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John Templeton's 2003 prediction
Old 06-17-2009, 04:27 AM   #1
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John Templeton's 2003 prediction

I vaguely remember hearing John Templeton's prediction back in 2003. Unfortunately, I ignored it.

The really bad news is he said back in 2003 that housing prices will fall 90% from their peak... So if you are feeling like the next great bull market (in stocks or housing) is around the corner,might be worth reading what a truly great investor said 6 years ago.

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Old 06-17-2009, 08:33 AM   #2
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Old 06-17-2009, 09:53 AM   #3
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Seems a little far fetched to me, but who knows. My house was worth $600k at the peak so when it sells for $60k I guess I will get my credit card out and buy another

It seems to have stabilized at $400k, which is bad enough
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Old 06-17-2009, 10:05 AM   #4
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I guess I'll be able to snatch up all the neighbor's houses for $18k apiece. Then I'll bulldoze them all and build lakefront luxury condos and high end boutique shopping and make millions.

In reality I really doubt we will see across the board 90% price drops from the peak (or anywhere near that). That would mean MASSIVE deflation in virtually everything. Energy, labor markets, materials, commodities, raw land, etc. would all have to drop precipitously to add up to a 90% decrease in value. I thought the current meme was massive INflation, not deflation? It's hard to keep the monthly hysterias straight.

Perhaps there may be isolated cases of properties in bubble areas selling for 90% of their peak value. I'm thinking of the $200,000 40 year old mobile homes on 1/20 an acre of land in the worst part of town. Say they went into foreclosure and fetched $20k at fire sale prices. Boom - 90% of peak value.

At some point the cash investors would be swooping in to buy up houses (maybe from outside the country). There is a floor on prices somewhere.
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Old 06-17-2009, 10:12 AM   #5
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It's scary. OTOH, the fact that he created the "Templeton Prize for Progress in Religion" tells me that perhaps he's a little cracked -- in the way that some very smart people get kooky when they get old.

The basic problem of debt that he talks about -- has it been resolved in any way do to the housing/stock market problems?
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Old 06-17-2009, 10:14 AM   #6
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Originally Posted by TromboneAl View Post
It's scary. OTOH, the fact that he created the "Templeton Prize for Progress in Religion" tells me that perhaps he's a little cracked.
Or smoking crack...
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Old 06-17-2009, 04:06 PM   #7
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I also heard that he was later quoted (2005) as seeing only a 50% drop in real estate prices. I think we have seen 50% in a number of markets and possibly 75% in places like Detroit, Las Vegas, Riverside County, and parts of Florida. Nobody seems to have produced a copy of the original interview online so hard to say what his real prediction was.

Clearly he got the worse globaly financial crisis part awfully close and we aren't out of the woods yet.

As for the Religious Prize much of the recent focus has been on bridging the gap between religion and science. Most of the recent winners have been physicist, cosmologist including several Noble laureates and more importantly haven't been "Intelligent Design" proponents.
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Old 06-17-2009, 04:37 PM   #8
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It's scary. OTOH, the fact that he created the "Templeton Prize for Progress in Religion" tells me that perhaps he's a little cracked -- in the way that some very smart people get kooky when they get old.
You may want to check out his book "The Worldwide Laws of Life"... may help explain the prize. I think he thought people ought to believe in something bigger than themselves.

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Old 06-17-2009, 05:23 PM   #9
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You may want to check out his book "The Worldwide Laws of Life"... may help explain the prize. I think he thought people ought to believe in something bigger than themselves.
He was a believer in believing.
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Old 06-18-2009, 08:53 AM   #10
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Templeton didn't predict prices would decline by 90% - but he did say that they would be a buy after declining 90% from their peak.
Quote:
"After home prices go down to one-tenth of the highest price homeowners paid, then buy."
Some real estate in Florida isn't far from there now.

My recollection of his views on housing: prices would rise with inflation with little or no real growth. The surge would be followed by underperformance and would eventually revert to mean (inflation). This made sense then and still does, and is what seems to be happening to much residential property now.
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