Who is the all-time greatest investment manager? There was a time not too long ago when Bill Miller's name would have been right at the top of a very short list of "greatest ever". As the Chairman and Chief Investment Officer of Legg Mason's Value Fund, Mr. Miller managed to beat the return on the S&P 500 Index for 15 years in a row between 1991 and 2005. While I am not sure if there are any "official" statistics for this category, I think that Miller's 15-year consecutive out-performance against the S&P 500 Index is a record which probably stands alone. And if he had retired at the end of 2005, Miller may very well have gone down in history as the "greatest ever"!
However, in the securities business (as in many walks of life), sometimes "we are only as good as our last trade!" Value investors, including Mr. Miller, were annihilated between August 2007 and November 2008 when Fannie Mae (FNM) and Freddie Mac (FRE) both went from $70/share to ZERO! While I don't have the exact figure, I believe that Mr. Miller's value fund had greater than a 65% draw-down during that period. So much for talk of the "greatest ever"! Still legendary, of course, but definitely no longer on the short list of "greatest ever" for Mr. Miller.
So where is Bill Miller now, and why this special SuttonWatch update in his honor? Bill Miller is currently the Chairman and Chief Investment Officer of Baltimore-based LMM Investments. LMM has $2.9 billion under management and is a partially owned subsidiary of Legg Mason. He was interviewed by CNBC this past Wednesday, October 14th. In that interview, Mr. Miller said that there are NO reasons to be bearish on the U.S. Stock Market. The list of positives, according to Miller, include moderate economic growth, low interest rates, and low inflation (among others).
NO REASON TO BE BEARISH ON THE U.S. STOCK MARKET !?
WOW !!
In my previous SuttonWatch column dated Sunday, October 11th, I said there are several major cycles that will turn down towards the end of this month. I was hoping to be patient enough to wait for evidence of those negative turns before establishing significant short positions in the U.S. stock market, but Miller's CNBC interview on Wednesday had a profound impact on me. Late last Thursday I dipped my toe in the water with a very minor short position in the S&P 500 using the double-short SDS ETF. And late Friday during a vicious last-hour rally, I executed a major short position that completes my commitment to the bearish case for the U.S. stock market immediately ahead.
This coming Monday is October 19th, a date that will live in infamy for most of the older traders and investors. In 1987, the DJIA fell 23% on that incredible Monday in October. To put this in perspective, the October 1987 single day loss was almost double the percentage loss sustained on any of the black days in the October 1929 crash! In 1987, the S&P 500 peaked on August 25th and bottomed out on October 19th. This year, the S&P 500 bottomed out on August 24th, and I strongly believe that the peak will be seen on Monday, October 19th (or was already posted at Friday's close, October 16th)!
Does anyone think that it's odd that no one on Wall Street is talking about the possibility of a Fed rate hike following the October 27-28 meeting? It seems to me that in almost every speech from from almost every Federal Reserve official over the last three months (at least), including Janet Yellen, a rate hike before year-end 2015 is still on the table. Why risk a rate hike in December just before the all-important holiday buying season? If a 2015 rate hike is going to happen, then I think the most logical time for the Fed to test the waters is at the late October meeting. While precious metals mining shares have recently posted big gains (50% or more) from their early September 2015 intra-day lows, daily chart sell signals have been triggered by my computer trading system in most of these stocks over the last couple of days. My recommendation now is to liquidate holdings in this sector in favor of a better buying opportunity later this year.
Does anyone think that it's odd that no one on Wall Street is talking about the possibility of a Fed rate hike following the October 27-28 meeting? It seems to me that in almost every speech from from almost every Federal Reserve official over the last three months (at least), including Janet Yellen, a rate hike before year-end 2015 is still on the table. Why risk a rate hike in December just before the all-important holiday buying season? If a 2015 rate hike is going to happen, then I think the most logical time for the Fed to test the waters is at the late October meeting. While precious metals mining shares have recently posted big gains (50% or more) from their early September 2015 intra-day lows, daily chart sell signals have been triggered by my computer trading system in most of these stocks over the last couple of days. My recommendation now is to liquidate holdings in this sector in favor of a better buying opportunity later this year.
Caveat Emptor! Let the buyer of U.S. stocks beware!! Trouble immediately ahead!
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| S&P 500 Index Weekly Chart with 75-Week and 150-Week Moving Average Lines & Computer Trading Signals |
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