Storied value investor Bill Miller said yesterday at an annual Legg Mason (NYSE:LM) luncheon that it "looks as if the bottom has been made in U.S. equities". No one must be hoping this is truer than Miller himself, who's had an absolutely atrocious run over the last several years after a 15-year winning streak against the S&P 500. His flagship Legg Mason Value Trust fund has lost almost 60% year-to-date versus a 41% loss for the S&P 500:

Value Trust Top 7 Holdings
(as of Sept. 30. 2008)

% of Assets

YTD Performance
(as of Dec. 2, 2008) (NASDAQ:AMZN)



AES Corporation



Aetna (NYSE:AET)



Citigroup (NYSE:C)



UnitedHealth Group (NYSE:UNH)



Sears Holdings (NASDAQ:SHLD)






Benchmark: S&P 500 (Total Return)



By his own admission, Miller misjudged the scope and severity of the current crisis. Given that he has the self-awareness to admit that, I'm surprised he would even try to call a bottom in the market, particularly in a period when the market is guided by a hand that is more irrational than invisible. Once fear and uncertainty take over, it's pretty well useless to call any bottom (other than zero).

Bottom or not, stocks are cheap here
Still, Miller did share a very valuable insight: U.S. stocks are inexpensive. In fact, he went so far as to say that "every sector... has companies that represent... exceptional value". You won't find me disagreeing: At the end of October, I wrote that the Dow looked no worse than fairly valued at 8,991 – 5% higher than it is now. If you have cash that you can invest over a minimum period of 10 years, be aware that stocks should provide acceptable returns from these levels.

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