Yowza! The mailbag is flooding with responses from yesterday’s piece, “Fan and Fred are Dead -- and So Is Bill Miller.”

If I had to sum up your verdict in one sentence it would be “Off with his head!”

There were so many replies, I had to divide them into four broad categories: single-word, funny, scary and thoughtful.

The single-word replies came in direct response to my inquiry, “[Bill] Miller should be tarred, feathered and ridden out of town on a rail. Agree? Disagree? Let me know.”

Of these, many of you simply put “AGREE” in the subject line. One of you just wrote “100%.”

There were no “disagrees.”

Below are a few of the funnier responses. Some of them genuinely cracked me up. (Thanks for that, by the way. Laughter always makes a morning better.)

Fire Him!!! Do not pass go, do not collect 200 dollars.
- TD reader James R.

AGREED!  I could have sent my buddies to Vegas to drink tequila and play craps with my money and received a similar return.
- TD reader George D.

Good point, George. Though I wonder... Wouldn’t a rip-roaring time in Vegas actually count as a positive return on investment? Especially if your buddies could somehow securitize the resulting “You wouldn’t believe what happened” stories for recurring dividends...

Miller should be out on the street with a tin cup. If I were to spend a bunch of money on a nonreturnable, incorrect repair part... I'd get that pitying look from my CEO. What the heck, I needed a spare anyway. If I did it again... and again.... My ass would be on the street. And deservedly so.
- TD reader Ed

I am not convinced that such stupidity is possible unless a person is actually insane...
- TD reader Gerard G.

Hmm. You know, there might be something to your theory. Maybe the stress of keeping up the winning streak drove him crazy...

The really sad picture is the way the politicos stand around and pick their noses wondering what to do. Then they hide their booger when the cameras are turned on so they can look "clean" and righteous while they posture and pose...
- TD reader Gill E.

Thanks a lot, Gill. Now I’ve got this mental image of Hank Paulson working on a digger.

There were a few scary responses, too. Here’s a small sampling:

Hang the SOB.
- TD reader J.C.

Should have been strung up over a strong limb...
- TD reader A.G.

You are being too nice. On the other hand, if you shoot him he won't suffer as much. Take both knees and elbows and one eye and then throw him on the street.
- TD reader S.S.

Tar yes, and confiscate every single thing he owns.
- TD reader J.J.T.

Whoa, whoa! You don’t really want to physically harm the guy, do you? The tar and feather stuff was more a figure of speech... Guess I could have made that more clear. Nor am I a big fan of the confiscation idea (taking everything the man owns and so on).

At the end of the day, Miller’s investors gave him the power to manage their money as he saw fit. Miller was a jackass in the decisions he made, but he didn’t break any actual contractual laws as far as I know (only the unwritten law of doing right by your customer). I’m hesitant to endorse punishments outside normal legal channels -- going above and beyond a court of law -- because mob justice (no pun intended) is a two-edged sword.

If I’m out four-wheeling in the Nevada desert and accidentally flatten a rare cactus, for instance, I don’t want to give hyper-environmentalists the moral right to string me up by my thumbs. If I happily advocate that others be strung up by their thumbs... beyond the boundaries of free expression and moral condemnation, that is... I run smack into the “do unto others” dilemma. America’s legal system may be lousy and half broken, but it’s better than nothing as protection against the whims of the offended. (That and a good working firearm, I suppose.)

And as always, there were many thoughtful comments, too. Too many to print even a fraction, I’m afraid. We’ll start with a swipe:

Had you written this six months you would be better than Bill. Coming at this time you sound liverless not Livermore.
-- TD reader John M

John, I’m not sure what that means, for one man to be “better than” another. It wasn’t my intent to demonstrate moral superiority. I simply called Miller out for putting his ego above the well being of investors... and for neglecting his moral responsibilities as a steward of other peoples’ money.

Also John, you start off with “had you written this six months ago....” Well here’s the thing. I’ve been hammering Miller’s inane bottom calls for at least a year now (and have the calendar-stamped e-mails to prove it). But I’ll do you one better than that. Almost six months ago to the day, I said the following right here in Taipan Daily:

The practical answer is that, in its recent actions, the Fed has committed much more than just $200 billion. It has committed itself to funding the mother of all bailouts. They have burned the bridges and damned the torpedoes; Wall Street will be saved, no matter what it takes.

... What the Fed is doing might not qualify as the biggest bailout in history… yet. But it will. Before all is said and done, the Fed’s ongoing rescue attempt -- and desperate measures to stave off a deflationary downward spiral -- will go further and deeper than anyone can imagine. (Well, almost anyone.)

... As the old saying goes, “give a mouse a cookie and he’ll want a glass of milk.” If Wall Street is the mouse, Fed Chair Bernanke is the friendly fellow with the cookies and the milk.

In other words, this $200 billion garbage-into-gold lending plan is only a stopgap. It’s just the first salvo in what could become an increasingly desperate campaign to save Wall Street from itself.

The byline on that piece? March 12, 2008. That’s six months to the week. You can read it for yourself here. (And I still think we could see a stimulus-led melt-up, by the way.)

Back to your comments:

I believe he (and Legg Mason) should be held accountable, and criminal
charges should be the order of the day.....Being the mess Bear Stearns, and
the credit crisis as inflicted on this economy, his actions should never
have been taken....Am sure if he's booted, he'll get a nice package just
like Mr. O'Neill ($160 million) had gotten, which in my view should be
handed over to the shareholders.....This way "justice" can be duly
served....pun intended....for everyone!!!
-- TD reader Mark

Bill Miller made a career out of doubling down on bad bets.  He did it with Amazon.com and numerous other technology stocks.  It's a great strategy in a bull market because the market will bail you out a lot of the time and you generate huge returns when the stocks rebound. The "catch a falling knife" strategy makes you look like a hero every time you actually catch the knife. The problem is that if you do it too often one of the knives will land right between the eyes.

Another problem with Miller's strategy was that he often bet on very low quality companies -- companies with a lot of debt or diminishing cash flows. When you combine bad companies with a bear market you get something like FNM and FRE. This wasn't just a falling knife he was trying to catch, it was a flaming spear.

Not only should Miller be shown the door for throwing good money after bad, no competent analysis of FNM or FRE should have led you to believe those companies could have survived without huge capital raises that diluted the shareholders to nothing. I'm sure Bill will argue that their books were cooked and that led him to the wrong conclusion. However, the accounting and financial machinations these companies undertook made it impossible to figure out what was going on. And that was his final mistake -- never invest in something you can't understand after perusing the financial statements.
-- TD reader Thomas N.

Well said, Thomas. I like your thought processes. You aren’t in the market for a job, perchance? (Quick aside: If you live and breathe markets and love the idea of writing about them, drop me a line: justice@taipandaily.com.)

Bill Miller follows the likes of Victor Neiderhoffer, Alberto Villar, Joseph Granville, and that Hunt Dude (of cornering the silver market fame)... no diversification, no position sizing, monster bets, huge ego. It seems that every few years, some genius runs amuck in startlingly similar fashion.
- TD reader Robert P.

The first mistake was these college educated idiots thinking you can trade mortgages like orange juice as a commodity. Land does not move and is not a stable consumable commodity and the house sits on the land... Some idiot wanted to treat homes like the lumber and components that go into housing and those are only good as long as someone is building. The reality for these over paid dum-dums.

Average American family income $49,600.00... average of unsecured debt $15,000.00 at 18%. Reality of affordable mortgage $135,000 to $150,000. Average American 89.6% of the population. Number of retired people to be 75,000,000 million in 10 years, average income $35,000. These idiots can't even run the numbers. Housing and McMansions are dead space from here on out. World economy big pull back. American consumer murdered and this guy should be hung with the rest of those guilty.
- TD reader C.

Yikes. Right in there with you ‘til the end there, pal...

There were more great responses, far too many to print, so I apologize if yours was missed. I try hard to read them all but can only sample a fraction of them here. Loving this feedback process, too... I have no doubt many of you are sharper than I, particularly on specialty topics where you really know your stuff.

Still to Come: Thoughts on Money Management

There were also a number of thoughtful inquiries on the money management issue: Where to place stops, the psychology of taking a loss, your personal experiences, and so on. Rather than give those responses short shrift in a small space, I’d rather save them for another full-fledged Taipan Daily episode.

I’ll make a note to respond to your money management questions next week, as I wing my way back to France for another conference. (Such is the life of an editor. It’s a dirty job, but someone’s got to do it...)

Thanks again for all the feedback, and for making my job more fun.

Warm Regards,

JL


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