For those of you who don't know, Sir John Templeton, now 92 and running a charitable fund out of Bermuda, is one of the greatest investors that has ever lived, only to be compared with Buffet and Munger.
The below comments were made by him in an interveiw in Feb 05, this man knows his stuff, he hqas lived through a number of recessions, housing crashes and fed reserve chairmans, and probably has more personal wealth accumulated then Australia annual treasury budget.
Now the U.S. has this extraordinary thing - I think in some places we see 50% to 100% gains on the housing market. Other places across the country might be up 25% to 30% in just a matter of three to four years. Incredible gains.
When you invest in stocks, you get the same value all over. The same stock sells at the same value, no matter what nation you're in. But that's impossible in real estate. Real estate value depends on locality. If you're going to be a real estate investor, focus on location, location, location.
So when you're trying to invest in real estate, you have to do a lot of serious research on whether this location is likely to be popular in the long run.
That's why I wound up believing beachfront property is a good investment. I don't think there's ever going to be any more beachfront than there is now. Now people are getting bigger and the amount of money is getting bigger. So beachfront is pretty sure to go up in value.
Owning a home on the ocean is better than owning one that's not on the water.
But there are large tracts of oceanfront property still available in South and Central America in countries where there is a rule of law. You used to be able to buy land at very low prices. But still there are some good deals.
A 50% drop off in prices is quite possible.
I've never, never ever had a mortgage on any house. I learned that long before you were born. When I was a child in Tennessee, I watched so many people lose their farms because they had tiny mortgages, but they got to the end of their years, when it was impossible to earn a profit on the farm. They couldn't meet their payments and their mortgage was sold at auction in the courthouse.
I don't rule out borrowing money. But I think it's risky.
Factors Undermining the Market:
American Debt Is Highest Ever
American debt is the highest the nation's ever had. The federal deficit, the federal debt are the largest in history. But that's just the beginning.
Also, the unfavorable trade balance is the largest the nation's ever had.
And the national deficit - the shortage of taxes collected over what's spent - is the largest in the nation's history.
Americans were famous 30 years ago for being so thrifty. They were saving over 20 cents out of every dollar they earned. Last year, Americans saved less than 2 cents on every dollar.
All those things add up to the fact that there is almost sure to be a period of pessimism - a bear market. Not a crash, but a bear market.
The old rule of thumb for brokers was: The bear is about half as long as the bull. If I had to say when this bull market started, I would say 1990. So it's 14 years old.
The immediate future is that there are more dangers than I've ever known before. It's just more dangerous.