Buying at the Point of Maximum Pessimism

Scott Phillips is a principal and portfolio manager at Lauren Templeton Capital Management, LLC, an alternative and traditional asset anagement firm that invests based on the principles of the legendary value investor Sir John Templeton. Before joining the firm, he served as research analyst and consultant to Green Cay Asset Management, where he was lead research analyst on the Siebels Hard Asset Fund, a long/short equity hedge fund focused on hard assets and commodities. With Lauren C. Templeton, he coauthored Investing the Templeton Way. He currently writes the globally distributed quarterly newsletter, The Maximum Pessimism Report.

• Foreword . . . xiiiAcknowledgments . . . xvAbout the Author . . . xviIntroduction . . . 1Chapter 1: The Fed Sentences the Consumer to Debtor’s Prison . . .7An Economic Recovery Built on Borrowed Money . . . 8The Fed’s Potion of Low Rates and Rising Home Prices Becomes an Economic Elixir . . . 14A Chicken in Every Pot? Try a Hummer in Every Garage. . . 15The Three Cs of Credit Give Way to Financial Innovation . . . 19Chapter 2: The Biggest Gamblers Go “All In” on the Housing Bet . . .35Trouble in Paradise . . . 37The Canary Died Unheard from the Boardrooms, Yachts, and Golf Courses . . . 39The Credit Bubble Draws in Every Last Bull . . . 46Chapter 3: Financial Chaos . . . 53The Crisis Moves from Subprime to Prime Time . . . 61Chapter 4: Quis Custodiet Ipsos Custodes? . . . 71An Alphabet Soup of Rescue Acronyms Will Save Us. . . 72Strategy Number Two: Spend Our Way Out of a Spending Problem . . . 75The Vestigial Effects of the Crisis Come into Focus . . . 79The Visible Hand Is Coming into View, and It’s All Thumbs . . . 92Chapter 5: A New Landscape for Investors . . . 101Entrepreneurialism Is Thriving in Many Key Emerging Markets. . . . 105Crisis Is an Opportunity for Those in a Position to Seize the Opportunity. . . 111The New Landscape . . . 113Chapter 6: China: Ready for Prime Time . . . 117A Culture Well Suited for Capitalism. . . 119Putting Those Rainy-Day Savings to Work in the Worst Storm of the Past Century . . . 122Urbanization Is the Growth Engine . . . 126The Path Toward Consumerism and the Domestic Economy. . . 128Prime-Time Products . . . 135Chapter 7: Proteins and Agribusiness: Billions and Billions to Be Served . . .141Where’s the Beef (and Chicken and Pork, Too)? . . . 142Eating Good in the Global Neighborhood . . . 146Brazil Has the Competitive Advantages in Agribusiness. . . 152Strong Fundamentals Across the Value Chain. . .161Chapter 8: Formula for Success: Rise Early, Work Hard, Strike Oil . . .165In the Long Term, Healthy Demand Meets Higher Cost Supply. . . 170Market Distortions from the Fed’s Loose Credit and Easy Money . . . 179Seeking Alternatives in the Hydrocarbon Space. . . 191Chapter 9: An All-Too-Common Tragedy . . . 201Human Behavior Is Timeless . . . 202Strong Demand Underscores the Overexploitation . . . 206A Tragedy Leads to an Opportunity . . . 210Chapter 10: What Happens When 700 Million Students Want Extra Help?. . .217Spending on Education Takes Precedence in Many Emerging-Market Households. . . 220The Role of Technology and Innovation . . . 22310 Million Students Applying for 6 Million Spots in College–No Pressure . . . 225Continuing Education. . . 227Financial Crisis Portends Continued Growth in the Emerging-Market Education Services. . . 230Education Plays and Their Fundamental Dynamics . . . 234Chapter 11: A Rare Opportunity . . . 241Demand for Global Technology Remains Strong. . . 242It’s Not Easy Being Green . . . 245There Is Oil in the Middle East; There Are Rare Earths in China. . . 249Index . . . 257

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