Word: millers
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Still, it would be foolhardy to underestimate Miller, given his extraordinary record. And get this: his current perspective is profoundly at odds with that of almost everyone else. With oil trading at about $65 per bbl., fears abound that a further rise will hobble consumer spending and doom the global economy to recession. Yet Value Trust's latest report showed that the fund still doesn't own a single oil and gas stock because Miller, never one to run with the herd, expects oil prices to tumble...
...Miller sees it, "Five thousand years of commodity-price history" says that oil should be priced at the "marginal cost of production"--the price at which it makes sense for companies to find and extract it from the ground. And that, Miller says, is currently about $40 per bbl. Oil has shot way higher for perfectly rational reasons, from booming global demand to Hurricane Katrina's impact on refining capacity, but overseas producers have every incentive to boost supply at today's prices, says Miller, which should make up for existing shortfalls. "Barring an unforeseen event"--another Katrina...
...Miller believes that the fall has already begun. Even the ominous approach of Hurricane Rita, which in late September threatened further devastation to American refineries, failed to drive oil prices close to the post-Katrina high of $70.85--a sign, in his view, that the upward momentum has run out of gas. Miller also points out that oil's rise has been driven by trend-following hedge funds and traders piling into whatever is hot. With the oil price slipping, "that speculative money flow will reverse," as they bet instead that it will keep dropping...
...prices fall, easing pressure on the economy, Miller expects the somnolent stock market to revive. Among the companies he thinks will benefit are banking behemoths like J.P. Morgan Chase and Citigroup. He's also wagering that Internet company Expedia will profit from increased online travel bookings and that other consumer plays, like Sears Holdings and Home Depot, will rebound as concerns over high fuel costs fade...
...anti-oil" portfolio, as Miller calls it, should rally sharply if the price of crude slumps. But will it happen in time for him to beat the market for the 15th straight year? Miller knows the odds are against him. If only he had bought those oil and gas stocks, he laments, "we'd be nicely ahead of the market now." For once, he understands how hapless the market makes the rest of us feel, but in Miller's case, that lesson in humility may prove as ephemeral as the gathering gloom over the price...