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Templeton of doom

Come on then – did you take my advice, so freely and selflessly offered in the last column before my enforced summer holidays? I bet you did not but I bet you wish you had. Oh, I am sorry – you somehow missed it? How mildly ironic because I advised you to do yourself a favour and avoid any involvement with the wider financial media over the course of the rest of the summer.

More precisely, I suggested: “For the good of your health and specifically your blood pressure, you should really try to keep away from business-oriented papers, websites and television as the quieter summer months will inevitably see trading volumes grow thinner, markets more volatile, headlines shriller and the definition of “news” more elastic.”

Looking back over the last couple of months, I can live with that prediction – just as I can with my summary of how the eurozone crisis keeps recycling through the media. “Greece will default in some shape or form, the crisis will spread and eventually bring down the euro”, “Hold that thought, the Greeks have jumped through the latest hoop and everything is going to be fine”, “No, we were right the first time and the eurozone really is toast”, “Hang on a second, maybe everything is going to be all right after all.” Plus ça change, as Nicholas Sarkozy probably would not say in this instance.

Am I being too glib? Almost certainly – that does rather go with the territory in the top right-hand corner of these two pages but, really, what game-changing facts do we know now about the twin debt crises we did not a year ago – let alone when I wrote what I did back at the start of July?

Euro, the world’s slowest train wreck? Check. US economy in a bit of a pickle? Check? Politicians on both sides of the Atlantic not only unable to solve the problem but sometimes seemingly unable to see there is one? Check? Julian better off not turning on his laptop while on holiday? Check – but then, of course, no cheques.

All very depressing, which brings me neatly, if contrivedly, to my least favourite paradox, Sir John Templeton’s exhortation to “Invest at the point of maximum pessimism”. Granted, it seems unlikely he meant it to be a paradox but it is one, isn’t it? After all, unless there is something fishy going on, investment is an inherently optimistic act.

The reason I am being so philosophical is because of the recent publication of the report by the Independent Banking Commission. Depending on your commentator of choice, the proposed reforms to UK banks either do not go far enough or are yet another nail in the coffin of the sector although, as ever, the reality is more likely to be somewhere in the middle.

As such, it occurred to me I ought to be gaining some exposure to such investment pariahs as Barclays, Lloyds and Royal Bank of Scotland and so I had a quick look at the top 10 holdings of a portfolio that might leap to mind if one were looking for some, as it were, financial opportunities – and none of that trio made an appearance. Sensing a change of tack was in order, I looked up the biggest holdings of a certain recovery fund and there they all were. What was stopping me placing my order?

More philosophy, apparently. Even if all value investors worth their salt strive to remove emotion from the investment equation, investing in recovery situations still “feels” about as optimistic as it gets. So how could it be a time of maximum pessimism if I were to invest in such an optimistic way? I was getting a headache and I apologise if you are as well.

I thought it might be instructive to see when I last mentioned the maximum pessimism line in this space and found it was in February 2009, when in fact I did invest in some emerging markets funds. Not bad timing, I thought – maybe I am onto something here. But then I considered how unlikely it was I might get it so right twice in a row, which left me more pessimistic than ever. Oh …

Julian Marr is editorial director of and


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