John Hempton emails with an insight about Bill Miller:
Buying a stock when it falls precipitously is selling volatility.
This helps explain Miller’s outperformance over the course of the Great Moderation: by doubling down on his losers, he was selling volatility during a period when volatility kept on hitting all-time lows. On the other hand, by sticking to the same strategy in an environment of rising volatility, he’s doing nothing more than digging himself ever deeper into his self-inflicted hole.
Incidentally, that more justly famous value investor, Benjamin Graham, has had his name attached to three new exchange-traded notes issued by Deutsche Bank. One of them, the Benjamin Graham Small Cap Value ELEMENTS fund, is being listed on the NYSE under the ticker symbol BSC — a ticker symbol which is more or less synonymous with the dangers of doubling down when the stock you like falls substantially in value. (Just ask Joe Lewis.)
Which sets me to wondering: can ticker symbols be cursed, like locations for restaurants? Citigroup, when it was CCI, was a fantastic stock; once it took over C from the doomed Chrysler, its fortunes reversed. I guess the chaps at Deutsche Bank aren’t superstitious.
(HT: Newton)