Barron’s Article on Bill Miller Shreds the Credibility of That Rag

By on October 11, 2009

Touting Legg Mason’s Bill Miller as a member of its All-Century Investment Team, Barron’s is doing a disservice to its readers. Miller’s fund lost 72% in 18 months, but so far this year Miller’s Legg Mason Value Trust has a gain that puts him in the top 5% of his peers. The problem is, despite the recent gains, his fund still lags the S&P 500 over the 3, 5, and 10 year periods by a wide margin.

Barron’s states, “DON’T WRITE OFF Bill Miller quite yet.” I’m sorry, but any fund manager who completely missed the oncoming trainwreck and lost the amounts of money he did deserves to be written off permanently. It’s galling that Miller can still make the cover of a major financial publication with a beaming smile as though he’s some sort of hero.

Miller is quoted, “If you do this long enough, the market has a way of making you look stupid from time to time.” Again, I apologize for sounding harsh, but anyone who is paid what is reportedly in the hundreds of millions of dollars for managing a fund should not be stupid enough to lose all the gains they made, and more, in a couple of years. The fact is that Miller lost more money than he ever made because his assets under management were far larger when his fund collapsed that the years in which he was outperforming the S&P 500.

Below are exerpts several Barron’s reader comments (the ones with a clue):

“Bill Miller totally mis-read the new environment in which his largest investments were operating. He was totally dependent on the Government bailing these companies out while keeping the shareholders (those in the 1st loss position) whole. This was not a period like the 1980s. The brokers had become more leveraged. They dealt much more in over-the-counter derivatives that resulted in much more counterparty risk that two decades prior.”

“A FUND IS DOWN 78% YOUVE DESTROYED ALL FUTURE GAINS 38% GAIN IS NOTHING YOU STILL HAVE TO GO UP 454% TO BREAK EVEN….PROTECTION OF CAPITAL IS FAR MORE IMPORTANT THAN HIS LOUSEY RECORD OF 15 YRS. ONE MAJOR LOSS YEAR OR 18 MONTHS OF LOSSES DESTROYS EVERYTHING….HIS TRACK RECORD IS WORTHLESS NOW”

“Mr Miller has been making more than 100 million dollars/year for last 20 years or so. That is more like a failed banker CEO salary or the salary of Hedge Fund manager than a mutual fund manager. He did not lose a dime during this crisis. He most likely does not invest with his mutual funds or invests only a small portion of his net worth with himself. Mr Miller is a wall street insider with grandiose ideas about his self worth.”

“In response to your recent article, “It’s Miller Time” Are you kidding me? Mr. Miller’s 10 year annualized total return is -1.82%, that’s minus. Before inflation and taxes. His fund lost 72% of its value in 18 months. This is not money management. It’s playing cowboy with other people’s money – for a fee. But to be fair, not unlike the typical mutual fund manager that whose only performance measure is relative performance to the S&P 500. Could the bar be set any lower. Got Risk Management? Huh.”

“Had I put $100k with him at the start of this…..I’d be down 72%, but wait, up 37.52%! That leaves me $38,500. Enough said.”

“It amazes me that these fund managers can destroy so much wealth while taking unbelievable salaries, and get away with it!! If you invested $10,000 with Bill Miller 10 years ago, you would have less than $10,000 today. Investing in a simple S&P500 index fund would leave your account with more money. That’s incredible!”

“It’s too bad Barron’s makes heroes out of failures.”

Below is a long-term chart of Miller’s fund:

Source:

http://online.barrons.com/article/SB125513241806577275.html

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