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 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.
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.
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.
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.
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.
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.
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.
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.
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.
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
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