November 5, 2007
When Fear Sets Prices
Bill Miller’s recent Letter to Shareholders
I agree with everything he says. The only difference between us is that he has a 190-foot yacht and I don’t.
“Where will the new leadership come from? The same place it usually does: the old laggards. I think the new leadership will be US, large-cap, dollar-based, and grow to encompass what no one wants to own today, especially financials and consumer. I also think so-called growth stocks will continue to do fine. When growth becomes scarcer and the discount rate becomes lower, growth becomes more valuable.
More particularly, just as the right thing to do in 2002 was to buy what everyone was panicked about, I think the greatest gains over the next 5 years will be made in those securities people are panicked about today. For specific names, consult the 52-week new low list.”
November 6th, 2007 at 8:55 am
Bill will of course be correct - eventually. The trick is in the timing, as “early” is just another word for “wrong” in this business.
Right now, and for the next 2Q’s or more, would constitute “early” (regarding the financials).
Why give up on trades that are working today, i.e. making daily profits, in order to park your coin in the penalty box for months on end?
I’ll ride them up after that trend is in motion, just as I have been and am riding them down.
November 6th, 2007 at 9:33 am
There are certainly going to be plenty of winners in the financial space in the coming years. I don’t think you can say overall that all financial stocks look good, because some are in major trouble. I like GS and WB as good values.
November 6th, 2007 at 9:44 am
I was going to post comment, but CapitalGain did the work for me. Well said.
November 6th, 2007 at 9:51 am
Miller says he’s trimming many of his fund’s largest holdings in order to buy more of the battered brokerage, housing and consumer stock. He has had an enviable record that has stood the test of time, but I believe that he is calling this way too early. I feel that it’ll take several years for effects of the subprime / credit crunch to dissipate and that it’ll get worse before it gets better. In April 2006, he was advising investors not to buy oil and commodities.
He wrote: “Given the choice of buying Commodities with a capital C, or buying capital C— Citigroup—at current prices, I’ll take the latter. Check back in 5 years.”-Bill Miller, April 2006
Well, he did say, check back in 5 years. *grin*
(above comes from http://lcmarket.blogspot.com/2007/11/bill-millers-letter-to-shareholders.html )
November 6th, 2007 at 10:02 am
@CapGain & manuel: I hear where you’re coming from … just let me know when you time your entry so that I can add to my penalty boxed holdings.
@Lawrence: Nice catch on his old capital C comment … I’ve been suffering in C lo these many years and look forward to 2011 (fingers crossed). ;-)
November 23rd, 2007 at 6:32 am
But it has not been right to buy everything that was panicked about in 2002. Look at the telcos, a major leading sector of the previous bubble, they are still down in the drains, even after 5 years of boom in everything else.
November 23rd, 2007 at 8:38 am
jamotide: Very true, and one could argue that the semiconductors have never come back either.