosine that day. Does anybody use cosine the last couple years?' Let's have show of hands - some have used cosine last six months. 'Then remember tangent and cotangent, why would you want to know about tangent? Then remember area under the curve, calculus, area under curve - what the hell would you want to measure area under curve for? That is such garbage.' Don't need this for stock market. 'If you can add 8 and 8 and get fairly close to 16, that's all you need. You say $400 million in debt, no equity, no cash, losing money - forget it. They get $300 million in cash, no debt, $200 million in net worth, they're losing $10 million a quarter - they'll be around. That's all you need. Math is not that hard. If you made it through fifth grade math you can handle this stuff.'

Lynch's Army roommate told story about his hero at 'very good school in the South I won't tell you name of, but it's in Atlanta and rhymes with Roger Wreck.' Great footballer as freshman - would go to line of scrimmage and they'd change the play. Couldn't figure this out. Football is complicated - half the plays change at line, about 300 plays. You go there thinking it's run to right, turns out it's screen pass to left or draw, all blocking assignments changed, all passing different. 'You have to instantly think: oh, new play, what do I do in this new play - just like that and do it.' He could not handle these deals. 'Just give me the ball, I'll tote it' - he'd go for about 8 yards, really good at this. 'Now this is not why he's my hero. Reason he's my hero: in a classroom about this size his freshman year he asked the question: DOES X ALWAYS EQUAL 7?' He never made it to second semester, never made varsity, never made NFL. 'It was that damn X, never could figure out X.' Lynch always thought: 'If only they could resolve what to tell X equal - give us 247 and a quarter - just finally resolve what X was, we could save all this time and do something useful. You don't need X in the stock market.'

Lynch: 'Now we'll get to the important stuff. There's always something to worry about.' This is what happens in stock market. Everybody's got brain power to do well in stock market - question is whether you have the stomach for it. That's the key organ in the body. There's always something to worry about. Grew up in school in 50s - big theory that depression was caused by stock market crash. 'Totally wrong - less than 1% of Americans owned stocks in 29.' We had big time recession, in fact it was a depression. Wasn't caused by stock market - economy went down, Federal Reserve raised interest rates, we had depression. In fact had several depressions like that from 1850 on - this was only one of about 8 depressions since 1850. But people thought only reason we got out of depression was World War II, said once we get back next time we have recession we're going to have a depression and it's going to be a Great Depression. 'I never understood that adjective in front of depression - might be crummy depression or bad depression, but Great Depression I never quite understood.' So people weren't buying stocks in 50s because thought another great depression going to happen. In addition people very scared about nuclear warheads and nuclear war in 50s. People building fallout shelters, stocking canned goods. 'Something about going to Vermont, building fallout shelter, putting canned goods in it - you don't buy Minnesota Mining or Eastern Kodak. The syllogism just doesn't work out.' Remembers literally in classes in elementary school in 50s: 'They'd come in, have one of these air raid drills. Somebody yell a hat and come, blow a whistle, you get under your desk. Even then I said I don't think this can do a lot of good.' People worried about depression and nuclear war in 50s. 'Warheads couldn't do much damage back in 50s. Now one of these Stan countries - Kakistan and Kazakhstan, all these Stan guys that spun off, these Freeman Billings spin-offs - every one of these little countries has enough warheads to blow world up 88 times right. Who's built a fallout shelter? We stopped worrying about it.' There's always something to worry about. In 50s it was depression and nuclear war. 50s was best decade this century for stock market except for 80s, only slightly better. People didn't expect a lot, just didn't expect much. We made it through. Stock market was terrific.

Lynch continues litany of worries. Remember when oil went from $4 to $40? 'Experts and centers can go to $100 and all countries of world will go bankrupt and big banks go bankrupt and we're going to have great depression and stock market's go down and wind up selling pencils and apples.' Oil went $4 to $40, experts said going to $100. Within two years oil was at $14. 'The experts, now much higher paid at this point, are saying it's going to go to $4 and we'll have a depression.' People believed it again. Remember when money supply was growing too fast - said we're going to have depression. Then growing too slow, we're going to have depression. Remember LDC debt? 'All the banks, our banks were very smart - they lent all their net worth to Zimbabwe and Botswana and Ceylon and all these countries Chile, lot of countries they can't pronounce. Chase Manhattan and Chemical and Manufacturers Hanover. These countries weren't doing so well. They were called undeveloped countries or less developed countries. Now you have to call them emerging countries - not politically correct to call anybody undeveloped country. It's like I just found out other day that term for somebody that's overweight is laterally challenged.' These are LDC debt, they're all going to go bankrupt and we're going to have depression. Then Mideast was going to own the world - remember that one? Mideast around the world, they weren't going to buy our bonds and market crashing, would have depression. Then Japan was going lower man - that one. 'Japan was going to have all the assets and they weren't going to buy bonds and we'll have depression. Within three years the Nikkei Dow had gone from 40,000 to 16,000. Banking system is in trouble.' People said Japan was going to collapse and we're going to have a depression. 'People on their prayer list the other day they eliminate crippled children, Mother Teresa, they're praying for Japan. It's a country with a 15% savings rate - some bizarre.' Commercial real estate, global warming.

Lynch thinks older you get the more nerves you get about these things. Thinks why younger people are better investors is they're not worried, they haven't heard about all these crises. 'Being with children I think - if you don't have any kids you gotta rent some kids for the weekend. Get a 7-year-old and ask if he knows about the money supply, how fast it's going. Ask if he knows about shape of yield curve, is the wrong shape of the yield curve. Or that we're 48.3 months into economic recovery, the average recovery is less 52.3 months. Ask an 8-year-old if they know about that. 8-year-olds have a very high expectation about the next 20 years. That's what you need to do. The more you get away from 8-year-olds, the more away from living rolls, the more you start reading these crazy things you read over the weekend.'

From 1955 to 1985, stock market went up grand total of 1,000 points. But it was down 800 on Mondays. So therefore was up 1,800 on non-Mondays. 'Wasn't an accident the stock market went down October 1987 was a Monday. People over the weekend become economists and portfolio strategists and they're bullish if they take their lunch on the way to work.'

Lynch knew very well market was going down in October 1987 - first vacation he was going to take in 6 years. Decided on Ireland, stayed in little cottages, play golf. Left Thursday after close of trading, market was down 55 points. 'Wasn't a good start but it was down 55 points.' Got over there, because of time zone were able to do what wanted and got down to Cork, called in - market was down about 118. Said to Carolyn: 'If market was down on Monday we'd better go back. We're already here so I'll also stay for the weekend.' As you know mark went down 508 on Monday. So flew home because his fund had gone from 'I think from $13 billion to $9 billion in two working days and it was - the trend here is not positive. Like I could do something about it.' But there's something when they call, they wanted to say 'What's he doing right now?' 'Well he's on the 10th hole, he's even par on the front 9 but he's in a trap right now, this could be a double bogey, could be a quadruple bogey right here, could blow the entire front nine right here. This is not what they want to hear.'

Lynch has no idea when markets can go down and no idea when it's going to go up. 'I'm totally shocked the market was 4,000 two and a half years ago, a little while ago it's 8,000. I had no idea about this. Very surprising to me. But I'll guarantee you the market will be a lot higher in 15 years. It'll be a lot higher than 25 years. What it's going to do next one or two years I don't have any idea. And if somebody in this room knows about it they're not telling anybody or they're not in this room, they're down in Palm Springs somewhere. They've made a billion dollars. Or if they know anything about interest rates - if you can be right 5 times in a row on $10 grand you can have $2 billion. It's not that many people with $2 billion. There's a lot of people predicting interest rates. Did you ever think about that one? Just 5 times right around $10 grand, $2 billion. If you're right 8 times in a row you can have the GNP of the United Kingdom - big number.' So doesn't worry about that. Knows we've had 96 years a century and market's fallen 53 times - 53 declines of 10% or more. So 53 declines in 96 years - once every two years we have a 10% decline. Of the 53 declines, 15 (1-5) have been 25% or more. So 15 in 96 years but once every 6 years the market falls 25% or more - that's what we call a bear market. 'And it's going to happen. I don't care when it's going to happen. I would love to know, obviously it'd be very useful to know when it's going to happen. It doesn't make any difference to me. Market probably a lot higher 8 years from now, a lot higher 16 years from now, a lot higher 30 years from now. That's what I deal with.'

Q&A begins. On international stocks: Lynch found he was better overseas than domestic because 'just less coverage, less people following these companies.' Big theory: 'If you look at 10 companies you'll find one that's mispriced. Look at 20 you'll find 2. Look at 100 you'll find 10. The person that turns over the most rocks wins the game.' Overseas numbers much better, not that much coverage - international stocks definitely worth looking at. When to sell: sell for exactly the reason you bought it. You write down reason you bought it. Bought Subaru - they were distributor, didn't make cars (Fuji Heavy Industries made them), they distributed Subarus in US. Stock was $80, up from $6 to $80. 'I was a little late on this but didn't bother me, should never let that bother you.' They had $40/share in cash, very low priced car, well liked. Did well 5-6 years, stock went 80 to 320. Reason sold Subaru: Hyundai came in with low-cost car, Chrysler cut price of Omni Horizon, Ford came out with low priced car. 'All of sudden Subaru was no longer unique. So if the car's not a buy the stock's not a buy. That's what you're looking for. The reason you buy a stock you keep it posted. If the reason changes you go on to something else.' What industries do you like best today and why? 'No idea.' Where's your favorite stock investment today? 'No idea.' What would rather tell you: 'There are lots of great stocks out there. You'll find them. I could recommend this stock and 3 months later go up or go down but the great stocks are out there.'

Lynch continues: worked in investment business, missed Franklin, missed Dreyfus. 'Franklin went up 300-fold. Dreyfus went up 50-fold. I didn't miss Dreyfus twice. It was my industry.' When Dreyfus went in the crash - this is bizarre - Dreyfus went from 50 to 30, crash it fell to 18. 'They had $17/share in cash and no debt.' Selling for $1 over cash. 'I did that math very rapidly.' Week of crash they were 90% in money market assets and bonds - their assets didn't go down week of crash. So went from 50 to 18 with $17/share in cash. 'I paid attention to my own industry. Imagine being in retailing industry - you had seen Home Depot, you're seeing Circuit City, you're seeing all these great companies. These people buying biotechnology stuff, it's like crazy.' Do you believe S&P 500 market is expensive? 'Yes.' Which industries look most attractive now? 'I would say if you look at the secondary stocks, we've had 3,000 companies come public the last 4 years - that's two a business day. 3,000 companies. One third of them are lower than the price it came public at. Some of these are not great companies but some are good companies, they had a glitch and no one cares about them. So it's the secondary companies to me is the research list. That's where I'll be looking today.'

Question: If you believe should know what you own, discuss pros and cons of concentrating your estimates versus diversification. Lynch: 'Very good question. I don't believe in diversification at all. I would own one stock if I could find one great stock. Diversification is a big mistake. I call it diworsification. You buy this thing that might balance this other thing and they both go down.' What he does believe in: 'If I find 10 good stories they're all equally attractive, I buy all 10. And I wait to see them unfold. It's like watching 10 poker games, 10 games of stud poker. You watch the cards turn over. Story 3 gets better, story 6 slips, story 7 stays the same but it goes up 50% so you sell 7 and buy 2. That's all I do. So if they're equally attractive I buy all 10. Then gradually some story says oh my god this is getting better and better and guess what the stock just went down. So you keep watching 10 stories and magically, because of that rule of stocks going up and down a lot, then you load up. You really take a big advantage. So that either happens because sometimes the company or the market goes down and all stocks go down.'

Q: Will you please cease writing articles on mutual fund conversions? A: 'I'm not going to cease writing articles on mutual fund conversions. It gets me mad that 99% of people that have deposits in a thrift when it goes public, this thing comes to them, throws it in the trash. They don't even look at it. It's sad they don't even consider buying it because they're used to getting something from savings and loan - they gave them a calendar and a free toaster - and they're not used to something as 75 pages of black ink and they have to put money up. So I'm still trying to educate the public to take a look when thrifts come public.' Q: Opinion of Wayne Huizenga's style? A: 'Great style.' Q: Statistics show women control most of the money in US, where are they at this moment? A: (reads question) 'No idea where they are. There's some males trying to find these rich women.' (re-reads) 'Looks like drill them, I can't believe it. Oh tell them what to do.' Lynch: 'Don't know. I've got three daughters. We've specialized in that gender and they're great and they're bright as hell and I think they're going to be terrific. So I don't know why there's so many men in this room but I think it'll even out over time. It takes a little while to catch up. I remember when our business school and Wharton had no women in it. Now they're 50% so it's working the right way.'

Q: Barton Biggs says we are in a bear market rally, do you agree? A: 'I don't have the freaking idea what rally shmally this is. Total... yeah.' Q: Manny Freeman said this morning they're in the 5th inning of the current world market. A: 'This is also... (laughter)... the only difference this is more current.' Q: How many banks will there be in 10 years? A: 'We still have 7,500 deposit takers United States. In England they have 7 commercial banks, they have 3 building loan societies, they're totally 10 deposit takers. In Canada there are 8 banks in the whole country. My town we have over 9 banks - little town 18,000, we have 9 banks. We have 7,500 deposit takers United States including credit unions. They all have their own audit, their own advertising jingle, their own software systems, their own board of directors. Unbelievable waste. How many banks will be in 10 years? A lot less than there is now. How many thrifts will be? A lot less. This industry is going to have a serious consolidation. It's an unbelievable redundancy, waste, duplication and it's going to shrink. And it works now - these stocks are up, they use paper, it doesn't cost anything to do it. Done.' Lynch: 'I appreciate it very much, thank you.'