Miller Value Funds’ Bill Miller recently delivered his market letter for the fourth quarter of 2018, in which he talked about his market expectations for the current year. To describe the tough market environment in 2018, Mr. Miller relied on the Chinese astrology by which 2018 was the year of the dog. In this way, he used humor to explain the results most of the investors had in the year behind us.
“From an all-time high reached on January 26, US stocks began a decline just as the Chinese New Year welcomed the dog, culminating in a decline of 6.2% in the S&P 500 before dividends and 4.4% after. That was the worst year in stocks since the 2008 financial crisis. December had its worst return in that month since 1931 when the economy was collapsing into the Great Depression.”
Continuing in the same manner, Mr. Miller informed his investors that 2019 is the year of the pig. “Market participants are likely to immediately recall the old saw that “bulls make money, bears make money, but pigs get slaughtered.” That would suggest a very dim view of one’s prospects if the pig is an apt metaphor for what we are likely to experience in 2019. I think, though, there is a better analogy than the bromide noted above. In 1992, George Soros and Stan Druckenmiller bet heavily against the British pound, expecting it to fall sharply. George kept telling Stan the position needed to be bigger and Stan dutifully increased it each time. Stan worried that the position had gotten too big, and when George told him again it needed to be bigger, Stan repeated the point about pigs getting slaughtered. George responded, “It takes courage to be a pig.” That courage was rewarded when the pound collapsed on September