Yesterday’s post looked at a somewhat self-serving suggestion from a money manager that investors would be better off hiring a professional to do their investing for them. One of the problems with such a suggestion is that you might end up with someone like Bill Miller. You don’t hear much about Mr. Miller these days but a few years back Mr. Miller was widely feted in the business press for beating the S&P 500 for 15 consecutive years from 1991 until 2005.
Investors who read about Mr. Miller’s streak and invested in the Legg Mason Value Trust (LMVTX), the fund he managed, would have been sorely disappointed. Since 2006, the S&P 500 is down 14.57% while Legg Mason Value Trust is down 51.68%. Mr. Miller’s disastrous bets on AIG, Bear Stearns, Freddie Mac, Countrywide Financial and Citigroup meant that his fund trailed the S&P 500 by a stunning 18 percent in 2008. Mr. Miller bounced back somewhat in 2009 but investors are not hanging around to see if his star will rise again. Value Trust’s assets have fallen from a peak of $21 billion to just $4.3 billion recently and Mr. Miller is already “passing the torch to the next generation”.
Looking back into my older posts, I cringed when I read this one that highlighted the Q1-2006 market commentary from Mr. Miller in his heyday. In it, Mr. Miller says that looking out 5 years, he prefers buying capital C — Citigroup — to Commodities with a capital C. There is still one year left but I think you can safely declare a winner here. The iShares S&P GSCI Commodity Index ETF (GSG) is down about 43% over the past 4 years. By comparison, Citigroup is down 92%.