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Is Bill Miller right this time?
Value investors are nothing if not predictable. The approach, unfortunately, has been disastrous this year. This was exemplified most dramatically by Bill Miller, who beat the S&P 500 for 15 years straight until he was undone by the credit crunch. He just kept on loading up on financial stocks, notably Freddie Mac, even as they hit new lows. His Legg Mason Value Trust fund has sunk about 60 percent this year vs. about a 40 percent total return for the S&P 500. In any case, he's now telling reporters that stocks are cheap. He goes as far as to say to Reuters that the Federal Reserve should buy up stocks and bonds now to avert a worsening financial crunch and that "the taxpayer would make a killing." Do you believe him?
For more:
- here's the Reuters article
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Bill Miller news from FierceFinance
Comments
By JayB | Posted 11:38am | December 5, 2008
Stocks are cheap based on what metric?? EPS over the past 20 years? "Historic PE multiples"?
Bill Miller is a bright guy, Warren Buffet is a bright guy and Kerk Kerkorian, another bright guy said just yesterday "I've lived one year too long."
Any analyst that is using the past 20 year PE or EPS as benchmarks is assuming the type of growth and expansion that's taken place over the same time period, recessionary cycles included.
There's never been a period where sales imploded by 30%, and where consumers, the driving force behind the past 30 years are actually slashing their spending.
Why should the average PE be 8x..Why does anything think PE's dipping to 12-15 from 18-25
make them justifiably "cheap"? The sky isn't falling, its merely caving in. Miller is talking his book..Paulson is reacting in a crisis mode, and there isn't one sell side 'expert' that was able to predict what's unfolding. Kool Aid is on sale.!
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