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Thursday, 9 September 2010

Bullish or Bearish? The World's Greatest Investors Debate.

Padraig O'Hannelly

The bears and bulls were battling as ferociously as ever over the past month. Let's dive right into the debate, through the words of some of the world's greatest investors.

Bill Miller, chairman and chief investment officer at Legg Mason Capital Management, was clearly in bullish mood when he declared:

U.S. large-capitalization stocks represent a once-in-a-lifetime opportunity in my opinion to buy the best quality companies in the world at bargain prices. The last time they were this cheap relative to bonds was 1951. I was one year old then, but did not have sufficient sentience to invest. I do now, and if you are reading this, so do you.

Of a similar frame of mind, albeit with a focus on emerging markets rather than the United States, Mark Mobius dismissed fears of a double-dip recession:

"Given that there won't be a double dip, we still think that there will be a continuing bull market," Mobius said. "The global recovery is well in place."

Societe Generale's perma-bear strategist Albert Edwards, on the other hand, predicts that the S&P 500 will sink to 450. While complaining that his ideas have been "dismissed as the attention-seeking ravings of a lunatic," he went on to proclaim:

"The structural bear market has not reached the end. We have long said that the de-bubbling process would end only when equities became very cheap and revulsion in equities as an asset class hangs in the air like a fog."

Commodities guru Jim Rogers was also at his ursine best during the month:

I am going to sell bonds short, but I'm not going to short them now because the central banks have more money than I do.

I would rather own commodities than stocks. If the economy gets better, more will be bought and, if it gets worse, then they are going to print money, which is good for silver and gold.

When challenged with the notion that the gold price is now in bubble territory, he counters:

I'd hardly call something that is very depressed a bubble. It probably will be a bubble some day, I fully expect that, I expect there to be hysteria in the precious metals markets in five or 10 years. Right now very few people own gold, and I can hardly call something a bubble when very few people own it yet. [But] I would prefer silver, I own both ... it's just that I expect more percentage-wise from silver than from gold because it's so depressed.

On the subject of gold, U.S. Congressman Ron Paul, who believes price of gold is being held artificially low, has proposed an audit of America's gold reserves:

Why should anybody oppose us counting what's in the bank? ... It'd be nice for the American people to know whether or not the gold is there.

While not advocating a return to the gold standard, he suggested allowing precious metals to compete with the dollar as legal tender:

If people get tired of using the paper standard, they can deal in gold or silver.

Avoiding the whole bull/bear argument, index fund pioneer Jack Bogle was as critical as ever of the fund management industry:

Returns come and go, as it were, but costs go on forever ... Despite the irrefutable evidence on the impact of fund costs, fund expenses continue their upward march. Conclusion: The huge economies of scale available in managing other people's money have largely been arrogated by fund managers to their own benefit rather than to the benefit of fund shareholders.

Taking a pleasingly oblique look at the world, everyone's favorite chairman, Andrew Perloff of Panther Securities, took a swipe at the utility giants in his company's interim results:

All these big companies no longer seem to care about their customers. They have deliberately awkward contact systems and contracts that may be 18 pages long in print only suitable for Lilliputians.

He goes on to tell a 4,000-word story about learning the importance of customer service in his family's pub in the UK. Hardly standard fare for corporate results announcements, but the investment community is always richer for his "Chairman's Ramblings."

There it is the market month through the words of some very smart investment minds.

This article has been adapted from our sister site across the pond, Fool UK. The Fool owns shares of Legg Mason and has a disclosure policy.

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