Bill Miller on risk, real and perceived

The problem is that real risk and perceived risk are two different things.  And that's where people get into trouble, because they perceive risk to be high when prices are low, and they perceive risk to be low when prices are high.

~ Bill Miller

Bill Miller on fear and greed

One of the things that we know - it's been proven over and over again - is that the coefficient of loss-to-gain is 2-to-1.  So a dollar's worth of loss in the market is twice as painful as a dollar's worth of gain is pleasurable.  And, as Warren Buffett often says, "fear is contagious and spreads rapidly, and confidence only returns slowly, one person at a time."  But what that means is that when you have very dramatic events that people tend to overreact to them and that those are rare, but they're perfect buying opportunities.

~ Bill Miller, interview with Consuelo Mack, January 11, 2022

Bill Miller on the risk of a black swan in Saudi Arabia

The chances there [Saudia Arabia] of a very significant shutdown of oil are relatively, I'll say relatively, small. They're not vanishingly small, but they're relatively small.

~Bill Miller, chairman and CIO, Legg Mason Capital Management, CNBC's Squawk Box, April 6, 2011

Bill Miller on how he's limiting his downside potential

Oh not at all [does Miller have to worry about limiting his upside by pursuing a more conservative, risk-attuned strategy]. I think what's limited is the downside.

You know, had we gotten defensive back in the fall of '07, and then gotten offensive in the fall of '08, that would've worked out very well. Right around the time Warren Buffett wrote his editorial about 'time to buy America.'

~Bill Miller, chairman and CIO, Legg Mason Capital Management, CNBC's Squawk Box, April 6, 2011

Bill Miller on how he's adapted his management style to the existence of black swans

We've always had a very robust set of strategies for dealing with all kinds of different kinds of markets, but I think the big mistake that we made, or that I made, was effectively to say, "We need a strategy to deal with anything that's happened in the post-war period." So, inverted yield curves, inflation, a crash like in '87, all different kinds of panics.

But I explicitly ruled out a return, in essence, to depressionary conditons, just like I ruled out a new Civil War, for example. Well, the answer, I think, is you can't rule out anything. Anything. I think you have to look at anything that can hit aggregate demand or aggregate supply. And that's the thing I think we're well prepared for now.

And also, understanding that there are two types of financial crises: one of them, which we've navigated in very well, like the crash of '87, which are liquidity-driven crises. The strategy in a liquidity-driven crisis is pretty simple, which is, when massive liquidity is injected, you buy what the center of the crisis is; in an asset-based crisis, like we had in 2008, that strategy is very bad, as we found out to our chagrin. The proper strategy there, in an asset-based crisis is, you don't do anything until the authorities move to stabilize asset values and preserve them. That was TARP. Everything the Fed had done or the government had done, the Treasury had done up until TARP destroyed equity value. So, wipe equity holders out at Bear Stearns and wiped them out, and even creditors, at Lehman Brothers.

Once they decided to preserve equity values with TARP, that was the beginning of the end of the crisis. That was the time you go in and buy. So, I think we're covered on both kinds of crisis in the future.

~Bill Miller, chairman and CIO, Legg Mason Capital Management, CNBC's Squawk Box, April 6, 2011

Bill Miller on the Fed's ability to avoid hyperinflation II

Well you never know [if you're headed for a big, surprise shock], the markets, everything is uncertain. But, you have history to go on, you have theory to go on, you have enormous slack in the economy, what you've got, you know, is the unemployment rate is still 8.8%, you're a long way away from wages, which are 70% of corporate costs. You'd certainly need to be closer to capacity utilization in the 80s instead of in the 70s [percent] where we are right now, you'd need unemployment down probably 5-6 [percent] before you're going to have any type of a cost-push in things.

~Bill Miller, chairman and CIO, Legg Mason Capital Management, CNBC's Squawk Box, April 6, 2011

Bill Miller on the Fed's ability to avoid hyperinflation

[The Fed has] already monetized a huge amount of this, they've provided an enormous amount of liquidity, there's a trillion dollars of excess reserves sitting on the Fed balance sheet. The issue is, how do you move away from that? I personally wouldn't go so far as Chairman Bernanke that he's a hundred percent certain that they can do it, but, you know, call it eighty-five to ninety percent, because the Fed's balance sheet will normalize on its own. If they don't do anything, all of those mortgage-backed securities will mature and they'll just drift away over the next 7-10 years.

~Bill Miller, chairman and CIO, Legg Mason Capital Management, CNBC's Squawk Box, April 6, 2011

Bill Miller on historical Fed-induced buying opportunities

Historically, when the Fed starts to tighten, when it moves from 'accomodative' to 'neutral', you get a pretty significant correction in the overall market. That's always been a buying opportunity. The real problem comes when you move from 'neutral' to 'tight'. When the Fed starts talking about imbalances and they're trying to correct imbalances. So, you could get a correction, and there are going to be corrections along the way, but anywhere from the zero-bound right now to, call it 2-3%, is not going to be a significant drag on equities.

~Bill Miller, chairman and CIO, Legg Mason Capital Management, CNBC's Squawk Box, April 6, 2011

Bill Miller sees room to grow for stock prices and earnings

The market's up about 90% or more from the bottom, but earnings are up about 90% from the bottom. So, we're really looking at a market where forward twelve earnings multiples are not much higher than they were at the bottom. The difference of course is that the market as a percent of GDP is a lot higher than it was then, so the slack is not what it was. But you still have great values in this overall market.

You're going to see margin headwinds and that kind of thing and also just consumption, because of oil prices, will be a bit of a drag. But at the end of the day, you're looking at companies with great free cash flow yields and rising dividends and low P/E ratios and I think the overall earnings growth is not going to be what we've seen but you'll see earnings growth over the next few years be at least equal to nominal GDP, maybe a little bit higher.

~Bill Miller, chairman and CIO, Legg Mason Capital Management, CNBC's Squawk Box, April 6, 2011

Bill Miller: Best time to invest since early '80s (2010)

This is the best time to invest since probably the early 1980s.

~ Bill Miller, as appeared on CNBC, October 20, 2010

Bill Miller on his decision to increase his holdings of financial stocks in 2007

We bought financials after the Fed [first] injected liquidity [into the market by cutting the discount rate on Aug. 17, 2007, and then the fed-funds rate on Sept. 18, 2007, continuing into 2008.] That's what you do in a liquidity crisis... This turned out to be a collateral-driven crisis caused by underperforming debt... We've analyzed that mistake and tried to make adjustments to risk management and the portfolio-construction process.

~ Bill Miller, portfolio manager, Legg Mason Value Trust, "It's Miller Time!," Barron's, October 12, 2009

Bill Miller on his decision to invest in Bear Stearns

When it failed in March [2008], it had the highest capital ratios ever. There was no rogue trader... But that didn't stop a run on the bank.

~ Bill Miller, portfolio manager, Legg Mason Value Trust, "It's Miller Time!," Barron's, October 12, 2009

(Bear Stearns was eventually purchased by JPMorgan Chase for $10 a share, leaving Value Trust with a huge loss.)

Motley Fool's Matt Koppenheffer: "Premature to start betting against Bill Miller (2008)

To me, it seems premature to start betting against an investor like [Bill] Miller, who has performed so well over a long time.

~ Matt Koppenheffer, "Legg Mason Still Takes Its Lumps," Motley Fool, January 31, 2008

Legg Mason CEO Mark Fettig on fund goat Bill Miller

Chairman and Chief Investment Officer [of Legg Mason Capital Management] Bill Miller has built a tenacious team of long-term investors. Thus far in their 26-year history, any period of underperformance has been more than offset by subsequent outperformance. We fully support their thoughtful action plans for improvement.

~ Mark Fetting, president and chief executive officer, Legg Mason, "In a bad year, these funds were the worst; Down more than 60%, three U.S. stock portfolios hope for a turnaround," MarketWatch, January 2, 2009

(Among non-leveraged U.S. stock funds with at least $100 million in assets, none did worse than Bill Miller's Legg Mason Opportunity Trust (LMPOX), which as of Dec. 30 was down 66% this year. The third-biggest loser was another fund from Legg Mason Inc. (LM, 21.91) , Growth Trust (LMGTX), which is down 61%.)

Bill Miller on a miserable 2008

When you're underperforming and losing more money than the market in a down market, then that's a much more problematic situation. We've performed far worse than I would've predicted we would.

~ Bill Miller, portfolio manager, Legg Mason Value Trust, ""Bottom's been made" in stocks: Legg Mason's Miller," December 3, 2008

(For the year, Miller's flagship Value Trust (LMVTX) fund was down 59.7 percent as of Tuesday, compared to a 41 percent decline in the reinvested returns of the S&P 500 index, according to Lipper Inc., a unit of Thomson Reuters.

Performance over the year-to-date, one-, three- and five-year periods for Value Trust put it at the bottom of the barrel among its peers, Lipper data shows.)

Bill Miller plugs Citigroup stock (2005)

Citigroup chief financial officer Sallie Krawchek said recently on CNBC that it was "credit nirvana," the best environment they had seen in almost 15 years, and Citigroup raised its dividend another 10%.

Who would park their money in cash at 2% and pay taxes when they could get 3.7% in tax-advantaged dividends in Citigroup stock and own a piece of the world's largest financial-services firm, one that is perfectly well-positioned to be the banker to the developing world's burgeoning consumers?

~ Bill Miller, portfolio manager, Legg Mason Value Trust, "Good Times Are Coming!," Time, March 8, 2005

Bill Miller: Countrywide Financial is worth $40 per share (2007)

After falling 20% in a only a few days on no news, and this after being down 50% for the year, CFC rallied over 30% in one day once they reported their results and indicated they would be profitable for the 4th quarter and expect to earn a reasonable return on equity of 10-15% for all of 2008. The price action on both sides was driven by emotion -- first fear, then relief -- and was hardly the result of a careful analysis of Countrywide's long term business value. That, by the way, we think is in the $40's compared to its current price of about $14-15.

~ Bill Miller, Legg Mason Value Trust 3rd Quarter 2007 letter, "Bill Miller: Countrywide Financial Is Worth $40/Share," Seeking Alpha, November 4, 2008

(Countrywide was acquired by Bank of America for less than $5/share in stock in July, 2008.)

Bill Miller: "The worst is behind us" (2008)

I think we will do better from here on, and that by far the worst is behind us. I think the credit panic ended with the collapse of Bear Stearns, and credit spreads are already much improved. Although the economy is likely to struggle as it did in the early 1990s, the market can move higher, as it did back then.

Most housing stocks are up double digits this year despite dismal headlines, a sign the market had already priced in the current malaise. I think likewise we have seen the bottom in financials and consumer stocks, but not necessarily the bottom in headlines about the woes in those sectors.

~ Bill Miller, portfolio manager, Legg Mason Value Trust, "Legg Mason's Miller sees recovery for stocks," MarketWatch, April 23, 2008

Bill Miller: Buy financial, housing and consumer stocks

The greatest gains over the next five years will be made in those securities people are panicked about today. Today fear dominates the pricing of housing stocks, of mortgage related securities, of financials, and of many consumer stocks.

Large-cap U.S. is the cheapest part of the equity market.

The stock market rally has been led by the same groups that have led for five years: energy, materials, industrials, and technology. Confidence and optimism underlay the pricing of energy, materials, industrials and non-U.S. stocks, especially those of emerging markets, and China in particular. It seems to me the leadership is about to change. Where will the new leadership come from? The same place it usually does: the old laggards.

This is the first time since 1990 we have had two calendar years behind the S&P 500. Perhaps not surprisingly, that was also a time of panic due to a housing market recession, soaring oil prices, banks and financials collapsing. We were able to take advantage of the values then offered to begin a pretty good period of excess returns.

~ Bill Miller, portfolio manager of Legg Mason Value Trust, November 1 letter to shareholders, as reported on MarketWatch, "Legg Mason's Miller: Buy financials, housing stocks," November 2, 2007