US Dollar Very Long Term Chart

Legg Mason's Bill Miller Calls 'the Bottom'

Presumably this is a different bottom than the one he called in April 2008.

"The worst is behind us." 23 April 2008 - Bill Miller

Bill Miller of Legg Mason Calls a Bottom

Reuters
Legg Mason's Miller: "Bottom's been made" in stocks
By Jennifer Ablan and Herbert Lash
Wed Dec 3, 2008 3:56pm EST

NEW YORK, Dec 3 (Reuters) - Legg Mason's Bill Miller, a celebrated investor but whose stock picking is far off the mark this year, said on Wednesday the "bottom has been made" in U.S. equities.

He recommends that the Federal Reserve buy stocks and junk bonds to avert a deeper financial crisis, adding "the taxpayer would make a killing" as markets rebound. (Yikes! - Jesse)

Speaking at Legg Mason's annual luncheon for media, Miller said that all long-term investors believe that stocks today are cheap, but credit markets must regain health before equity markets can rally.

It "looks as if the bottom has been made" in U.S. stocks, he said.

Miller told Reuters the year has been "terrible, a disaster and awful," yet he held out his past performance in down markets as a reason why he should not be counted out.

"We've performed in most of the financial panics that we've had -- the last one being the three-year bear market ending in 2002 -- we outperformed all the way through that," he said.

"So even though we lost money, we lost a lot less money than the market did," Miller added.

However, Miller acknowledged that his performance has been worse than in past downturns.

"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," he said.

For the year, Miller's flagship Value Trust LMVTX.O 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.

The severe sell-off has provided ample opportunities. (Yes. Like a plague creates plenty of vacancies in hotels - Jesse)

"This market is very unusual because since the end of the second quarter, it has been a pure scramble for liquidity which accelerated obviously post-Lehman Brothers and people sold without regard to value at all," Miller said.

"So at the end of the end of this quarter, every sector in the market has companies that represent what we think are exceptional value."

A Few Charts in the Babson Style for Midweek 3 December

November Payrolls Report Preview

The Non-Farm Payrolls Report for November will be released on Friday 5 December at 8:30 AM EST.

The consensus of economists is for a loss of 325,000 jobs, as compared to October's loss of 240,000 and September's loss of 284,000 which are likely to be revised with this report.

Here are our projections with the usual caveat that the numerous large 'adjustments' and revisions to this report make it very difficult to forecast with any reliability.

The imaginary jobs added, alternatively known as the "Birth-Death Model" of phantom businesses should be a relatively inconsequentional addition of 29,000 jobs into the pre-seasonally adjusted number. If it were added to the seasonally adjusted number it would be significant.



More important is the seasonally adjusted 'headline number' which we think will come in close to consensus with a loss of about 305,000 to 320,000 jobs. There is potential downside to this number depending on how they revise the October loss of 240,000. As you can see we are assuming they revise it much lower to a loss of around 310,000. The spin will be that the job losses are 'bottoming.'

The Bush Administration might choose to hit the numbers quite hard with a worst case adjustment down to the -400,000 level and then show a gradual improvement into the end of the term of office to make the case that the economy was bottoming and improving when handed over to the Democrats.

Conversely, a 'hot number' of a decline of only 260,000 or thereabouts with a stiff downward revision to October would set up the spin of a 'market bottom' and a strong rally. If you have not notice the smart money has been unloading stocks with some initiative the past few months, taking profits where possible in anticipation of an increase in taxes on capital gains and the wealthy under the incoming presidential administration, which is not a bad assumption.

The first scenario of a 'bottoming' around the 300,000 lost jobs level seems most probable despite these other possible outcomes. We won't be willing to bet on it however.

Its Machiavellian we know, but that's the way it is, and has been, and the way we see it based on everything we know.


And finally, the projected adjusted and actual numbers just to emphasize the huge seasonal adjustments that are being made, beside the historical revisions.



The government numbers have become distorted and less reliable over time, starting with some vigor in the Clinton Administration. Reacting to single number events is almost nonsensical but that is how the Wall Street speculation game is played these days. As Dr. Greg House says, "everyone lies" and that seems to be the case more often in these times, especially for those in positions of power.

The most important number is the longer term trend, which we suspect will remain lower until the economy bottoms. In fact, we expect a real bottom here to be an indicator of a nascent recovery as it was a sign of the top.