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The Wisdom of Sir John Templeton

Financial gurus today are little more than entertainers.  They tell you if you can afford it, ring cash register sound effects and even call employees losers with an L-shaped hand signal.  But, what have these TV gurus accomplished that qualifies them as experts?   If they were making any money investing, they wouldn’t be hawking their latest books and seminars.  They would be living in the Bahamas, quietly amassing a fortune from their portfolio.  That describes the life of Sir John Templeton, a true financial guru.

John Templeton

Sir John Templeton

Image Courtesy of Lauren Templeton

John Marks Templeton (1912 – 2008) was born in Winchester, Tennessee.  He first attended Yale, then later Oxford University as a Rhodes Scholar.  He was married twice and had three children.  He renounced his U.S. citizenship in 1968 and moved to the Bahamas.  He was deeply involved in the Presbyterian Church and many of his philanthropic efforts centered on modernizing the understanding of religious principles.

He pioneered global mutual funds and founded his Templeton Growth Fund in 1954.  This fund invested in the undervalued companies in countries, such as post-war Japan.  It had an incredible run of performance, where it exceeded a 15% annual average return for decades.  He ignored the technical indicators, instead concentrating on each company’s fundamental value and future profit potential.  He was often described as a contrarian-value investor.

He became a billionaire and was listed by Forbes and the New York Times as one of the wealthiest people in the world.  Money magazine called him “arguably the greatest global stock picker of the century”.  Time magazine named him one of 100 Most Influential People, under the category of Power Givers.

The Memorandum

In June of 2005, Mr. Templeton sent a Memorandum to his niece Lauren Templeton and three other investment managers.  The full text of the Memo is contained in an article in The Huffington Post, written by Janet Tavakoli.  It is a fascinating read and his predictions have been incredibly accurate.  If you are unfamiliar with Mr. Templeton’s Memo, I highly recommend you read it.  Here are some of my favorite excerpts.

Financial Chaos

Probably in many nations in the next five years. The word chaos is chosen to express likelihood of reduced profit margin at the same time as acceleration in cost of living.

Increasingly often, people ask my opinion on what is likely to happen financially. I am now thinking that the dangers are more numerous and larger than ever before in my lifetime. Quite likely, in the early months of 2005, the peak of prosperity is behind us.

Consumer Debt

Mortgages and other forms of debts are over tenfold greater now than ever before 1970, which can cause manifold increases in bankruptcy auctions.

Over tenfold more persons hopelessly indebted leads to multiplying bankruptcies not only for them but for many businesses that extend credit without collateral. Voters are likely to enact rescue subsidies, which transfer the debts to governments, such as Fannie May and Freddie Mac.

Education

Most of the methods of universities and other schools which require residence have become hopelessly obsolete. Probably over half of the universities in the world will disappear quickly over the next thirty years.

Research and discoveries and efficiency are likely to continue to accelerate. Probably, as quickly as fifty years, as much as ninety percent of education will be done by electronics.

Globalization

Increasing freedom of competition is likely to cause most established institutions to disappear with the next fifty years, especially in nations where there are limits on free competition.

Now, with almost one hundred independent nations on earth and rapid advancements in communication, the top one percent of people are likely to progress more rapidly than the others. Such top one percent may consist of those who are multi-millionaires and also, those who are innovators and also, those with top intellectual abilities. Comparisons show that prosperity flows toward those nations having most freedom of competition.

Investing

In the past century, protection could be obtained by keeping your net worth in cash or government bonds. Now, the surplus capacities are so great that most currencies and bonds are likely to continue losing their purchasing power.

Not yet have I found any better method to prosper during the future financial chaos, which is likely to last many years, than to keep your net worth in shares of those corporations that have proven to have the widest profit margins and the most rapidly increasing profits. Earning power is likely to continue to be valuable, especially if diversified among many nations.

My Observations

Within three years of creating of his Memo, John Templeton’s predictions about the Financial Crisis came true in startling detail.  His remaining predictions about investments, education and globalization seem very likely to me.  I came to many of these conclusions on my own, before reading the memo, including the growing divide between the rich and the poor.  And, I started to question the wisdom of 9-5 until 65 that was once my life’s purpose.

Special Thanks

I would like to express my sincere gratitude for the picture and background information I received from Lauren Templeton for this article.  Lauren and her husband Scott Phillips maintain the investment traditions and principles of Sir John Templeton through Lauren Templeton Capital Management, LLC.  You can check out their website at MaximumPessimism.com.

Maximum Pessimism

The Bottom Line

The bottom line is that some advice is much more valuable than the rest.  And, the advice from someone who was exceptionally successful for almost a century is priceless.  Consider the source and then choose your gurus wisely.

“I thought, I’m only going to be on this planet once, and only for a short time. What can I do with my life that will lead to permanent benefits?”

Sir John Templeton

Recommended Reading

Huffington Post – Financial Chaos and Investing
Live Richly – Is College Worth It? Part 2
Online Investing AI – Investor John Templeton Dead at 95

This post was featured on the Carnival of Personal Finance over at Alpha Consumer. If you aren’t familiar with the Carnival of Personal Finance, you need to check it out.  It’s the premiere carnival for Finance Blogs.

21 comments to The Wisdom of Sir John Templeton

  • Wow, the man had some uncanny predictions. The more I look at people like him and Warren Buffet the more I realize that there’s no replacement for common sense; buying companies instead of just stocks and predicting a mortgage meltdown precipitated by a gold rush without enough assets to back it up both seem like obvious things.

    The biggest lesson we can draw from this is to look past the hype and question things that just don’t feel right. Does that mean we’ll ever learn? Probably not.
    Cognoramus recently posted..The Math Behind PrioritizingMy Profile

    • Boy you said it Alex, look past the hype.

      All of the greatest investors seem to have one thing in common, they concentrate on fundamental value and they aren’t swayed by the latest fads or market gyrations.

  • He is even more fascinating than I initially thought. Thanks for sharing.

    I do get your point that many gurus are just fancy salesmen. I’m a bit conflicted though because some of them have done a lot of good: you have to pick out the “bones” within their info, so to speak.

    The good ones love what they do regardless of how much money they have. Thanks for this review.
    Roshawn @ Watson Inc recently posted..Huge Average Net Worth Round Up with Uncommon Money NewsMy Profile

    • Shawn,

      I listen to some of the gurus, even Robert Kiyosaki. I think they do help a lot of people, especially Dave Ramsey. But, they are definitely posers compared to Buffet, Soros, Graham and Templeton.

  • This is a great post. His predictions seem profound and startlingly accurate, given what we have seen since then. It will be interesting to see how things continue to play out.
    Invest It Wisely recently posted..Five Tips to Become More Productive with Google AppsMy Profile

    • His predictions for education really are brilliant. Paying $100K for a college degree doesn’t make any sense. Neither does the long, tedius drawn-out process.

      For example, I took two years of French in high school and I could probably double my fluency in about two weeks using Rosetta Stone. Interactive learning is the future. Lectures and text books are the past.

  • His schooling alone validates his intelligence. I’ve heard of Templeton funds but I had no idea it came from Sir John Templeton.
    Mandy June recently posted..Can Tax Software Replace My Expensive AccountantMy Profile

    • Hi Mandy,

      Thanks for stopping by.

      I remember when he sold the Templeton Funds to the Fanklin Group and retired. Everyone pretty much knew the heyday of those funds was over.

  • Hi Bret, thanks for the link! You’ve mentioned Templeton to me before and I see why you’re so impressed by him.

    I totally agree with following financial “gurus” who’ve actually proven they know what they are doing. I’m a big fan of Jim Sinclair who has been eerily prescient with his calls and is a very rich man to boot. I often wonder if the commentators on TV actually follow their own advice!
    Jennifer Barry recently posted..Live Richly Round-Up 5My Profile

    • Jennifer,

      Thanks a bunch for inspring this post.

      I got those exceprts from the Memo for comments on your education post and I knew that I had to share this with everyone. It’s amazing how acurate these predictions were and yet they didn’t get any coverage. It’s too bad this wasn’t made public back in 2005.

  • Very interesting article, Bret. Thanks for sharing this.

    He was very prescient in his assessments about the future. Really impressive. I agree with your comments about education and gloabalization down the road. The investing part was interesting as well, as he almost dismisses cash and government bonds as a source of secruity. Intellectually, I can see where he’s going, and it speaks to a much more fluid, volatile environment in my view.

    • Right now, the state of government bonds and currencies scares me more then the stock market. It’s a global problem and something needs to be done about the reckless deficits.

  • Used to love to watch his appearances on Wall Street Week. It was amazing how right he was with his long-term predictions, and his eternal optimism.
    The Biz of Life recently posted..Father and Son Film Outer Space- DIY StyleMy Profile

    • I also liked watching Wall Street Week. Louis Rukeyser always had the best guests. We have definitely lost some of the great ambassadors of Wall Street. And, in my opinion, they have been replaced by people of lesser integrity.

  • Jan

    Excellent article. Glad I stopped by. I don’t write a PF blog- just every day musings of a retired teacher- but I added this into my site today.

    • Thanks for stopping by Jan.

      I checked out your blog, Ground Level in Kansas, and it was very entertaining. I appreciate the link back to my post on Sir John Templeton.

      It’s interesting to get a teacher’s perspective on his predictions for education. Someone who has spent as much time as you have in front of students is definitely an expert.

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