The current credit crunch is "much more serious" for the U.S. financial system than the 1987 stock market crash was, warns Legg Mason's Bill Miller in a conference call with analysts. "The mortgage market is bigger than the whole U.S. economy, and that market is effectively shut down."
But once the immediate crisis has passed, Miller thinks stocks will head higher. And he predicts that the industry sectors that have led the market in recent years, such as energy and basic materials, will become laggards. "The leadership is likely to change," says Miller, whose Legg Mason Value (symbol LMVTX) beat Standard & Poor's 500-stock index a record 15 straight years until 2006.
The worst of the credit-market debacle may be over and stocks will likely rise as the global economy expands, said Mark Mobius, who oversees $30 billion at Templeton Asset Management Ltd. in Singapore.
The fund manager said his company has used the market rout in the past month to add to stocks that are attractively priced, including energy producers in Asia and Brazil. South African shares and those in Chinese companies traded in Hong Kong are among the most attractive in emerging markets worldwide, he said.
For six years private equity firm Thomas H. Lee Partners tapped the credit markets to buy one consumer-products brand after another and roll them all up into United Industries Corp. But even though United's total debt jumped from $375 million to $860 million by 2005, its leverage—one measure of a deal's riskiness—didn't move much.
How could that be?
Question: How is ecommerce changing? People often say is it’s becoming mature, and that is why we see all these overlaps, with companies moving onto each other’s turf.
Meg Whitman: One perspective I would give you is that after the stock market bust, when all the Internet market caps collapsed, people did, in fact, write off the Internet to some extent. But if you actually look at the fundamental, underlying metrics throughout that period, they were very strong.
John W. Henry, today the owner of the Boston Red Sox and of Boston’s famed Fenway Park, is on the very short short list of the most successful futures traders ever. An avowed trend-follower and chairman of one of the largest managed futures advisors, this is one market celeb who claims he can’t predict anything. Dull cocktail party conversation? Perhaps. But, the results of his funds likely have been the buzz in the right circles because of their stunning performance over the long haul. In most cases they have beaten the performance of the S&P, in some cases handily, even as Henry openly admits that he doesn’t know offhand where the markets are going.
We increasingly hear that “the world is awash with liquidity,” and that this justifies expecting asset prices to continue rising. But what does such liquidity mean, and is there really reason to expect that it will sustain further increases in stock and real estate prices?
Liquid assets are assets that resemble cash, because they can easily be converted into cash and used to buy other assets. The idea seems to be that there are a lot of liquid assets lying around, and that they are being used to get money to bid up the prices of stocks, housing, land, art, etc.
