Although only a distracted hermit
didn't realize this, it is now official that the US economy is in a recession.
Even credit card companies are getting cautious about how high our credit lines
are and they anticipate a terrible default rate on credit card
debt.
So don't be surprised to see your lines of credit reduced in the months
ahead, and they can't be good for either consumer spending and consumer
confidence. It's enough to make the stock market go into another deep tailspin.
This economic mess might take a long time to right itself, but....
While we wait patiently, here's what the late John Templeton [one of the
most successful investors of alll times] can teach us...
How to Build Wealth With Risks, Bargains
and Tax Deferral
Here is Templeton's five-step formula for financial independence, based
on almost a century of experience.
1. Take calculated
risks. Templeton started off by taking significant risks in his
business and investments. He was a serious poker player in college, and in 1939,
he borrowed $10,000 from his boss to bet on 100 stocks listed on the NYSE
selling for under a buck. A high percentage of these companies were close to
bankruptcy, but Templeton reasoned that they would recover during a wartime
economy. (It pays to have a correct "macro" view of the world.) In four years,
he sold all the stocks, paid off the debt, and pocketed $40,000 in profit. He
was on his way to success.
2. Save, don't spend.
Templeton started out poor, but through the principles of thrift and hard work,
he was able to get ahead. When he married, he and his wife set a goal of
saving 50% of their income. He avoided consumer debt - in fact, he bought
his first home with cash. He carried his "cheap" approach into later life. I met
Sir John once in the Bahamas in his Rolls Royce, but he was quick to tell me
that he bought it used!
He always works hard, putting in 60 hours a week.
He would agree with J. Paul Getty, whose motto was, "Make your money first...
then think about spending it."
3. Shop for value
investments. Templeton follows the fundamental "bargain-hunting"
approach to investing. "The long-range view requires patience." His Templeton
Growth Fund, which he ran for 50 years before turning it over to the Franklin
Group, held stocks for an average six to seven years. He always searched for
companies around the world that offered low prices and an excellent long-term
outlook.
