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Wisdom from an investing legend

Published: Mar 11, 2009 3 min read

Legendary investor John Templeton died last July at age 95, but recently I find myself thinking about some of his classic value-based gambits as I follow and report (and suffer) through this market meltdown.

It started last week when Barry Ritholtz, blogger extraordinaire at The Big Picture, used Citigroup’s plunge below $1 a share to anoint the new Blue Chip Penny Stocks. The massive erosion of shareholder equity among former market stalwarts is nothing but devastating but it reminded me of Templeton’s signature investment move. Back in 1939, just a few years past the Depression rout and amid a new round of unease as the inevitability of World War II was beginning to sink in, Templeton borrowed $10,000 from a friend (the equivalent of about $152,000 today in inflation-adjusted dollars) to buy one share of every stock traded on the New York exchanges. Just four of the 104 firms went out of business. Thus began a very long career of fortune building through fire-sale purchases. This was the guy who scooped up Japanese bonds in the early 1960s, as the country was still struggling to reboot its post-war economy. And in the wake of the jolting October 1987 sell off Sir John (yes, he picked up a knighthood along the way; not for his investing smarts, but his philanthropic bent) dove in and bought big time. As Templeton often explained “The time of maximum pessimism is the best time to buy.”

But it’s another Templeton bon mot that I keep coming back to these days: “The four most expensive words in the English language are, `This time it's different.'”

I now find myself reciting that Templetonian wisdom to myself on a near-daily basis. This does feel quite different but it isn’t the first (or last) bear market. It’s just the big scary one we are stuck living through right now. When I need more assuaging I remind myself that the 12 months after a bear market are when most of the rebound-money is made. I have no insight on when that will be; but am just sure I can’t time it, so I will stick with a diversified allocation strategy and keep repeating the Templeton mantra.

-- Carla Fried