Berkowitz, Heebner And Miller Are Worst Stockpickers Of 2011 As Permabullish Groupthink Bus Crashes

Tyler Durden's picture

It's time for the permabullish broken clocks to move back to their default position. Very much in line with common sense, Bloomberg reports that Bruce Berkowitz, Kenneth Heebner and Bill Miller, "three of the best-known U.S. stock pickers" (perhaps, if one equates daily CNBC appearances with popularity), are competing for last place this year after their bets on an economic expansion backfired. More: "Funds run by Berkowitz of Fairholme Capital Management LLC, Heebner of Capital Growth Management LP and Miller of Legg Mason Inc. (LM) are the three worst performers among large diversified U.S. mutual funds in 2011, according to data from Chicago-based Morningstar Inc. The funds lost 11 percent to 12 percent through June 9, compared with a gain of 3.4 percent for the Standard & Poor’s 500 Index." Ironically, this "totalitarian troika" would not even be in business, if the government had not bailed out the permabull brigade whose entire career has been based on doubling down first on the Greenspan and then on the Bernanke put, and decided to implement central planning along the way. But that is obvious: "People assume because certain managers have had good streaks that they are always going to be a step ahead of the market,” Russel Kinnel, director of mutual fund research at Morningstar, said in a telephone interview. “It never works out that way."

More from Bloomberg:

The three managers are known for concentrating money in a small number of industries, said Kinnel, a strategy that can produce market-beating gains when the investments work out and large losses when they fail. Berkowitz, Morningstar’s fund manager of the decade, and Miller, known for beating the S&P 500 for 15 straight years through 2005, are wagering on a rebound in financial stocks. Heebner, manager of the best-performing diversified U.S. stock fund over a 10-year period until this year, was betting on automakers.

The two industries are the worst performers this year in the S&P 500 out of 24 groups. Bank stocks, as measured by the KBW Bank Index (BKX), fell 10 percent on concerns that the housing slump, litigation over mortgage bonds and foreclosures and new fee-crimping rules will depress bank earnings.

"Define insanity"

Berkowitz’s $14.8 billion Fairholme Fund had 74 percent of its equity holdings in financial stocks as of Feb 28, Morningstar data show. The fund fell 12 percent through June 9, ranking it last among 870 diversified U.S. stock funds with at least $500 million in assets.

Berkowitz didn’t respond to a request for comment. In a June 9 interview, Berkowitz said he was “more certain” than ever that his investments in financials made sense.

“The trends are getting better,” he said in the interview with Bloomberg Television’s Erik Schatzker. “The balance sheets are getting better and the cash flow is there to take care of the problems.”

Berkowitz said Brian Moynihan, chief executive officer of Bank of America, was doing “a good job” and that the bank “was making all the right moves.” Bank of America, based in Charlotte, North Carolina, fell 19 percent this year, including dividends.

And while the totalitarian troika is betting on greener pastures courtesy of another several trillion in free Fed money, and promises that "this time it really is different" investors are not hanging around to see the results:

“Berkowitz may be right, but I thought it was prudent to reduce our concentration in the distressed financial sector,” Sugameli said in a telephone interview from Wellesley, Massachusetts.

Investors pulled $2.3 billion from Fairholme Fund (FAIRX) in April and May, according to Denver-based Lipper. The fund attracted deposits of $11 billion in the four years ended Dec. 31.

Miller’s $1.5 billion Legg Mason Capital Management Opportunity Fund lost 11 percent through June 9, third-worst among large funds, Morningstar data show. The fund had 36 percent in financial shares at March 31.

In an April letter to shareholders, Miller wrote that the first quarter was a good one, “for almost everyone except us.” He said technology, health care and financial stocks were attractive. Miller, 61, declined to comment for this story, Maria Rosati, a spokeswoman for Legg Mason, wrote in an e-mail.

The bigger problem is that should these lambs finally start selling to preserve their record low cash levels, then not even the HFT permabid algos will do much if anything to prevent Waddell and Reed to be 2011's market crash scapegoat du jour all over again.

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ZeroPower's picture

and promises that "this time it really is different" investors are not hanging around to see the results

What a stupid fuck.

oogs66's picture

who was the guy who buffet hired last year?  wasn't he always long financials?  but that is okay, because even if you are wrong at berkshire, the accounting games hide it all

SheepDog-One's picture

AH, just so happy to see the permabull short bus crash and burn after having to hear all their crap for a year. Looks like Erin Burnett bailed just in time.

Even the best of butt-boys know to never carry too large of a water bucket, you'll likely fall in and drown yourself.

This time, its different. The FED has already pumped and dumped, to ETF's and therefore 401K's and pensions, which theyll be seizing next. Do people really think the FED did all this to ensure mom and pops comfortable leisure resort golden years? I hope not. Get out of the way its coming fast.

Franken_Stein's picture


There will be brutal crackdowns, bloodshed, violence, carnage, mayhem and mass-executions in America.

SS-style commandos roaming the streets in Humvees.

Martial law. Round-ups.

Mass gassings in underground death camps.


SheepDog-One's picture

People will head to the stores for food, which few in america have even a few days worth stored, and banks when they hear their accounts are frozen. Therefore get lots of food stores, get money out andkeep it or turn it into things you need. Stay away from the panicked mobs, and theyre coming soon.

eureka's picture

Let's see, the Permabears lost... - isn't every zerohedger bearish?

And if not, shouldn't we be - withdraw from stocks, bonds and banks out of patriotic duty?

SheepDog-One's picture

Already did that a couple years ago.

eureka's picture

So why mock the permabears?

SheepDog-One's picture

Who is 'mocking permabears'? This article is on crashed permabulls.

the not so mighty maximiza's picture

Erin Burnett ran for her life.

SheepDog-One's picture

She was either smart, or has the most spectacular cootchie on Wall St and was swept up by them to safety.

SheepDog-One's picture

Yea, but how good can it REALLY be? And shes kind of a ditz too...I just dont know.

Cdad's picture

I just cannot shake this weird feeling...this feeling that....this odd feeling that somehow we...


Miss Expectations's picture

I'm not opening that.  I have a feeling it's porn.

lizzy36's picture

Berkowitz...."i am early" so lets average down.

And FTW (Berkowitz) buy a name when there is only 1B more shares to be off loaded by the government. Of course this lets him average down from his current $32 average price that he paid for his stake in AIG. Brilliant.


Caviar Emptor's picture

He did a quick CNBS interview Friday and he looked so depressed he could barely talk through it. Not CNBS's finest hour

idea_hamster's picture

Once they started mentioning Heebner by name in that retarded fencing commercial, I knew it was all over for him.

(And as a collegiate fencer, I'll note that the fencing was crap too -- couldn't they even spring for some actual fencers? They're wearing masks so they don't even have to look good!  Geez-o-pete.)

Caviar Emptor's picture

But, but, but..does that mean we aren't going back to being silly, frivolous and wasteful??

I thought everybody agreed! When the going gets tough, the tough go shopping...that's what we learned! They told us that was our patriotic duty! 

writingsonthewall's picture

"Miller, known for beating the S&P 500 for 15 straight years through 2005"

Wasn't that a 15 year boom? - doesn't anyone ever point this out - or even notice things like this at the time?

My 'property investment' (called my house) beat the S&P 500 for 15 years straight from 1993 - 2008 - you don't see me invited as a talking head on CNBC do you?


Do they care? - isn't it all client money anyhow?


Is this how investment reputations are made "hey look at me, I made money in a bull market - invest with me - I am the king"

...and Bear inevitably follows bull - not that these clowns know this because they always think that "this time it will be different" - just as every gambler thinks as he walks into yet another casino....

SheepDog-One's picture

They trained monkeys to throw darts at stock pages during those years...thats how guys like Cramer got a name. Pile of free money, throw it at anything, it goes up. Different story now though.

fonestar's picture

Fuck, fuck, fuck.  Wish I had some time, money, etc to go short.  Short everything, short on sight and short to kill.  But I'm just glad I got some PM's and some PM's got me.

Jim in MN's picture
06-13 09:30: Fed's Lacker says inability of expansion to gain more traction is frustrating 'frustrating?' 
Come on.  How about 'indicative of fundamental failures in fiscal and macroeconomic policy?'
It's like a toddler being frustrated that he has nothing to drink after pouring all the milk on the floor.  And we are being told to INVEST in this context?  Invest in some good Scotch and a better mattress to sleep on and hide stuff under would be my charitable read.
Cdad's picture

I agree...and so does Mr. Market, as it was only able to muster 31 minutes of algo driven "confidence" this morning [on volume which requires 20X magnification to see] before the first [of many to come] sell programs came through and the first fixed income love fest was registered [which I am sure the folks over at the BlowHorn will soon announce so as to warn momentum people about getting caught in the Pachinko equity market].

Locate your nearest "smoothing mechanism" and please try not to trample folk to death as you exit through the algogate.


SheepDog-One's picture

A few beads of sweat now appearing on the brow of usually complacent 401K bathrobe brigades forehead, we'll see it get really interesting when all these guys put in their sell orders to a bidless market.

Cdad's picture

Correct...which means, of course, bad closing bell action until further notice as brilliant and fully invested mutual fund "investors" process liquidation orders into the bell...which criminal syndicate Wall Street banks will anticipate and arb to death, of course, during the meat of the day.

The extent to which even morning algo action is directionless on micro volume is the extent to which fear IS registering, even if the VIX is not registering it due to the utter manipulation of this instrument via certain ETN products...and also due to the always curiously and permanently bid Roach Motel [SPY] it opens wide to receive its daily dose of equity vomit.

Cdad hearts "investing"...



SheepDog-One's picture

I love investing. It always assumes the one doing the 'investing' is the smartest person out there and whatever they 'invest' in with their new cool 'heat map' function will always later be bid higher by someone else later, a less smart investor because if they were smarter they would of course have bought before the other investor.

'Greater Fool Theory' the greatest thing ever invented.

Cdad's picture


The always enjoyable and entertaining Joe Lovorgna was just on the BlowHorn, the network obviously hearing your questioning of the "Greater Fool" theory.  J. Love just said, "IF we get 4.5% to 5% GDP in the second half, stocks WILL look historically cheap."  I swear, if these banker tools do not broaden their vocabulary, I'm going to have an aneurysm.  And anyway, did J. Love miss the fact that EVERONE has now lowered their GDP expectations?  But I digress.

For those who missed J. Love's announcement:  "Attention Greater Fools.  Please report to the algogate today before 3:00 pm est in your assless jeans to receive your mandatory distribution of bubble stocks from the outwardly bound criminal syndicate Wall Street lemmings."


SheepDog-One's picture

RIGHT suddenly all the intelligentsia buzz is somehow in a couple months we'll brush aside the plummeting economic data and have record busting GDP to the upside! No reason anyone can think of 'just cuz' is good enough for the Blowhorn. We just need Kirk saying 'make it so' every Blowhorn fade to commercial break.

SheepDog-One's picture

I wonder if RoboTrader was on the Permabull short bus when it went thru the guard rail?

akak's picture

Don't be silly --- RoboLemming was driving it!

fiddler_on_the_roof's picture

Are the bears going to have their heads removed again?
Sentiment is extremely bearish. I think time for wallstreet to make
Some money from shorts in the name of "no qe3"

SheepDog-One's picture

So how would 'no QE3' hurt bears? 'Time to make some money from shorts in the name of no QE3'... I dont follow.

Cdad's picture


Fiddler is obviously registering his opinions from the Hot Tub Time Machine...and he doesn't know that he is now @ November, 2010 and just now discovering assless jeans and health burritos as viable alternative currencies.

I would avoid his thesis much like I would avoid J. Love prognostications about the "incredible buying opportunity" of the S&P @ 13 times forward crack pipe dreams.


fiddler_on_the_roof's picture

- there will be qe3 in some other name or stealth qe3. they cannot stop this.

- dollar will be sacrificed(and bond market hold better via bond buying).

- As ANOTHER said a decade ago paraphrasing  that-  Asians and others compete to sell merchandise to USA to get dollars for many decades and time will come when they compete to sell dollars and buy assets. I think all that dollar will "try to" unsuccessfully bid for US Real Estate/stocks/Gold...etc. I already see chinese buying local real estate in california using "cash". ie dollars tsunami coming to US shores. I think we are going into this phase - so don't be shorts assets in my humble opinion.


- Also remember that most of the Elites in US are debtors and not creditors. The creditors are mostly middle class and above/401K/pension funds....etc. debtors want dollar trashed. Most middle class have networth zero(subtracting their debt from their networth) if a dollar trashing happens, they are net zero again. they will continue working as "near" slaves with no  security in life.

- by this analogy, a company like Apple sitting on billions of cash(creditors) will be smarter to buy other comany stocks(or it's own) than lending it to treasury.

- "cdad" : I was screaming in ZH during september 2010 not to be short then and bears were massacred. you can search my comments then.


One small tidbit a person by name ORO wrote in usagold forum.

"The hyperinflation phase of a credit money system is a substitute for the deflationary phase. It is a choice made by the leaders of the monetary system to retain leadership through the supply of as much monetary base as is needed to fulfill all obligations of the banking system. The inflation of the high-power monetary base prevents the transfer of asset ownership that occurs during deflation:

From bankrupt corporations and individuals to banks

From bankrupt banks to bank liability holders.

From bankrupt banks and cash strapped bank liability holders to the holders of cash.

Remember that 30% of private and corporate industry was bankrupted in the Depression. But 50% of banks were bankrupted by the same process. The ultimate beneficiaries of the wealth transfer would have been the holders of cash (then gold). This last transfer phase was avoided by confiscation of cash=gold and the inflation of the monetary base.

Why was this done? So that the captains of industry would retain their positions rather than lose out to ma an' pa coin hoarders - the sworn enemies of the leveraged finance world."


THe mass of people were royally screwed then - not only were they told to give back their Gold, but Gold ownership banned and hence they were prevented to participate in this "sweet inflation" for the elites.

Cdad's picture

I was screaming in ZH during september 2010 not to be short

Ummm...that was exactly my point.

PulauHantu29's picture

These guys did well when the entire market was going up and thought they were geniuses....only thing is they also lost Big Time when the market crashed in 2008-2009....

"No one could have seen this coming..."


Yeah, real geniuses.