Bill Miller is a brave, brave man.
From Reuters:
Legg Mason’s star stock-fund manager Bill Miller said on Wednesday the “bottom has been made” in U.S. equities and that the Federal Reserve should consider purchasing stocks and junk bonds to pull the United States out of the financial crisis.
Speaking at Legg Mason’s annual luncheon for media, Miller said that all long-term investors believe that stocks today are cheap.
If you’re going to swallow that line, please, help yourself to some salt.
Because not only is Legg Mason’s flagship Value Trust fund - for years a star performer - down 59.7 per cent as of yesterday, but Miller told Reuters that his funds “performed far worse than I would’ve predicted we would” this year. Foresight you can trust? Not so much.
Yes, Miller beat the S&P 500 for fifteen years running. But lately, he’s been just as wrong-footed - and as wrong - as everyone else.
Some background:
- Legg Mason is the second largest publicly traded asset manager in the US, with assets of $842bn as of September 30, according to Reuters data. Its stock price has slid more than 75 per cent year to date.
- Late on Tuesday, Legg Mason said it expected to take a $523m charge in the fourth quarter as it provides yet more support for four ailing money market funds that invested in asset backed securities and SIV-issued commercial paper. Legg has already spent nearly $2bn in a bid to prevent these funds from breaking the buck.
- The company also amended its debt covenants to “provide flexibility during a time of prolonged market turmoil.”
- Last month, Legg Mason Capital Management - the subsidiary run by Miller - cut a third of its staff as asset values sank.
In light of the above, one can argue that Miller’s call is more hopeful than anything else.
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