Can I Get Your Thoughts on This John Templeton Quote?

Hi Jason,

1. Do you think Templeton’s quote should be applied to the Australian property market in general? Why or why not?

I’m not even convinced that he is totally correct, though he is approaching things from the right angle. To me, the quote chosen seems a bit too “folksy” to be correct. A bit too convenient, even contrived.

Let’s see – if enthusiasm has built up to fever pitch, buyers will be bidding up to buy anything available. So, in that way his words are sound…. but then consider other words where it is said “Booms go for FAR LONGER than they should” (Sydney reminded me of this about a year ago) so prices continue to climb even after they should have peaked. In the absence of any major national or international “bad news” the boom might grow for another year or two yet.

And the obverse side of that coin ….. how does that stack up? Templeton says time of maximum pessimism is the best time to buy. Again, he is close for sure, but wait….. I’m sure he is talking of a market pessimism (e.g. Sydney) rather than International (e.g. a world-wide depression) so in that vein, again pessimism is a meal that takes a lot of slow cooking over an extended period. Often-times, the depression is individual-centric, and this allows “bargain buys”. But a “Market Pessimism” would be all over the news and “the herd” would be building up to maximum pessimism even as green shoots of a recovery begin sprouting.

Add to that there is no bell at the top and bottom of any Market. Similarly, no bell is rung when Max Pessimism is reached. So, HOW does one tell when Max IS reached? What if the Max has “more to go”? Like booms, busts can go way too long, and undershoot too.

Just HOW does one accurately gauge Max Pessimism – except in hindsight?

As I started, he is in the right ballpark – but we ignore our own knowledge and experience (even our gut) at our peril !!

Benny

PS A recent comment in a property investing mag went like this:-
“80% of buyers purchase real estate way too late in the cycle”. This must surely distort any truisms about Maximum Optimism – i.e. if 80% remain positive even as a market falls…. Or could it be that the Optimism reported in the media might lead to further buyer optimism, leading to further optimism-fuelled buying? Hmmmmm !

I am a huge fan of timing the markets too, perhaps a little on the conservative side, but I only buy when markets are rising or booming and bail prior to peak.
OK, I don’t have a crystal ball and you wont time it perfectly, but you don’t need to, most property cycles last for 3 years the point is get in when it starts rising and buy as many as you can and once you have made 40%+ get out, don’t be too greedy and move on to the next cycle. Its certainly worked for me, easiest way to make money.

Marisa
MTR:)