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Maximum Pessimism Pays Off in Optimum Profit

By    |   Thursday, 12 Aug 2010 07:54 AM

Sir John Templeton was — and is — my mentor.

By luck, I moved to the Bahamas, where the legendary stock investor — the man Money magazine described as “arguably the greatest global stock picker of the [20th] century” — resided in his later years.

At Sir John's memorial, I met Christopher Ruddy, president and chief executive officer of Newsmax Media, Inc., who happened to sit next to me.

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We struck up a conversation and immediately hit it off, sharing similar views on gold, the stock market and upcoming problems due to the financial crisis.

However, it was an amazing coincidence because the same weekend we met was also when the S&P hit its low for 2008 — and when many markets fell to their lows of the financial crisis. Maximum pessimism.

A few months later in March 2009, I made one of my best trades. I had always been bullish on India, and after watching “Slumdog Millionaire,” I turned even more bullish.

The fact that the country would allow such a film to be produced and released is a true sign of a free society. So I began to look at ways to trade the market for opportunities.

I came across an article on the Nano, the $2,000 car Tata Motors was producing. At the time, there were a lot of worries about Tata. It had huge losses and a highly indebted balance sheet due to the takeovers of Range Rover and Jaguar.

However, I figured with a huge amount of pent-up demand for their Nano and the Indian economy much stronger than America’s, this stock was a buy.

So I bought Tata at $3.50 a share. On Aug. 10, Tata hit a 19-year high on the Indian market. It is trading at more than $20 a share on the NYSE.

Now I don’t recommend this stock at these levels.

However, it just shows that when you buy amid maximum pessimism, it gives you great opportunities.

Find optimism when others are negative. This is the way you make money. Not by watching Bernanke or the Fed’s every move but by purchasing assets when they are cheap and undervalued.

About the Author: David Skarica
David Skarica is a member of the Moneynews Financial Brain Trust. Click Here to read more of his articles. He also writes the Gold Stock Adviser. Discover more by Clicking Here Now.

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Sir John Templeton was and is my mentor. By luck, I moved to the Bahamas, where the legendary stock investor the man Money magazine described as arguably the greatest global stock picker of the [20th] century resided in his later years. At Sir John's memorial,...
david,skarica,Maximum,Pessimism
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2010-54-12
Thursday, 12 Aug 2010 07:54 AM
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