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« On Becoming a Grandfather | Main | Letter to My Senators »
Monday
Jul142008

The Master Investor

Sir John Templeton

Sir John Templeton (1912 - 2008)

 

Most everyone enjoys the story of a small town boy who does well.  That is certainly the story of John Marks Templeton, one of the greatest investment minds of the 20th century.  In fact, Money Magazine (Jan. 1999) called him "arguably the greatest global stock picker of the century."  It was his influence and interests outside of the investment world however, that even further distinguished him from his peers and gave additional substance to his amazing life.

John Templeton was born Nov. 29, 1912 in the small town of Winchester, Tennessee, just south of Nashville.  He was the son of a small town lawyer and cotton merchant.  He was brought up as a strict Presbyterian and at age 15 he became the superintendent of his local Sunday School.  His Bible-belt faith, inherent decency, and optimistic outlook proved to stay with him and shape his world view his entire life.

He was accepted to Yale upon graduating from high school and began his study of economics; but during his second year his father lost most of his money and could no longer afford to help pay the fees.  Young John was determined to finish his studies though, so he set about winning prizes and scholarships to help with his finances.  He also began a student newspaper in which he sold advertising space.  Through a combination of thrifty living and determination, he made it work, and by the time of his graduation, he was the top scholar at Yale.  He was then awarded a Rhodes Scholarship to study Law at Balliol College, Oxford, and thus began his life-long love of the British.

When Templeton graduated from Oxford in 1937, the Great Depression still held sway in the United States, but he managed to get a job on Wall Street with a company that would eventually become part of Merrill Lynch.  Around this time Templeton began "dabbling" in the stock market on his own account.  In 1939, sensing war on the horizon and assuming that it would jump-start America out of the depression, he ordered his stockbroker to buy $100 worth of all the stocks selling for less than $1 per share, including the ones in bankruptcy.  Within four years his $10,000 investment (a portion of which was borrowed) became $40,000 (only four of the companies proved to be worthless), and thus, his legend was born.

In 1940 he took control of a company managing $2 million; by the time he sold it in 1967 it was managing $400 million.  During the 1950s and 1960s, often working 80 hours a week, he built a number of successful mutual funds. He launched his flagship fund, Templeton Growth, Ltd in 1954. Each $10,00o invested then with distributions reinvested grew to $5.5 million in 1999.  In 1963 he moved from New York to Nassau, in the Bahamas,(so he would not be "going to the same meetings everyone else was attending") where he took British citizenship and continued to work 60-hour weeks well into his eighties.  He was one of the first investors to look outside the United States for investment bargains.  His theory was to look for bargains in countries and industries that were hitting rock bottom, the "point of maximum pessimism" as he put it.  He was one of the first to invest in post-war Japan, and one of the first to sell Japanese stocks in the mid-80s before the bear market set in.  At the height of the internet bubble in the early 2000's, Templeton sold short dozens of young technology companies just before their shares came out of "lock-up," the six-month cooling off period following an IPO.  He made over $80 million in a matter of weeks.  He called it "the easiest money I ever made."  He always gave freely and was knighted in 1987 by Queen Elizabeth II for his many charitable acts.  He sold his interests in Templeton Funds to the Franklin Group in 1992 for over $440 million and this freed him to the work he considered really important -- the promotion of religion and spirituality.

At one time Templeton was one of the world's richest men, but by his death he had given much of it away.  One of his long held dreams was to encourage cooperation between the field of science and religion.  He saw no contradiction between the two; to the contrary, he thought that both disciplines could be strengthened by the other.  To this end his Templeton Foundation, with assets of more that $1.1 billion, awards over $60 million each year, including the $1 million Templeton Prize, the world's single largest award.  This award is given for "Progress in Religion" and grew out of his belief that honors equivalent to the Nobel Prize should be awarded to living innovators in religious action and thought.  Mother Teresa of Calcutta received the first prize in 1973.  Other honorees include Billy Graham, author Alexander Solzhenitsyn, and theoretical physicist Paul Davies.  Hindus, Jews, Buddhists and Muslims have been on the panel of judges and have been recipients. 

We can learn much from the way Sir John lived his life and from the beliefs that guided him.  He was of the opinion that "To buy when others are despondently selling and to sell when others are avidly buying requires the greatest fortitude. . . and pays the greatest reward.  But his all-consuming goal was to never just make money for himself, but to earn it for others.  He once told Philanthropy magazine, "At Yale I was investigating what talents God gave me, and where I thought I could be most beneficial to people was to help them make fewer stupid mistakes in selecting their investments."  Yet he never measured a man by his wealth; in fact in one of the many books he authored he quoted social reformer Henry Ward Beecher when he said that "No man can tell whether he is rich or poor by turning to his ledger.  It is the heart that makes a man rich.  He is rich according to what he is, not according to what he has."  He often said that "Happiness pursued eludes; happiness given returns."  Templeton was a great believer that true wealth does not come from money, but from fulfilling a purpose outside ourselves, whether that comes from exercising our talents, raising our children to be happy, productive adults, or contributing to our communities in some meaningful way.

In an interview three years ago Sir John had some valuable and insightful observations we would have done well to have heeded.  He noted that housing prices in some parts of our country had appreciated 50% to 100% in only a few years and that a day of reckoning was in the offing.  We are seeing that today.  He noted then that in all of his 92 years that he had never seen a time when it was so hard to find a bargain in stocks.  He said that he found no American stocks under valued.  He was worried then about the "exuberance" in the market.  He was worried about debt, both at the federal level and that of American families, three years ago.  And he also noted the undesirable effects of the nation's trade balance and the effect it would have on our currency vis a vis other world currencies.  He predicted then that a bear market lay in our future; he was not sure about the timing of such an event, but was reasonably certain that we would see one.  He did not expect a 1929 type of crash, but the usual cyclical downturn where prices correct.  It would appear that this prediction is coming to fruition.  He was also worried about the coming wave of "baby boomer" retirements.  He predicted that eventually pensions payments would not begin until 10 years after one's retirement.  That was his quick fix for the social security problem.  But in spite of all the troubles our nation and our economy faces, he was the ultimate optimist.  He maintained that a positive mental attitude helps in every way.  He noted that this country, and the world, have much good to anticipate; that there were many reasons to be optimistic. 

For the last several years of his life, Sir John Templeton used his wealth to encourage others to use scientific methods to find answers to spiritual questions.  His foundation is still run by his son, Dr. John Templeton, a retired medical doctor, and is still dedicated to discovering how religion can influence the physical.  He was one of the few truly wealthy individuals to use his wealth in such a cause.  Sir John died at 95 on July 8, 2008.  He was a true iconoclast and a genuine genius and well deserves the respect that he garnered during his life, a life well lived.

 

I borrowed liberally for this article from the London Telegraph's account of Sir John Templeton's death, as well as from Alexander Green's comments.  Mr. Green is the Investment Director of the Oxford Club.

 

Fly/Drive Safely

15 July 2008

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