Buying at the Point of Maximum Pessimism: Six Value Investing Trends from China to Oil to Agriculture

285 Pages·2010·4.26 MB·English

by  Scott Phillips

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Praise for
Buying at the Point of Maximum Pessimism
“Sir John’s ability to comprehend complex concepts and distill these into money-
making ideas for his investors was legendary. With this book, Scott Phillips extends
Sir John Templeton’s crystal clear vision to some of tomorrow’s most interesting and
powerful money-making opportunities. All readers should be prepared to learn—
and profit!”
—Jeffrey Everett, Founding Partner, Everkey Global Partner
“The brilliant global investing strategy of Sir John Templeton finds new life in Scott
Phillips’ Buying at the Point of Maximum Pessimism. With the U.S. in trouble,
savvy international investing is a must and this book shows you the best places to
put your money for serious profits ahead.”
—Christopher Ruddy, CEO, Newsmax Media, Inc.
“In Buying at the Point of Maximum Pessimism, Scott Phillips delivers a road
map to investment success traveled by the very few but guaranteed to lead you to
enormous profits. The book offers a delightful, common sense approach to investing
that unfortunately is not so common.”
—Robert P. Miles, author, The Warren Buffett CEO
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“Many investment books are published every year. Unfortunately, many are me-too
books spewing forth the same old self-help advice under the value or growth
investment banner. This time readers have hit the jackpot with a new book by
investment adviser and author Scott Phillips who has written a delightful, witty, and
extraordinarily valuable book based on the wisdom of Sir John Templeton, one of
the greatest investors of all time.
“While Templeton’s wisdom inspired him, the truth is that Scott Phillips has
abundant wisdom of his own to impart. Often investment tomes are produced by
professional writers who research an aspect of investing but lack firsthand
knowledge, or by investment pros whose writing skills are somewhat second-rate. In
Phillips, the reader gets firsthand knowledge of a skilled value investor combined
with wonderful, artistic writing skills. He has a fresh eye and wonderful humor to
entertain and simultaneously teach both the novice and professional investor.
“The author deeply probes the current difficult investment landscape by examining
six contemporary value investing trends. If you have had trouble understanding the
subprime mortgage debacle that almost brought the world’s economy to its knees,
Phillips’ first two chapters, ‘The Fed Sentences the Consumer to Debtor’s Prison’
and ‘The Biggest Gamblers Go All In on the Housing Bet’ will clarify and edify you
in a delightful, tongue-in-cheek manner.
“What more to say? Read this book. It is a 21st-century update on MacKay’s
Extraordinary Popular Delusions and the Madness of Crowds.”
—John W. Schott, M.D, Principal and Director,
Steinberg Global Asset Management,
author of Mind Over Money, and
Trustee of The John Templeton Foundation
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Buying at the Point of
Maximum Pessimism
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Buying at the Point of
Maximum Pessimism
Six Value Investing Trends from
China to Oil to Agriculture
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Scott Phillips
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Vice President, Publisher: Tim Moore
Associate Publisher and Director of Marketing: Amy Neidlinger
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Indexer: Lisa Stumpf
Senior Compositor: Gloria Schurick
Manufacturing Buyer: Dan Uhrig
©2010 by Pearson Education, Inc.
Publishing as FT Press
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This book is sold with the understanding that neither the author nor the publisher is
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Printed in the United States of America
First Printing May 2010
ISBN-10: 0-13-703849-6
ISBN-13: 978-0-13-703849-7
Pearson Education LTD.
Pearson Education Australia PTY, Limited.
Pearson Education Singapore, Pte. Ltd.
Pearson Education North Asia, Ltd.
Pearson Education Canada, Ltd.
Pearson Educatión de Mexico, S.A. de C.V.
Pearson Education—Japan
Pearson Education Malaysia, Pte. Ltd.
Library of Congress Cataloging-in-Publication Data
Phillips, Scott, 1974-
Buying at the point of maximum pessimism : six value investing trends from China to oil to
agriculture / Scott Phillips.
p. cm.
ISBN 978-0-13-703849-7 (hbk. : alk. paper) 1. Investments. 2. Stocks—Prices—Forecasting. I.
Title.
HG4521.P495 2010
336.2—dc22
2009051970
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To Mary Handly, asleep in her crib—Dream big.
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Contents
Foreword . . . . . . . . . . . . . . . . . . . . . . . . . . .xiii
Acknowledgments . . . . . . . . . . . . . . . . . . . .xv
About the Author . . . . . . . . . . . . . . . . . . . .xvi
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . .1
Chapter 1: The Fed Sentences the Consumer to
Debtor’s Prison . . . . . . . . . . . . . . . . . . . . . . .7
An Economic Recovery Built on Borrowed
Money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
The Fed’s Potion of Low Rates and Rising
Home Prices Becomes an Economic Elixir . . . . . 14
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A Chicken in Every Pot? Try a Hummer in
Every Garage. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
The Three Cs of Credit Give Way to
Financial Innovation . . . . . . . . . . . . . . . . . . . . . . . 19
Chapter 2: The Biggest Gamblers Go “All In” on the
Housing Bet . . . . . . . . . . . . . . . . . . . . . . . . .35
Trouble in Paradise . . . . . . . . . . . . . . . . . . . . . . . . 37
The Canary Died Unheard from the
Boardrooms, Yachts, and Golf Courses . . . . . . . . 39
The Credit Bubble Draws in Every Last Bull . . . 46
Chapter 3: Financial Chaos . . . . . . . . . . . . . . . . . . . . . .53
The Crisis Moves from Subprime to
Prime Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Chapter 4: Quis Custodiet Ipsos Custodes? . . . . . . . . .71
An Alphabet Soup of Rescue Acronyms
Will Save Us. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Strategy Number Two: Spend Our Way Out
of a Spending Problem . . . . . . . . . . . . . . . . . . . . . 75
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