Book Review: Buying at the Point of Maximum Pessimism

This book is misnamed.  The subtitle should have been the title, or, the author should have entitled it “The Financial Crisis and the Aftermath: Six Ways to Make Money Now,” because that is what the book really is.

I asked the publisher for the book partly because the title is one of the maxims of Sir John Templeton, a value investor that I respect.  One of his nieces is an investor, and wrote an introduction to the book that her husband wrote.

The sad thing is that the book doesn’t relate to the title much at all.  How to have the fortitude to buy at the point of maximum pessimism is quite a gift.  The book does not address that topic in any significant way.

This is the way the book is designed: the first half of the book talks about the financial crisis, and the second half talks about six different themes that the author thinks are promising:

  • China
  • Agriculural Proteins
  • Energy
  • Green Technology
  • Education
  • Rare Earth Metals

I find this to be an odd set of themes.  I am on board with agricultural proteins and energy, but the other themes have issues.  China is like Japan in the late ’80s.  Lots of growth, but is it growth that will beget more growth?  Green Technology has yet to prove its usefulness; often it is not as resource conservative as conventional technology.  Education is a good idea, but for-profit educators are not the best in terms of quality, and may not be a great investment.  Product quality matters.  As for Rare earth metals: yeah, great idea, would that you had said this earlier.  Most investments in stocks involved in rare earth metals are quite expensive.

That’s a metric that anyone involved in thematic investing should use.  What is the price versus the promise?  The book gives no guidance here.  As such, I find the book to be fundamentally flawed, and a stain on the good name of Sir John Templeton.  Better the authors had not tried to cash in on his name.

Quibbles

I have no quibbles with the book.  The book is flawed for the reasons listed above.  If the book had had a different title, I might have liked it, or not.

Who would benefit from this book:

Those wanting to read about the six trends could benefit from the book, but I would hardly call them “value investing.”  That said, the book is long on theory and short on practice.

If you want to, you can buy it here: Buying at the Point of Maximum Pessimism: Six Value Investing Trends from China to Oil to Agriculture.

Full disclosure: I asked the publisher for a copy, and they sent one to me.

If you enter Amazon through my site, and you buy anything, I get a small commission.  This is my main source of blog revenue.  I prefer this to a “tip jar” because I want you to get something you want, rather than merely giving me a tip.  Book reviews take time, particularly with the reading, which most book reviewers don’t do in full, and I typically do. (When I don’t, I mention that I scanned the book.  Also, I never use the data that the PR flacks send out.)

Most people buying at Amazon do not enter via a referring website.  Thus Amazon builds an extra 1-3% into the prices to all buyers to compensate for the commissions given to the minority that come through referring sites.  Whether you buy at Amazon directly or enter via my site, your prices don’t change.