William H. Miller spent nearly two decades building his reputation as the era's greatest mutual-fund manager. Then, over the past year, he destroyed it.A couple of years ago when I saw his portfolio was full of home builders and mortgage companies, I knew he was headed for trouble. He owned stocks that have since gone to zero. On top of that, many investors have pulled out of his fund, giving him little capital to buy stocks with now that the market has fallen. There's little chance of him making the money back. Unfortunately, while I saw his errors in advance, I didn't see the errors in my own portfolio. With the notable exception of Warren Buffett, a lot of value investors are getting creamed.
Fueled by winning bets on stocks other investors feared, Mr. Miller's Legg Mason Value Trust outperformed the broad market every year from 1991 to 2005. It's a streak no other fund manager has come close to matching.
Mr. Miller was in his element a year ago when troubles in the housing market began infecting financial markets. Working from his well-worn playbook, he snapped up American International Group Inc., Wachovia Corp., Bear Stearns Cos. and Freddie Mac. As the shares continued to fall, he argued that investors were overreacting. He kept buying.
What he saw as an opportunity turned into the biggest market crash since the Great Depression. Many Value Trust holdings were more or less wiped out. After 15 years of placing savvy bets against the herd, Mr. Miller had been trampled by it. ...
"The thing I didn't do, from Day One, was properly assess the severity of this liquidity crisis," Mr. Miller, 58 years old, said in an interview at Legg Mason Inc.'s Baltimore headquarters. ...
Mr. Miller's picks read like a Who's Who of the stock market's biggest losers: Washington Mutual Inc., Countrywide Financial Corp. and Citigroup Inc.
"Every decision to buy anything has been wrong," Mr. Miller said. ... "It's been awful."
Friday, December 12, 2008
The best investor became the worst
If your stock portfolio is down over the past year, take heart: It could be worse.
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Gosh James, you're super! We know, 'cause you just told us so.
ReplyDelete"James said
ReplyDeleteUnfortunately, while I saw his errors in advance, I didn't see the errors in my own portfolio. With the notable exception of Warren Buffett, a lot of value investors are getting creamed."
I too saw this coming a mile away and really decoupled much of my portfolio away from financials & their ilk into consumer staples, bonds, etc.
I even steered clear of commodities, assuming that everyone thought was inflation was really deflation.
Then the crash came and I was feeling pretty good about my predictive abilities.
However, what I totally missed was, I thought this was a largely american problem so I left my global stocks alone.
I checked them the other day - WHOOPS!!!
Anonymous said...
ReplyDelete"However, what I totally missed was, I thought this was a largely american problem so I left my global stocks alone."
You know exactly what I'm talking about. There's been nowhere to hide.
George said...
ReplyDelete"Gosh James, you're super! We know, 'cause you just told us so."
You're just pissed because you're too dumb to recognize an obvious housing bubble.
You're just pissed because you're too dumb to recognize an obvious housing bubble.
ReplyDeleteLet's see, you publish your thoughts on the Internet for all to see and comment upon. Then you receive a comment that reveals nothing about the commenter, yet draws a conclusion based on the information that you published about yourself for all to see (and to comment on).
The comment is incongruous with your self-image, so you lash out at the commenter by building a strawman argument based upon nothing but your own hurt feelings.
If believing that makes you feel better about yourself, by all means, proceed.
Also proceed with publishing more of your thoughts which reveal more about your self-image. I'm riveted.
Keep on renting guys! Prices in DC, Bethesda, Arlington..... are NOT and will NOT go down. That is the bottom line!
ReplyDeleteLooking at the prices in the Fairfax County area such as Franconia and Rose Hill, the annual appreciation is around 6.5% for the last 11 years. Shiller says expect an annual appreciation of around 3% above inflation. So the 6.5% figure may not be that far off to show the market has leveled.
ReplyDeletethere has been one "safe" haven during this debacle - cold hard cash.
ReplyDeletethere were a few pundits (itulip.com) recommending going to cash last October when the markets peaked at 14K.
With deflation being what it is, cash for now is the king of kings