Several blogs last week mentioned John Templeton in relation to the current state of the economy. As we mentioned in a post earlier in April, “Maximum Pessimism: Are We There Yet?,” there is discussion in the economic community about whether the economy has hit rock-bottom and, to use Templeton’s famous term, reached the point of “maximum pessimism.”
In a MarketWatch April 28, 2009, post Chuck Jaffee used the term “optimistic pessimism” in the context of Sir John:
Legendary investor John Templeton said one of the most recognizable buy points for the stock market was when conditions reached “maximum pessimism,” the period where pretty much everyone was so sour on investing that Templeton could swoop in as the lone buyer and scoop everything up on the cheap right before sentiment changed.
One would have to wonder what Templeton, or any investor, would make of current conditions, which after Tuesday’s consumer confidence numbers were released, can best be described as “optimistic pessimism.”
According to the Conference Board, consumers got a bit sweeter on the economy in April. It’s enough so that the consumer confidence index gained more than 40%, but not nearly enough to reach “happy days are here again” status. It was a small smile to brighten a foul mood.
On the Interactive Investor, Iain Murray questions in a April 20, 2009, post the current optimism about the economy and cites Templeton’s and Warren Buffett’s approach to the market:
In our time, contrarian investors such as Warren Buffett and Sir John Templeton made fortunes from flying in the face of received opinion. They did so, however, not through sheer pig-headedness but after diligent research to find sound reasons why the crowd was wrong.
We know that Templeton would advocate looking at the numbers to make investment decisions and would advise against riding a wave of sentiment. But one wonders what his thoughts would be on the numbers right now. Though we are unable to ask him, we hope to explore this topic in more depth in the coming weeks.
