Word: lynch
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Dates: during 1980-1989
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Boarding the plane, Lynch felt "like a prizefighter who knows that in six hours he will walk into the ring." Despite his confidence that the market would bounce back, he was troubled by fears and doubts, just like every other investor, large or small, during the historic crash. He thought about his mother, who lived through 1929 and "always said you should never own stocks." He wondered, "Maybe this is the start of the real thing." Most of all, he thought of the people who had bet on him, though he had always told them up front that...
...office, where he worked on what is now known as Terrible Tuesday until just before midnight. Though the blue-chip stocks in the Dow staged a rally, the rest of the market took a drubbing again. The price of a Magellan share fell by another 2%. Says Lynch: "Tuesday was the worst day of my career...
...Fortunately, the worst was over. The market kept gyrating during the next few weeks, but there were no more crashes. Lately, the inflow of new investments has started to outpace redemptions, and Lynch is pleased that only 50,000 out of the 1 million-plus Magellan customers have abandoned the fund completely. Even after the crash, Magellan investors are 2% ahead for 1987 as a whole. According to an independent study by Lipper Analytical Services, investors who have been in Magellan for three years have earned 68% on their money as of the end of November. Over the same period...
...Lynch's peers in the money-management business think that he came through the crash remarkably well, considering the enormous size of the fund he had to handle. Says Barton Biggs, a global strategist for Morgan Stanley: "Lynch is still the most consistent mutual-fund manager in the country, even if he does not outperform the market every time. None of us are supermen in a prolonged bear market." Agrees Anthony Thatcher, a portfolio manager at Scudder Stevens & Clark: "Lynch's reputation, though somewhat tarnished, is not obliterated...
...Lynch did learn some lessons though. For one thing, he never intends to be caught again without enough cash on hand. From now on, he will keep 3% to 5% of Magellan in money-market instruments or other cash equivalents, at least three times as much as in the past. Says he: "If $300 million wants to go out in a day now, I want to be ready." That way, if the market falls and redemptions suddenly run high, he will not be forced to sell stocks that he expects will rebound later...