RE: RE: RE: Optimism vs reality Love the generic bromides such as that Templeton example.
You've no doubt heard "out of sight, out of mind." Perhaps you've also heard "absence makes the heart grow fonder." Which is it? Either, depending on the situation.
So, sometimes optimism is not warranted. Countless bubbles through the ages, from the tulip bubble right up through the Internet and real-estate bubbles, have been examples of overwrought optimism. But sometimes ongoing optimism continues to be rewarded, in the case of those investing in Apple stock, for example, or simply buying gold, which has risen for 11 consecutive years despite being characterized as a bubble by detractors.
Similarly, sometimes pessimism is correct. Some analysts and investors were down on real estate and the Internet even as the prices boomed. Eventually the pessimists were right. Timing was the problem.
The fictionalized Jesse Livermore character from "Reminiscences of a Stock Operator" is oft-quoted, too, about making big money by "being right and sitting tight." The problem is, by definition, most investors think they are right in buying a stock or other investment. But if they are wrong and continue to delude themselves that they are right despite the evidence to the contrary, sitting tight can cost the whole investment, ala Enron and countless others.
Contrarian investing as espoused by Templeton works. The trick is to differentiate between examples where the pessimism is overdone, or where it is 100 percent on the mark.
If that were easy, we'd all be wealthy, like Sir John is, or rather, was.