Wall Street's Best Minds

Central Banks’ Endgame Not Good for Markets

A William Blair strategist writes that the unwinding of ultra-easy monetary policies will create a bad outcome.

By Brian Singer

There’s a perception that central banks have had the market’s back by implementing easy monetary policies since the financial crisis. But we’ve seen that these kinds of central bank actions have historically ended poorly for the market.
 

The United States is in the final stages of its post-global financial crisis ultra-easy monetary policy, but we believe it will be a slow process to unwind from this low-rate environment. We believe U.S. interest rates will stay lower for longer.
 

Europe’s and Japan’s monetary easing is not nearing that end point, but they are running out of ammunition—they’re finding fewer bonds to buy.
 

Brian Singer

We believe the unwinding of ultra-easy monetary policies will create a bad outcome for markets.
 

The European Central Bank (ECB) cannot currently buy bonds below their deposit facility rate, which is 0.40% today. As a result, more than half of outstanding bonds fall outside of the ECB’s bond buying program.
 

The Bank of Japan is similarly bond constrained, having already bought a significant amount of the available bonds and with bond yields negative way out on the yield curve. The Bank of Japan recently announced additional fiscal stimulus but to a lesser degree than markets were expecting and without further monetary easing. We are also starting to hear talk in Japan about a phenomenon known as “helicopter money.”
 

Helicopter money is not quantitative easing. Whereas quantitative easing can be unwound at any time and, therefore, is viewed by the market as temporary, helicopter money involves the central bank buying bonds directly from the Treasury—this can’t be reversed. That permanence has a different impact on behaviors—namely, it typically leads to consumption.

The temporary nature of quantitative easing tends to lead to saving.
 

The first stimulus injection by the Federal Reserve was a liquidity injection to prevent a freezing up of the market and a collapse of the financial system. But since then, central banks’ actions across the globe have been taken in the name of growth—and I’d say those efforts have not been successful at all.
 

Unfortunately, these kinds of central bank actions have historically ended poorly and have had a lasting impact on the market. Here’s a quick look back at previous ultra-easy policies and how they ended:
 

’70s Oil Shock: The oil shock monetization in the early ’70s did not prevent the Standard & Poor’s 500 from declining 50%.
 

’80s Greenspan Put: Starting in the late ’80s and accelerating in 2000, Alan Greenspan, the head of the Fed at that time, lowered interest rates several times, resulting in investors believing that the Fed would always step in a crisis and provide protection on stock market prices. This culminated in Y2K (when all computer programs were supposed to stop working at the end of 1999) and the dot-com bubble. Again, the equity market went down sharply, especially the Nasdaq, which dropped 70% at one point.
 

We’ve now seen about eight years of ultra-easy monetary policy, which we also believe won’t end well. It’s not that it will end poorly tomorrow or even this year or next year, but we believe it is likely not to end well and have significant ramifications on the markets.

 

Keep in mind that this easy monetary policy has been a global phenomenon. It hasn’t just been one country as we’ve seen in the past. It has been global in nature, and it has been ineffective. It has also scattered resources to all of the wrong places. And that’s why we believe the unwinding of these monetary policies will create a bad outcome for markets.

 

U.S. and Emerging Markets Outlook

 

The S&P 500 itself has been on a seven-year tear with little pause. That’s quite significant in terms of duration and, most importantly, in terms of magnitude. We’ve reached a point where price is above value in the U.S. and that leads us to a relatively cautious view.

 

We’re cautious—not necessarily negative—because the U.S. is still a significant safe haven; the least risky of the risky, the asset class and country toward which people around the world continue to gravitate. So, even though there are a lot of negative trends out there, there are other factors supporting the U.S. equity market. And that support may not stop over the course of the rest of this year.

 

Historically, market perception has closely tied emerging markets to developed markets, but we believe this relationship has consistently been overstated.

 

What about opportunities in emerging markets? Historically, market perception has closely tied emerging markets to developed markets, but we believe this relationship has consistently been overstated.

 

The biggest opportunity in emerging markets during the last few decades was after 9/11 when emerging markets declined significantly. This panic was triggered by the view that emerging economies would stall given the amount of trade between the U.S. and many of the emerging markets.

 

Instead, emerging markets experienced a significant rally over time.

 

Today, this connection continues to be overstated. In fact, it’s probably even weaker today given the growth that we’ve seen in emerging markets. The size of emerging markets relative to developed markets has increased significantly. China was basically a non-consideration back then. Now, it is very much a consideration with a size on par with that of the U.S. Not per capita, of course. On a per capita basis, it remains much poorer than the U.S.

 

But, in terms of the aggregate economy, China is significantly larger and able to influence global growth in much the same way as the U.S. economy can. As a result, China will influence emerging markets as much as the U.S. has been perceived to influence these markets.

 

Investment Implications

 

Our positive view on emerging markets is leading us to look at emerging markets and currencies, and we have slowly begun to increase our exposure to emerging market equities and currencies.

At the same time, given the ambiguous environment for central banks’ monetary policies and for global economic growth, we are placing particular emphasis on convexity—the use of options—in the portfolio today.

That means, all else equal, we currently have a preference to use options to gain exposures to those fundamental opportunities that have risk coming from stage two of our investment process (determining why value/price discrepancies exist) to help protect against extreme events, while maintaining the ability to participate in the upside.

Singer is head of the Dynamic Asset Allocation Strategies team at William Blair.

How Global Elites Forsake Their Countrymen

Those in power see people at the bottom as aliens whose bizarre emotions they must try to manage.

By Peggy Noonan

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Weekend Edition: China’s New Silk Road to Make a Big Move in Gold

Editor's note: Today, we're sharing one of the biggest stories you're not hearing about…

China is hard at work on the largest, most ambitious infrastructure project in history. Below, International Man editor Nick Giambruno breaks down why the U.S. should be worried… and why this project could send gold to the moon.
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By Nick Giambruno, Senior Editor, International Man


It’s one of the great engineering achievements in history…

At 48 miles long, the Panama Canal cuts through a narrow strip of land in Central America.
It links up the Atlantic and Pacific oceans, allowing ships to pass through the landmass instead of sailing around a whole continent.

Ships pay dearly to use this shortcut… up to $375,000 for a one-way toll.

It’s worth the price.

There’s only one other route between the Atlantic and Pacific oceans: a 7,872-mile journey around the tip of South America.

This trip can take weeks and cost hundreds of thousands of dollars in fuel.

The U.S. built the Panama Canal in the early 1900s. At a cost of $9 billion in today’s dollars, it was the most expensive construction project in U.S. history at the time.

So when other countries (including Germany and Japan) tried to build a second canal in nearby Nicaragua, the U.S. wouldn’t have it. A second canal, just 500 miles away, would dilute its value.

In 1912, the U.S. military even occupied Nicaragua to make sure there would be no Nicaraguan canal.

And there never was.

But that’s all about to change…

The Chinese are preparing to build a Nicaraguan Canal. Like the Panama Canal, it will be a shortcut for ships to pass through Central America.

If all goes to plan, China will finish its canal in about 10 years.

And here’s the thing…

China’s Nicaraguan Canal is just a small piece of a much larger strategy of building strategic infrastructure to bypass U.S. control.

The focal point of this strategy is a project called the “New Silk Road.” And if China has its way, the New Silk Road will help it dethrone the U.S. as the dominant world power.

The New Silk Road is the biggest story you’re not hearing about. The U.S. media has barely made a peep about it. Maybe because it’s just too big and complex to fit into soundbites…

The World’s Most Ambitious Infrastructure Project

For over a thousand years, the ancient Silk Road was the world’s most important land route. It was a main trade route for lucrative Chinese silk.

At 4,000 miles long, it passed through a chain of empires and civilizations and connected China to Europe. Merchant Marco Polo traveled to the Orient on this path.

Today, China’s New Silk Road will include high-speed rail lines, modern highways, fiber optic cables, energy pipelines, seaports, and airports. It will link the Atlantic shores of Europe with the Pacific shores of Asia. It’s history’s biggest infrastructure project.


                 New Silk Road Routes


Chinese President Xi Jinping announced the gigantic plan in late 2013. The Chinese government rules by consensus. They’re careful long-term planners. When they make a strategic decision of this magnitude, they’re totally committed.

Plus, the Chinese have the political will to pull it off… and the financial, technological, and physical resources to make it happen.

There’s a saying that the new national bird of China is the construction crane. I was recently in Shanghai, Hong Kong, and Macau, and I can see why. These cities are full of impressive buildings and large skyscrapers.

The plan is still in the early stages, but important pieces are already falling into place. Late last year, a train carrying containerized goods left Yiwu, China. It arrived in Madrid, Spain, 21 days later. It was the first shipment across Eurasia on the Yiwu-Madrid route, which is now the longest train route in the world. It’s one of the first components of the New Silk Road.

In short, the New Silk Road is all about building alternatives to U.S. power.

Part of that, of course, is displacing the U.S. dollar, the world’s premier currency.

So it should be no surprise that China’s New Silk Road project is about to make its first big move in the gold market.

China’s Gold, a Threat to Dollar Dominance

According to recent press reports in Asia, China’s $40 billion New Silk Road Fund is likely to make a bid for a gold mine in Kazakhstan.

The Vasilkovskoye mine is owned by Glencore, an Anglo-Swiss mining company. It produced 380,000 ounces of gold last year. The New Silk Road Fund is considering buying it for $2 billion.

This is just the beginning…

China will continue to build new infrastructure for the New Silk Road. And continue to accumulate lots more gold.

This is not good news for the U.S.

Most people don’t realize it, but if the dollar loses its status as the world’s reserve currency, the dollar would collapse.

That would send gold to the moon.

Decline of Empire: Parallels Between the U.S. and Rome, Part IV

by Doug Casey




Now to gratify the Druids among you.

Soil exhaustion, deforestation, and pollution—which abetted plagues—were problems for Rome. As was lead poisoning, in that the metal was widely used for eating and drinking utensils and for cookware. None of these things could bring down the house, but neither did they improve the situation. They might be equated today with fast food, antibiotics in the food chain, and industrial pollutants. Is the U.S. agricultural base unstable because it relies on gigantic monocultures of bioengineered grains that in turn rely on heavy inputs of chemicals, pesticides, and mined fertilizers?

It’s true that production per acre has gone up steeply because of these things, but that’s despite the general decrease in depth of topsoil, destruction of native worms and bacteria, and growing pesticide resistance of weeds.

Perhaps even more important, the aquifers needed for irrigation are being depleted. But these things have all been necessary to maintain the U.S. balance of trade, keep food prices down, and feed the expanding world population. It may turn out, however, to have been a bad trade-off.

I’m a technophile, but there are some reasons to believe we may have serious problems ahead. Global warming, incidentally, isn’t one of them. One of the reasons for the rise of Rome—and the contemporaneous Han in China—may be that the climate cyclically warmed considerably up to the 3rd century, then got much cooler. Which also correlates with the invasions by northern barbarians.

Economy

Economic issues were a major factor in the collapse of Rome, one that Gibbon hardly considered. It’s certainly a factor greatly underrated by historians generally, who usually have no understanding of economics at all. Inflation, taxation, and regulation made production increasingly difficult as the empire grew, just as in the U.S. Romans wanted to leave the country, much as many Americans do today.

I earlier gave you a quote from Priscus. Next is Salvian, circa 440:

But what else can these wretched people wish for, they who suffer the incessant and continuous destruction of public tax levies. To them there is always imminent a heavy and relentless proscription. They desert their homes, lest they be tortured in their very homes. They seek exile, lest they suffer torture. The enemy is more lenient to them than the tax collectors. This is proved by this very fact, that they flee to the enemy in order to avoid the full force of the heavy tax levy.

Therefore, in the districts taken over by the barbarians, there is one desire among all the Romans, that they should never again find it necessary to pass under Roman jurisdiction. In those regions, it is the one and general prayer of the Roman people that they be allowed to carry on the life they lead with the barbarians.

One of the most disturbing things about this statement is that it shows the tax collectors were most rapacious at a time when the Empire had almost ceased to exist. My belief is that economic factors were paramount in the decline of Rome, just as they are with the U.S. The state made production harder and more expensive, it limited economic mobility, and the state-engineered inflation made saving pointless.

This brings us to another obvious parallel: the currency. The similarities between the inflation in Rome versus the U.S. are striking and well known. In the U.S., the currency was basically quite stable from the country’s founding until 1913, with the creation of the Federal Reserve.

Since then, the currency has lost over 95% of its value, and the trend is accelerating. In the case of Rome, the denarius was stable until the Principate. Thereafter it lost value at an accelerating rate until reaching essentially zero by the middle of the 3rd century, coincidental with the Empire’s near collapse.

What’s actually more interesting is to compare the images on the coinage of Rome and the U.S.

Until the victory of Julius Caesar in 46 BCE (a turning point in Rome’s history), the likeness of a politician never appeared on the coinage. All earlier coins were graced with a representation of an honored concept, a god, an athletic image, or the like. After Caesar, a coin’s obverse always showed the head of the emperor.

It’s been the same in the U.S. The first coin with the image of a president was the Lincoln penny in 1909, which replaced the Indian Head penny; the Jefferson nickel replaced the Buffalo nickel in 1938; the Roosevelt dime replaced the Mercury dime in 1946; the Washington quarter replaced the Liberty quarter in 1932; and the Franklin half-dollar replaced the Liberty half in 1948, which was in turn replaced by the Kennedy half in 1964. The deification of political figures is a disturbing trend the Romans would have recognized.

When Constantine installed Christianity as the state religion, conditions worsened for the economy, and not just because a class of priests now had to be supported from taxes. With its attitude of waiting for heaven and belief that this world is just a test, it encouraged Romans to hold material things in low regard and essentially despise money.

Today’s Christianity no longer does that, of course. But it’s being replaced by new secular religions that do.

Gold Has Now Entered Its Strongest Seasonal Period

Chris Vermeulen
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My analysis indicates that gold will be implemented in order to protect ‘global purchasing power’ and to minimize losses during our upcoming periods of ‘market shock’. It serves as a high-quality, liquid asset to be used whereas selling other assets would cause losses. Central Banks of the world’s largest long-term investment portfolios use gold to mitigate portfolio risk, in this manner, and have been net buyers of gold since 2010.

Investors should make use of golds’ lack of ‘correlation’ with other assets which makes it the best hedge against currency risk.  Last May of 2016, there was a huge trend change in U.S. gold investment as the Swiss exported a record amount of gold to the United States. There has been a huge increase in gold flows into the Global Gold ETFs & Funds.  Something seriously changed, in May of 2016, as the Swiss exported more gold to the U.S. within one month than they have done so over the last year.
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Gold has a “clear presence” to play in a world dominated
with ‘global economic uncertainty”

Despite the fact that we are in for a period of great financial turmoil, investors can safeguard themselves by investing wisely in gold. Do not be left behind and witness your dollar assets losing their value.

It is in these very conditions that gold (precious metals) is the only investment that will appreciate in value over time.  Gold will continue to perform its’ role as a “safe haven” during these times of crisis which currently appear to be never ending. The metals surge of as much as 8.1% on the day of the “Brexit” vote, last month, is an indicator that its’ luster of safety is undimmed in the current markets.

There is little to be gained from arguing whether such beliefs are right or wrong:  Governments, around the globe, have moved to a new stage of desperation by toying with the idea of “helicopter money”.

It is my belief that since “Brexit” occurred, it could unleash a general exodus and the disintegration of the European Union is now almost unavoidable.

The list of prominent Hedge Fund Managers who are investing in gold is growing.  Paul Singer, of Elliott Management Corporation, is the latest name to lend his support. It is likely that more investment institutions will turn to gold as the logical solution to countervail the effects of many years of ‘quantitative easing”.

Gold has been traded for over 5,000 years and for the first time has a positive carry in many parts of the globe as bankers are now experimenting with the absurd notion of negative interest rates. Some regard it as a precious metal while I regard it as a currency!

Soros Fund Management LLC, which manages $30 billion for Mr. Soros and his family, sold stocks and bought gold and shares of gold miners whilst anticipating weakness in various markets. Investors view gold as a ‘safe haven’, during times of turmoil but they tend to be late to the game as they don’t buy gold until there truly is turmoil and gold will have already appreciated substantially at that point.



“It’s a glaring warning sign of deflation. We’ve never really had deflationary fears throughout such a widespread part of the world before,” said Phil Camporeale, a Multi-Asset Specialist at JPMorgan Asset Management.

The FED is doing everything in its’ power to prevent a rise in the dollar. They are willing to “orchestrate” any scenario so as the stock market will continue to soar and people will feel a “wealth effect” from new stock market highs while the others are experiencing the economy “contracting”.

The FED is getting everything it wants, in this regard, and will continue to do so as their number one priority is “debasing” the U.S. Dollar.

As the U.S. Dollar falls from all of the FEDs’ QE, it will lift up gold prices to unprecedented highs.



Investors of all levels of experience are attracted to gold as a solid, tangible and long-term “store of value” that historically has moved independently of other assets classes.

Golds’ importance, even in today’s environment, was clearly visible during the massive rally at the start of the year, when all other asset classes were tanking. Investors piled into gold on the scare of an imminent global financial reset.

Investors should make use of golds’ lack of ‘correlation’ with other assets which makes it the best hedge against currency risk.

Does Gold Continue Its Bull Market Towards $1500.00?

 

Conclusión:

The trend for ETFs to pile in to the precious metal sent the price of gold soaring by 25% in H1, the biggest price rise since 1980. For the first time ever, investment, rather than jewelry, was the largest component of gold demand for two consecutive quarters.

Up and Down Wall Street

Clinton and Trump Both Embrace Keynesianism

Calls for expensive projects to boost infrastructure recall Nixon’s famous speech. The focus on fiscal stimulus favors value stocks, commodities.

By Randall W. Forsyth    

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English economist John Maynard Keynes Photo: Getty Images

 

           

We are all Keynesians now, President Richard Nixon famously declared after his New Economic Plan was unveiled in 1971. The notion seems to be echoing now, with the two major parties’ presidential candidates calling for increased government spending, notably for infrastructure projects.

 

That’s not surprising coming from Hillary Clinton’s Democrats, who have long espoused expanded government initiatives. But Republican Donald Trump last week also declared that it would make sense for government to take advantage of today’s historically low interest rates to borrow to fund infrastructure spending—precisely the same point made by the New York Times’ über-liberal columnist Paul Krugman last week.

 

Talk about strange bedfellows. Yet it is not without precedent; Nixon’s pivot from orthodox Republican economic policies was arguably a more radical shift than his historic trip to open ties with China.

 

In one fell swoop, in a speech on a sultry Sunday evening exactly 45 years ago, Nixon imposed a freeze on prices, wages, and rents, a surcharge on imports, and an end to the dollar’s convertibility into gold.

 

The latter move had the longest-lasting impact, as it marked the beginning of the end of the Bretton Woods system of fixed exchange rates and augured the shift to the system of floating currencies that the world has had to cope with ever since.

 

As for Trump, who has called himself the “king of debt,” he said in a CNBC interview last week, “Normally you would say you want to reduce your debt, and I like to reduce debt as much as anybody. The problem is, you have a military problem, you have an infrastructure problem—a tremendous infrastructure problem—and you have other problems. The asset is, your rates are so low.

 

“What’s going to happen when the rates eventually go up and you can’t borrow, you absolutely can’t borrow, because it’s too expensive?” Trump continued. “It would destroy our balance sheet, totally destroy the balance sheet.”

 

Not to nitpick, but rising interest costs would actually play havoc with the nation’s income statement, that is, the budget deficit, as interest expenses boost the deficit. As for the balance sheet, if the nation ends up with long-lived, productive assets, along with the bond liabilities, at least we’d have something to show for the debt. Think such New Deal projects as the Hoover Dam, or the roads and bridges in the New York area overseen by Robert Moses, who commandeered the dough from D.C. to become the controversial master builder of the Big Apple. Hillary’s call for universal broadband access recalls the rural electrification program of the 1930s.

 

The cost may not be quite as paltry as Krugman claimed in his column, where he cited the yield of just nine basis points (0.09%) on 10-year Treasury inflation-protected securities. (By Friday, 10-year TIPS’ yields were down to just five basis points.)

 

But that doesn’t take into account the annual inflation adjustment to TIPS, based on the consumer price index, which is likely to be more than the energy-depressed 1% rise in the CPI in the past year.

 

Still, with nominal Treasury yields near historic lows of about 1.5% for 10 years and 2.25% for 30 years, borrowing to build (as opposed to just spend) would appear to be a sound investment strategy.

 

That’s based on economics. Politically, it has been a different story. In the years since the financial crisis, debt crises from Greece to Detroit to Puerto Rico have pushed governments toward fiscal austerity rather than expansion.

 

Given the political opposition to borrowing and spending, monetary policy has been the main tool to spur economies in the U.S., Europe, and Japan. That has taken the form of ever-more-radical measures, including massive securities purchases and negative interest rates, which have proved to be more successful in boosting asset prices than economic growth and incomes.

 

The politics may be changing toward favoring a more balanced mix between monetary and fiscal policies, argue Bank of America Merrill Lynch strategists Michael Hartnett, Brian Leung, and Jared Woodward. That means investors also should shift their asset mix.

 

In the next two years, the strategists see the political tide moving policies “from the monetary abundant, fiscally austere mix of the past eight years to a more balanced mix of monetary fine-tuning and easier fiscal stimulus.” Indeed, they point out that as the Federal Reserve’s balance sheet has ballooned since 2008, real (inflation adjusted) U.S. government spending and investment has declined.

 

The diminishing returns from unprecedented monetary policies are apparent abroad where negative interest rates have been imposed. My colleague William Pesek scathingly details in his Aug. 11 Up & Down Asia column “Why Negative Rates Are Killing Growth.” While academics say monetary stimulus should make people spend and bankers lend, they reacted to zero and negative rates by pulling in their horns.

 

The tight-fiscal/easy-monetary mix has worsened income inequality, the BofA/ML team contends, with Wall Street soaring while Main Street lags behind, as reflected by the fall in the labor-force participation rate to the lowest levels since the late 1970s. In response to the resulting political changes, they see a shift in the opposite direction for policies.

 

“Electorates appear increasingly inclined to prefer policies that address wage deflation, unemployment, immigration, and inequality,” they write. As those policies shift from monetary to fiscal stimulus, investors similarly should move from “over-owned deflation winners back toward under-owned inflation winners,” they conclude.

 

That means shifting from growth to value stocks; from bonds to commodities; from U.S. equities to stocks from the rest of the world; from staples to banks; from the U.S. dollar to gold; from financial assets to real assets; and from Wall Street to Main Street.

 

As this week’s cover story shows, the election will have important implications for investors. And while the occupant of the White House can set the tax and spending agenda, it’s up to Congress to enact the measures.

 

In any case, investors will have to take into account potential policy shifts in structuring their portfolios.

 

A LEGEND WITH A NEARLY UNMATCHED RECORD hung up his spikes last week, while another parted ways with the team he was a part of for more than three decades.

 

Alex Rodriguez played his final game with the New York Yankees on Friday, ending his controversial on-field career that featured a one-year suspension for performance-enhancing drugs and left him, at press time, four home runs short of the 700 mark. But he’ll remain a consultant with the Yanks, getting $21 million in 2017 for the final year of his $275 million, 10-year contract. That’s on top of an additional $6 million for the remainder of this unproductive season.

 

Bill Miller, the mutual fund manager legendary for having beaten the Standard & Poor’s 500 index for 15 straight years from 1991 to 2005 while overseeing the Legg Mason Value Trust fund, last week parted ways with Legg Mason, where he had worked since 1981. He bought out Legg Mason’s 50% stake in LMM, which provides management services to the $1.3 billion Legg Mason Opportunity Trust (ticker: LGOAX), plus other portfolios, leaving him with full ownership of that vehicle.

 

Both departures marked ends of eras. We will leave aside the moralizing of performing-enhancing drugs in baseball. However, the investing public is increasingly looking askance at portfolio managers who are paid handsome salaries but deliver mediocre performance.

 

That has been especially true of hedge funds. Multibillion-dollar pension funds, notably in the state of California and New York City, have dropped pricey hedge funds, rather than pay their 2%-and-20% fees. There has also been the widely advertised mass investor exodus from actively managed funds to passive index funds and exchange-traded funds.

 

According to Morningstar, there was a swing of over $1 trillion from 2009 through mid-2016. While actively managed mutual funds lost $728.9 billion in assets, ETFs alone gained $342.8 billion. In other words, investors (and their advisors) were becoming aggressively passive.

 

The cost savings add up quickly, especially for institutions such as smaller endowments. They frequently can’t get past the velvet rope to get in the superstar hedge funds, so they’re stuck with second-tier performers. And given the modest level of prospective future returns from both stocks and bonds, wringing out every basis point from expenses takes on even greater importance.

 

In another era, that didn’t matter so much. Last Thursday, the Nasdaq Composite, the S&P 500, and the Dow Jones Industrial Average all closed at records, something that hadn’t happened since 1999. That was the halcyon era for the dot-com bull market and the middle of the outperformance streak for Miller’s Legg Mason Value Trust.

 

It will also be remembered as the steroid era in baseball, when hitting records that had stood for decades suddenly fell. For his part, Miller compiled his extraordinary record not by any nefarious means, but by making big, concentrated bets; they were homers in the bull market but costly strikeouts in the financial crisis.

 

Apparently only A-Rod these days can manage to get paid big bucks for lousy performance.