Bill Miller

“There is virtually no chance that we’ll have any kind of default… the markets understand that the debt ceiling is not going to be catastrophic,” says Bill Miller, Legg Mason Opportunity Trust Fund manager, discussing how the government shutdown will likely impact the markets.


you look at the government shutdown and think wall streetmight panic over that. but the futures are set to open about 50 points. is this just the beginning? we’re shrugging things off. i think on your show yesterday, you guys put out some data showing the previous government shutdowns have no impact.and we’re seeing it again today. we spoke with — i don’t know if it was an economist michelle gerard who pointed out themarket has gotten used to this emergency situation. and as a result you’ve seen smaller and smaller reactions. less pressure put on the congressional leaders and theadministration to try to get to some resolution. does that mean it could last for weeks and weeks on end. if it were something serious, obviously the market would react to it. the government shutdown for a few days or even a few weeks will have a marginal impact on the overall economy as has been said about this show and the shows the last few days. so if we get to the debt ceiling, which 17 days away and there’s still noresolution, then what happens? from the market’s perspective.the last time we had this was in august of ’11 and the s&pdowngrade. but that was in conjunction with the european crisis. we don’t have that european crisis now. and there’s virtually no chance we’ll have any kind of default or they won’t make payments, treasury can prioritize. you know, read a time in the times yesterday that the president will declare the law to follow will be to pay the debt. the markets understand the debtceiling will not be catastrophic. that would make lehman brothers look like a kindergarten show if they didn’t pay interest on the debt. you don’t think it’s going to happen? i hope it doesn’t happen, yeah. you know, we have had a number of guests who have come on cnbc in recent weeks. the journal kind of wraps up some of this today by pointing to carl icahn and warren buffett who have told us in the last week and a half that stocks at these valuations don’t look cheap to them. that, you know, it’s a lot harder to find deals these days. do you find the same thing? absolutely. the market’s fairly roughly valued. last year you could find things and we bought them last fall, netflix in the 60s, where it was pretty obvious unless something really was untoward, the risk/reward was fantastic. reasonably have a chance to be up 50% to 100% in the next 12 months. is that just the case in the u.s.? are there opportunities that look like that in europe or other places? you know, we mainly do u.s. stuff.europe is a different — europe is getting a little better. but i’m not — i’m still not wild about europe. the euro’s way over priced. and there are companies over there we’re looking at and might do.but, again, nothing looks like an easy 50% to 100% in 12 to 24months. there because of the qe, right? you know, the euros are probably there for a variety of different reasons. first, it’s not coming apart. second, if you look at the balance between the euro and the dollar from a chinese export standpoint, they tend to kind of balance out. if they had tapered, i think the dollar could be 1.25. well, it ought to be about par, really. that’s where it ought to be. all those markets. do you think they’ll start thisyear? tapering? i don’t know. does it matter to you when you look at the market? well, i think charlie monger at the berkshire meeting. charlie made a comment about — nobody would predict what you’re seeing right now. what the economy would look like. so the fed’s running a giant experiment. and we don’t know what the answer to the experiment’s going to be. we’re playing out in realtime. you say when you look around, it’s very hard to find bargains like you’ve seen in the past and you still have a lot of stocks you like, something like apple. is that a stock you could see doubling in the next 12 to 24 months?apple, apple is funny. there’s — when i listen to cnbc on the radio and when i’m driving, there’s a commercial where a guy used to talk about refinancing being something like — it’s the biggest no-brainer in the history of the earth, right? that’s what apple is right now to me. it just makes no sense for apple to trade where it is. 14%, you know, in essence, free cash flow yield. 10% simple free cash flow yield. if apple was a junk bond, it would trade 40% higher. but junk bonds, you know, junkbonds are a contract, they have a claim. but they have a claim on a typically bad balance sheet. a lot of large numbers. if it doubles, it’s going to be almost $1 trillion. double, i think, is probably not likely. it’s already the most valuable company. if it goes back to where it was — if it takes two years to go back where it was a year ago, it’s 50%. what’s the trigger? this is a psychology game at this point for a stock like that. someone has to decide and enough people have to decide it’s actually worth more. it was a psychology game when netflix was 60 and now it’s 300, right? that was a year ago. best buy was 13, now it’s 38. the psychology can change quickly. to me, the — when we saw the iphone get introduced, all the analyst, that’s overpriced. sell 9 million phones, the highest decimal is 7 1/2.the store in london, a mile long line outside of it. and we’ve got a little video of people in tokyo in a typhoon sitting outside the apple store. they wouldn’t go in during the typhoon. so, you know, yesterday came out that it was the most valuable brand in the world better than coca-cola. how much does coke grow?6%, 8% a year? where does it trade?