Wow, quite a statement. Not mine. But that of once revered investor Bill Miller of Legg Mason Value Trust in his most recent commentary to investors.
I think he is being a little dramatic, but I certainly wouldn't suggest that large caps are expensive. Given Miller's performance during the credit collapse in 08 when he seemingly flailed about buying whatever was down (think Bear Stearns, Washington Mutual) rather than whatever was cheap one certainly has to take his comments more carefully.
However, in his letter he hits on some key investment thoughts that are always worth keeping in mind. Here are a few of the most interesting excerpts from his letter.
"As longtime market observer Bob Farrell recently reminded us, the news is always a mix of positive and negative. When markets decline, people point to the negative news; and when it increases, the positive news is emphasized."
"The public’s distaste for equities is palpable and understandable. Negative returns for 10 years in stocks while “riskless” treasuries3 have soared, and right after one of the best 6 months treasuries have had in the decade, is more than enough to convince folks that stocks are just not where you want to invest long term."
I couldn't agree more. I have CNBC on in the background most of the day while I work and you can just sense how they spin news differently depending on what the stock market is doing.
"A few weeks ago I sent a little note to our staff about Exxon Mobil.4 It pointed out that Exxon Mobil was on the 52 week low list, and was actually lower than it was during the depths of the panic in the fall of 2008. It had (and still has) a yield greater than the 10 year treasury, trades at a multiple well below the market, has returns on capital above the market, has grown the dividend over 9% per year the past 5 years, and uses its prodigious free cash flow to shrink its shares outstanding by between 300 and 400 million shares per year. If it keeps this up for the next 15 years, it will be just about out of shares. Yet it languishes at 5 year lows. When it was last trading here in 2005 oil was $50 a barrel."
Hard to argue with this as well, although you have to have an opinion on the commodity that XOM produces as well.
"Cash returns zero, the 5 year treasury is now trading at one of the lowest yields in history, the 10 year yields 2.93% and that yield will not go up. Yet what do people want: treasuries. What do they not want: Exxon Mobil and most other large capitalization U.S. stocks with similar characteristics."
"The point here is simple: U.S. large capitalization stocks represent a once in a lifetime opportunity in my opinion to buy the best quality companies in the world at bargain prices. The last time they were this cheap relative to bonds was 1951. I was 1 year old then, but did not have then sufficient sentience or capital to invest. I do now, and if you are reading this, so do you."
Quite a statement from a once legendary investor. Certainly some food for thought for the rest of us. If I saw Buffett borrowing money to buy these great blue chips I might be a little more convinced though.
I think he is being a little dramatic, but I certainly wouldn't suggest that large caps are expensive. Given Miller's performance during the credit collapse in 08 when he seemingly flailed about buying whatever was down (think Bear Stearns, Washington Mutual) rather than whatever was cheap one certainly has to take his comments more carefully.
However, in his letter he hits on some key investment thoughts that are always worth keeping in mind. Here are a few of the most interesting excerpts from his letter.
"As longtime market observer Bob Farrell recently reminded us, the news is always a mix of positive and negative. When markets decline, people point to the negative news; and when it increases, the positive news is emphasized."
"The public’s distaste for equities is palpable and understandable. Negative returns for 10 years in stocks while “riskless” treasuries3 have soared, and right after one of the best 6 months treasuries have had in the decade, is more than enough to convince folks that stocks are just not where you want to invest long term."
I couldn't agree more. I have CNBC on in the background most of the day while I work and you can just sense how they spin news differently depending on what the stock market is doing.
"A few weeks ago I sent a little note to our staff about Exxon Mobil.4 It pointed out that Exxon Mobil was on the 52 week low list, and was actually lower than it was during the depths of the panic in the fall of 2008. It had (and still has) a yield greater than the 10 year treasury, trades at a multiple well below the market, has returns on capital above the market, has grown the dividend over 9% per year the past 5 years, and uses its prodigious free cash flow to shrink its shares outstanding by between 300 and 400 million shares per year. If it keeps this up for the next 15 years, it will be just about out of shares. Yet it languishes at 5 year lows. When it was last trading here in 2005 oil was $50 a barrel."
Hard to argue with this as well, although you have to have an opinion on the commodity that XOM produces as well.
"Cash returns zero, the 5 year treasury is now trading at one of the lowest yields in history, the 10 year yields 2.93% and that yield will not go up. Yet what do people want: treasuries. What do they not want: Exxon Mobil and most other large capitalization U.S. stocks with similar characteristics."
"The point here is simple: U.S. large capitalization stocks represent a once in a lifetime opportunity in my opinion to buy the best quality companies in the world at bargain prices. The last time they were this cheap relative to bonds was 1951. I was 1 year old then, but did not have then sufficient sentience or capital to invest. I do now, and if you are reading this, so do you."
Quite a statement from a once legendary investor. Certainly some food for thought for the rest of us. If I saw Buffett borrowing money to buy these great blue chips I might be a little more convinced though.
