저자: BillMillerIV · 외국인
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결론: 이번 대담은 특정 종목·자산에 대한 명확한 가격 방향 예측보다는 투자 철학과 커리어 이야기 중심이며, 대상 자산 관련 1~3개월 전망은 사실상 없음. 투자 철학: 밀러는 가치투자를 단순 저PER 매수가 아닌 '확률적 펀더멘털 가치(probabilistic fundamental value)' 접근으로 설명하며, 시장 인식과 실제 진실의 격차가 클수록 베팅 가치가 크다고 봄. 차트 기술(CMT)을 병행해 가격·거래량으로 투자자 행동을 읽는 것을 중시. 구글(알파벳) 사례: 검색 사업 우려 속에 저평가되어 매수했으나, 최근 매도(익절)함. 빅테크의 AI 투자 대비 필요 매출 규모가 과도하고, 자본지출 후 가격경쟁 위험이 있어 주의 입장을 표명. 현재 가치는 대략 적정 수준으로 판단. 리스크: 저평가라도 시장 동의가 없을 수 있어 포지션 크기를 시장 피드백으로 조절해야 한다고 강조. 가치함정(value trap) 회피는 '항상 잘 되지는 않는다'고 인정. 거시: 주택 담보대출 금리와 주택가격 상승률 관계를 언급하며, 장기적으로 주택가격 상승률이 금리(약 2% 언급)를 넘어야 가계 자산이 유지된다는 논지를 제시. 구체적 금리 방향 전망은 없음. 기타: 커리어·멘토·도서(『The Measuring Instinct』, 『Let Them』, 『The Psychology of Money』) 관련 대화 위주이며 종목 전망은 포함되지 않음.
다듬은 글
This week on the podcast, I have yet another extra special guest. Miller Value Funds. Bill Miller, the fourth. He is the son of Bill Miller, the third fascinating investor, a portfolio manager and World Series of Poker player. They have a very unique approach to value. It's not your traditional, just buy and cheap.
I thought this conversation was fascinating and I think you will. Also, with no further ado, my conversation with Miller Value Funds. Bill Miller. Bill Miller I feel like I have to add the fourth. Welcome to Bloomberg. Thanks for having me. It's great to be here. So so I want to talk about your investment philosophy, what you're doing at middle of value today.
But let's roll back a little bit beforehand. You get a degree in economics from Tufts and then an MBA from Dartmouth Talk School of Business. Was investing the original career plan? No, it wasn't the original career plan. You know, when I was growing up, I went to a small private boys school in Baltimore, Maryland, never really knew what I wanted to be when I grew up.
But when I pointed out to my parents, they said, Well, just consider school is your job. And the harder you study, the more options you'll have down the line, and I'll help you figure it out. So that sounds like pretty good advice. I followed it. It did well academically in school. So when I went to Tufts, I think the primary concern was somewhere where I could actually play baseball.
So growing up was a huge Orioles fan. That was something that my dad and I often did together. He was my coach in Little League, something I'm doing now today for my son. Sports teach you a lot about being on a team, about how to operate, how to internalize what you can and control what you can and not focus on the rest.
So I learned a lot from that. Did you play baseball in college? Yeah, but I wasn't very good, so I learned that pretty quickly. I played the difference between the guys who are good and really good is so tiny, just like a little wood on the bat once or twice more a week. And you're in a different tier.
Exactly right. It's fascinating. Yeah. And, you know, I probably deluded myself for a while about how good I could be, but I also probably didn't focus on the right things and knowing what I know now about how to get better and improve on things, I could have been much more systematic about it than I was.
So. So you start your career at McKinsey y y Consulting. What what led to that? Yeah, well, so I interned for my dad's group in college, loved it, learned a lot. But then, you know, on campus, recruiting came along and McKinsey was one of the names and I just applied to it, did a little work on it and made it through That interview process was pretty rigorous.
And I got an offer from McKinsey and I said, Hey, Dad, I love being with your group. Investing is a lot of fun. You know, what would you do if you were me? And he said, Well, you can always tell McKinsey, you can always come back and work for me. But if you tell McKinsey no, you'll never have a chance to work there again, right?
So it was this concept of optionality again. And also there was he knew and I didn't know at the time, but they place an immense amount of focus on professional development. And so that was a really valuable place to spend the first three years of my career. So I was working on a huge variety of consulting projects, mainly actually the job I had there.
Now I don't I don't know if it exists because I so what I was doing was remotely supporting teams on research efforts, deep dives on stuff which now you just asked CBT about in a probably does a better job summarizing everything I could possibly do. And you know, assuming it's accurate, which is always a little bit of an F, right?
That is a big F for sure. Yeah. Focusing on primary sources is a still a critical skill that I think a lot of people under emphasis. Would you take from your years consulting that showed up and as helpful as an investor. You know, one of the things this might surprise you less so about the data driven nature because my dad's a data driven thinker and thinking quantitatively has always been in my wheelhouse.
But the thing that I learned at McKinsey more than anywhere else with me focused on client service and how to interact with people, how to do the subtle things that show, you know, somebody else is the client in finance. You know, when you're managing money, it's very hard to differentiate yourself in that, you know, conference.
She was a professor of mine at Dartmouth, former French Factor model at Dartmouth. Sure, you got it. Exactly. One of the things he imparted on us was how how long does it take to know for money managers, actually? And the answer is from a statistically significant basis longer than any money managers career.
Right? So say ten years, 20 years. It's it's 20 plus four to see if it's statistically significant. Right. So you have to be doing other things. It's like we were talking about four. He came in here. Content's a big focus, right? That's a way to differentiate yourself, the way you communicate with clients, getting back to them quickly.
All of these things are really important, and I learned those at McKinsey, and I'm not sure I would learn those to the same extent if I had just directly joined my dad's firm. So that might be a surprising answer, but it is a no. It's really, really interesting. So McKinsey was a solid place to get grounded.
What led to the pivot to investing late? 0708 Yeah, so and McKinsey, we were effectively handing over analyses to clients and then leaving and moving on to the next analysis. And it occurred to me. If you actually wanted to, you know, build any equity in your analysis of what you were doing, you had to actually take a real stake in something.
Mm hmm. And so that made me think, okay, you know, this is it'd be a great time to pivot from what I was doing at McKinsey to my dad's side of things, where that's exactly what you're doing all day, every day. Excuse me. And then I also, during college, I took a liking to poker. And so played a lot of no limit.
Hold them. Back then, PokerStars was kind of in a legal grey area. And so I, I played a lot online and I saw a lot of similarities between what my dad did. Poker analytical edge in terms of thinking quantitatively, McKinsey And it all kind of came around to moving in that direction. So speaking of your your father, how did growing up in the Bill Miller household influence how you look at at risk and reward and investing at how big of an influence was he on your initial philosophy?
I think he's most of it. It's hard for me to specifically say A, B and C because it was as much learning from watching him and how he operated. So number one, he was always, always had a stack of research and was always going through content, always looking for new perspectives. He's a relentless truth seeker and I think that's ultimately what we're doing as investors is trying to separate where the truth is from, where the perception is around what's going to happen.
And the bigger the gap, the more you want to place a bet. That variant perception is really important. Is it? Exactly. Especially when that gap gets bigger and bigger. Yeah, and especially if there's a, you know, margin of safety there to protect you on the downside. So relentless true seeking. And the other thing is, you know, there were no shortcuts for him.
There's no there's no substitute for actually putting in the time to going through that content all the time and being in front of your your machine all day. And and just time is the ultimate resource and constraint for everyone. Mm hmm. And so thinking in blocks of time and thinking how to maximize your productivity per unit of time, I think is something that I took away from him.
Really, really interesting. So going back to the family business, that's a pretty loaded concept for a lot of people. What was it like first going back to work with your father and then becoming the controlling owner of Miller Valley Partners? It was fantastic because we were a small group at Legg for a good period of time, probably from 2013 or 2014 until we split off and went independent in I think it was 2019 or so.
So got to work with my dad very closely. A lot, you know. But at the same time, one of the things I love about it is the market doesn't really care what he did or didn't do. And ultimately, now that I'm in charge of the portfolios, it will hinge upon my decision making more so than what he did. And so it's on me to now take everything I've learned and run with it and do what we can do.
Was your father a poker player, or how did you find your way into that? No, he wasn't a poker player. It was when Chris Moneymaker won the World Series. I don't know if you remember. Sure. I think it was maybe, oh, two or three funny glasses. And he was an accountant, actually. And so, you know, he stressed a lot of the quantitative decision making.
And the other thing I actually looked at coming out of Tuck was baseball operations stuff, because Moneyball was a you know, the whole analytical side was just coming around then. And, you know, I know you like to talk about mistakes, but I think of specifically that recruiting process, my attitude towards it, and just some mistakes I made there.
So, well, we seem to learn more from our failures than we do from our successes because we don't know if our successes were the result of good fortune or skill. If it takes 20 years to figure out which it is, you're going to obviously learn more from the errors. Hey, we know this was a bad choice. That's right.
Or was it a good choice with a bad outcome? Well, I think in this case it was a you know, the outcome was good because it was ultimately where I was probably looking to wind up. But at that time, I was thinking, I want to be baseball, baseball, baseball. You know, I mentioned earlier I wasn't good enough to play.
I wanted to sort of use my analytical talents to talents, my analytical background and training to go into the analytical side. And as I went through the recruiting process, it became very clear that I was jumping through hoops, waiting for callbacks. And it was a very intense process. And I realized that I was probably going be charting pitches in Topeka at the end of it, which to me didn't seem all that exciting.
But in retrospect, if you want to be in baseball operations, you should do anything you possibly can to get your foot in the door to this competitive business. Let me point out, a little over a decade ago, a kid became an intern in the NFL and he just won the Super Bowl as head coach. So if you really love it that much and you're there committed.
I'm with you. I can't count pictures in Topeka. I just. Right. I mean, yeah, especially because you have how many other people were interns and they didn't head coach the Super Bowl winner. But it's funny because now I see that on the other side, right? So I get LinkedIn's and messages all the time.
Hey, I'm a really good software analyst. I want to come and work for you and be a software analyst. And I'm like, We don't need a software analyst right now. We need somebody that can go get me a sandwich at lunchtime, you know? But like so but I understand the perspective, too. It's just that I think if you want to become a member of a team, you have to understand what the team needs and where you can genuinely help.
And it may not always necessarily align with what you want to do. And I think that's important to keep in mind. Really, really very interesting. So as long as we're talking about all these career choices, if you were starting out today, would you follow a similar path to what you did previously or would you go a different route?
I really like what I'm doing now and I want to do it indefinitely. So it's hard for me to go back and say I would do something differently because I'm where I want to be in for the long term. I do think one of the lesser considered paths that a lot of undergrads don't think about would be actually going into something entrepreneurial.
And I don't mean like starting a startup that you're trying to scale from zero to gazillion dollars over the next year, right? But that's what people tend to think of because that's where all the returns look like they are. In reality. I think potentially scaling a small services business, you know, whether that's power washing, home cleaning, just things that where you can get your arm around the fundamental service and scale that and make it bigger is potentially a more a safer risk adjusted way to a big outcome than people consider.
Just because you're learning a business from the ground up and customer relations and all those other things. Yeah, well, you know, even in our business, it takes time to build a track record, It takes time to build the assets. And so anything you do where you're going to have a good outcome in the long run just takes repetitive effort and the right focus.
And so sometimes the learning around something that you can get your arms around can be easier than the learning around software development or, you know, scaling a big fund or things like that. So So you joined Legg Mason in oh eight, pretty much right in the middle of the financial crisis. How did that experience shape your perspective on investing and in particular on value?
Wow. Start with a hard hitting question here. So that was a as you point out, I joined right at the top. I think when I joined Capital Management, there were roughly 150 people working there. And then by the time, you know, capital management merged with Clear Bridge, there were a substantially fewer number of people working there.
Just because assets flew out the door, performance struggled. And, you know, that can be a pretty ugly compounding effect on an asset manager. So I'm sure, by the way, that story was pretty much ubiquitous throughout finance. Yeah. And so I think that taught me, you know, you had to run one of these businesses.
You obviously want to have some extra gas in the tank, you know, at all times. You want to you don't want to run it too thin from an operating capital perspective if you want to build it for the long term. And so it's a good idea to keep those fixed costs lower than you might even anticipate. So so let's talk about building on that.
You come out of the financial crisis, you get your CFA soon after 2011, something like that. It sounds right and then become a chartered market technician in 2018. Unusual combination. Tell us why you went that route. Yeah, so the analogy I make is if the CFA teaches you to play your cards on the poker table, CMT teaches you to play the other players at the poker table.
And in that, one of the interesting things about the CMT is, number one, it takes a lot less time than the CFA. But number two, I use that in some of the teachings from that more often now than I use the CFA. It's funny you you the way you described it, I always thought the difference was financial.
And I'll tell you what to buy technicians tell you when to buy. Well, I think that's accurate as well. Yeah. And so one of the things that is very easy to do as a value investor to see multiples coming down and stock going down, you go, Wow, this is way too cheap. The reality is that it could just keep going down because it's going down and people are selling it.
And you have to be able to read that on the chart. And when the volumes change and when the investor behavior changes. So it teaches you to look at investor behavior. Teaches you how to figure out what other investors are thinking based upon price trends and action and volume. And that's been a really valuable skill set and complement to the CFA.
So walk us through your process from idea generation to execution and position sizing. What sort of steps do you have to work your way through? Well, I think a lot of it starts with the appreciation that most assets are efficiently priced right. So we have a portfolio of things that we believe are undervalued.
And so all day, every day, we're constantly running through screens, we're reading research, we're looking at price movements, we're looking at insider action. A lot of the time when insiders are buying or selling to potentially point a point something out to us. But then we have to then once we identify something that looks interesting, it has to then be better than what what else we have in the portfolio.
So we have a group of things that we own and like, but at the same time, we're constantly comparing new ideas to see if it can be a fit come into the portfolio. And so how we make changes is going to be obviously directly relevant to that thesis. In some cases will have a name that the investment thesis completely changed with the latest earnings report or something went out the window.
And then we'll have an ability to either add something new or bump something up. But it's always about constantly looking for new ideas that could be undervalued and then trying to figure out the right way to wait them. Because as unconstrained investors, all of our talk is in our position sizing in the weights.
So, you know, we made a lot of mistakes. And oftentimes the answer to those mistakes is sitting right in our portfolio. You know, it almost always says we should do more of that and less of that. And so I spend a lot of time just going through the portfolio and figuring out where the relative weights should be.
But I would say at a high level, probabilistic fundamental value. Probabilistic fundamental value. Right? I like that phrase. When you're looking at fundamental values, how do you distinguish between something that's only temporarily out of favor, temporarily hated to, Oh, this business model is structurally broken.
How do you avoid the classic value traps? Well, we don't always, unfortunately. You know, and just because something is undervalued doesn't mean that other people are going to agree that it's undervalued. So I think that's an important thing to keep in mind, too. And it's important to use the markets to help you figure out how to change your position sizes, because sometimes you start legging into something, it just keeps going down.
You should probably heed the market's feedback a lot of the time relative to your own positions and their sizes. So one of the key reports that my dad looked at every day I still look at every day is our daily performance report. And basically it just says the entire portfolio ranked by weight and then how it's done over the past year, how each name has done over the past day, week, month, quarter, six months a year.
What about the reverse? When something's working out, do you pyramid and add to the position as it runs into patterns? So, I mean, we just you know, I know you like to talk about short term stuff and market related things, but we just eliminated our Google position a few days ago, right? So we mean that had a great 2025.
It did. And we actually got the I think, the investment thesis right. Hopefully we got the exit right. But, you know, the thesis there was, okay, here's Google. This is this should be a huge air winner. Everyone was concerned about their search business at the time. And hey, I replacing search and you know our position was hold on this trades at a massive discount to the mag seven trades at a discount to the market on an earnings and cash flow basis.
Yet it has all the distribution mechanisms for you know they're in seven out of ten phones globally and all the technology capability to implement. I mean, they're a giant tech brain trust. Right, Exactly. And they had a ton of funding to build it with. So and, you know, Waymo and all these other, you know, YouTube, all these other insane businesses that was trading at a discount to the market, it just didn't make any sense.
So we bought that. That's probably fairly valued today, I think. You know, and obviously one of the, you know, classic mistakes is selling things too early. Could it continue to compound? Yes. But if you look at why the whole Mag seven hyperscalers have done so well over the past 2 to 3 years, the answer has been, well, they're number one, growing faster than everything else.
And number two, they've got these huge incremental free cash flow margins. But if you look at what's been going on recently, they don't really have big incremental free cash flow margins anymore because they're dumping so much money into the AI space that there really is no free cash flow. And now you're betting on it materializing down the line.
So where we take the other side on the situation is if you actually look at the dollars required to be found in revenues five years out, they're so substantial. The number one, they're bigger than the entire software as a service business right now globally around the world. Okay. And number one, Number two, the total revenues that are required to justify all the investment that's gone in is bigger than the combined revenue of Mag seven today.
And those companies have been scaling for 30 to 40, 50 years in some cases. And so you got to find that in five years to make all this investment worth it. And if you think about the structural, the way it works, it's all this CapEx investment upfront and then it's very little marginal cost, right? So you potentially have a race to the bottom on pricing on the top line in a few years as well.
So that gives us a little bit of pause whether or not it's right, who knows, huh? So so what I'm hearing is that there's a probabilistic quantitative discipline. You're looking at value, you're looking at growth rate, you're looking at risk combined with a qualitative judgment about management. And it sounds like specific industry and whether these moonshots are going to pay off or not.
How do you balance between the squishy qualitative side and the more quantitative mathematical side? Well, I think there always has to be a quantitative value perspective, and anything we're buying or thinking about often from a total addressable market perspective versus versus the current valuation, one of the big themes for us also is alignment.
So we want to see managers, you know, actually using their cap. So capital allocation and alignment. So are they using their capital in ways that align with our view of the stock? You know, are they buying back a lot of shares if it's mispriced? Hopefully, yes. Are they aligned with you as a manager of the company?
You know, principal Asian conflict is one of the biggest sources of value destruction you can possibly imagine. And so that's important to us as managers. We are the biggest investors in our own funds as well, so. Oh, really? It's very interesting. Yeah, but it's you know, it's a first principles based approach.
So one of the things we pay special attention to, I think more so than most and can be opportunistic about moving on is insider activity. So when you see a big insider buy, if you can then reverse engineer a quantitative value perspective into that insider buy, that makes a lot of sense. That can be a really compelling.
I just saw a big Wall Street Journal piece. On two insider buyers indicate future performance. And I saved it. I haven't read it yet. What's your take? I mean, the assumption is insiders, there's a million reasons to sell a stock if you need liquidity. There's only one reason to buy a stock. You you stay with that conclusion.
Insider buying is indicative of positive things to come. I think it's a potentially high signal source of information. So in the aggregate, does it necessarily guarantee it? No. But if you can contextualize and say, okay, this CEO is really smart, he's done this sort of thing in the past, he has a plan for this company.
Here's what it's looking like. And he just put a huge amount of personal capital in. That can be a really good. So it's not binary. There are other factors that have to be it's a little more nuanced than the way we typically think of it. Context matters. Always really interesting. So let's talk about your investment philosophy separate from your your dad's.
Starting with how do you define value in a world where a lot of the traditional metrics like price to earnings or price to book seem to have been downgraded somewhat, Perhaps they don't fully capture modern. Intellectual property based business models. How do you how do you think about those? You know, I think you have to have a flexible definition of value, and that if it's just based on accounting figures, you're probably not going to do very well over the long run because if you look at some of the best performing assets stocks of all time, they never look cheap just because they have such a right tail and they compound with very you know, they're investing all their earnings and they're constantly seeking to grow that edge.
And so solely focusing on accounting factors is not a great way to capture long term value or outperformers, although it can be. You know, we have a strategy where we're by my business partner, Dan Lasik, has a collection of ten or 12 names that look insanely cheap on these metrics. So you can do there's a lot of different ways to skin the cat, right?
So what what are the different thought processes around defining value? So cheap but not broken is obviously what your partner is focusing on. How do you contextualize things like Amazon or in video or Google, which have looked expensive for ten years and have just shot the lights out? Yeah, well, in the case of Amazon, they started with a very small idea around just selling books online.
And it was, you know, it ended up being this retail juggernaut just because if you look at now that the distribution, logistics networks that they've used to fulfill their orders, it's just a it's a network that can't be touched. Right. And so everything store and it depends on the actual scenario. So, you know, one of the things that I've been vocal about now for probably ten years is our our view that Bitcoin is still a massively undervalued technology.
Mm hmm. And so that would be one where you probably say, well, why has no cash flows at it? You know, speculative. It's based upon other people's beliefs. And I'd say that's exactly right. It is based on other people's beliefs, but other people don't haven't yet come around to the view that it is a functionally superior technology to gold.
It's a form of capital governance. I think it requires a lot of different lenses, right? When we say we have flexible definition of value, you have to approach things from a variety of different perspectives. In this case, one of the reasons I think Bitcoin is so interesting and compelling, 17 years in, you know, it's gone from this weird technology on the Internet that only criminals use to now it's collateral for loans in our modern day financial system.
Right. And so what explains that? Well, markets explain it to an extent and that people are increasingly coming around to view it as an interesting place to put money and an interesting capital governance system. It's totally separate from the fiat systems that everyone has known for their entire lifetimes and multiple centuries before us.
It wasn't possible prior to 2000, nine or 2010 when the whitepaper came out. And so now you've got this new emerging system of capital governance that I think it's one of the most dynamic areas of finance in general, as a matter of fact. So it's an area I'm very optimistic about over the long term bounce around.
It'll be volatile, but I think it's headed to much bigger places. So so we're recording this the day after it briefly broke 60,000. Are you a buyer of Bitcoin at these prices? Yes. So it's a big part of my personal financial situation and and one of our MVP's, it's roughly our digital assets collectively are about 10% of that fund.
So we'll talk more about state of markets in a little bit. Let's stay with the concept of philosophically. This is an interesting technology. I've described this as something as a unique asset class. I think of it as, hey, it's somewhere between Facebook and Google, between Meta and Alphabet as a technology company, which gives it a little more perspective.
But at the same time, it came out around the same time as an iPhone. And I would never give up my iPhone. I don't know how I would my my train tickets, my plane tickets, my communication, my portfolio, everything I do, I do on this. If Bitcoin were to disappear tomorrow, it wouldn't affect my life in the least.
Why is it that 17 years in we're still waiting for this to gain broad usefulness? I'm still waiting for smart tickets that cut out StubHub and those guys and all sorts of technical technological uses that I heard about 510 years ago but still haven't happened. What's the response to the skeptics? Well, so if you look at the introduction of running water in households, it took 100 years for it to go from possibility to ubiquitous.
Mm hmm. Okay. And that was a clearly better technology than using an outhouse or boiling water to put it on you night or whatever. So. This is an entirely new idea. And again, from my perspective, it's a capital denominator. It's not a numerator, it's a capital denominator. So it's a Bitcoin as a denominator for capital.
And the reason I think it's so superior to what we've known before is that money, the way it works right now, it's ultimately backed by this the threat of state ordered violence, standing, standing army and a set of laws, right? That's right. You know, you don't pay your taxes, will throw you in a box and lock the key away.
Throw the key away. But this and if you think about actually around the world, the countries you want to visit, most of them are going to have stability of process and rule of law. Right. And the places where that's not the case, there's a much there's a much less distinct, much less of a distinction between who controls the ledger and who controls the guns.
So the farther apart those two things are, the better. So in this case, we now have a distinct ledger, entirely apart from any state, and its units can't be controlled by anyone, right, in that they're controlled by actual energy. So you need to have energy to crank out a new Bitcoin because that's what the whole mining process is about, right?
You verify a transaction takes a lot of energy to do that and in exchange for expending that energy, you get more bitcoin. That's the miner reward, right? Right. So this is a capital denominator whereby energy input is actually required to create new units. What happens now? What happens now is somebody, you know, a bunch of congresspeople signed something Fed goes and prints money to keep roughly rates roughly in line prices roughly stable employment roughly full and so it's.
It's there's there's still some issues with that from a process perspective. Right. So they're trying to control the money supply to engineer outcomes as opposed to having a fair set of value that we all agree upon. Right. This is a valuable thing because it takes energy to produce. And having that be the arbiter of value.
And so if you look at the political process today, it's not a it's a process issue more than anything else, and that oftentimes the least accountable party ends up winning in office because of all the promises they make. And what happens then? Well, more units get printed, right? And they just get printed and printed over time.
And that's what ultimately causes inflation. And it's you know, it's it's not a rare issue or blue issue. Most of the time. Republicans are cutting taxes in a way that probably doesn't make sense from a systemic perspective. At the other side of the equation, oftentimes the blue side of the aisle increases entitlements, Right.
Without an offset. And so both of those are bad things for the for the overall medium through which we transact over time. And so now you've got a system that offers a promise of effectively cutting that whole the clown show, as I call it, sometimes out entirely. So you look like you're not believing it.
Well, you know, I don't care about deficits. Since the past 50 years, I've been hearing about the problem with printing money. And everything that we were warned against didn't happen. The dollar hasn't devalued. We haven't had hyperinflation. We haven't crowded out private capital. And you could still lend money to Uncle Sam at historically low rates.
If if you want three and a half, 4% as a yield. So all the warnings about printing money and deficits have been, you know, the boy who cried wolf for half a century. So. So there's that. And then there's. Okay, so here's an idea that we can what are we limited to? 24 million to 121 million coins and that.
Scarcity creates value. I understand it's virtual. I understand the advantages of having things be purely digital from conception forward. I have a hard time getting past the criminality and the pig butchering and the blackmail that that's a little problematic. And it's sort of like democracy. All the others, you know, it's the worst system except all the others.
Well, a central bank and a government that makes sure we're doing. Something within reason is better than just opening it up to the Wild West, which is what this seems to have been for a long time. The U.S. did a was pretty aggressive in embracing it, especially this administration, and it seems to have speculatively run up in anticipation from that.
And, you know, once it was all in the price, you know, we got cut in half. It's when you're talking about stability. Yeah. The US dollar was down 9% in 2025, not cut in half. This is a giant whack in, you know, less than six months. So I have a hard time just wrapping my head around. Oh, the source of stability is something with no fundamental value but swinging wildly up and down.
So I'm. I'm not as negative about it as a lot of people are. I was really negative about the nfts and my which way you want to take something with literally no value and totally reproducible. And like I understood the idea of, Hey, you're going to buy a $10,000 Birkin bag and here's the unique identifier on the blockchain.
All right, that made some sense, but not $68 million. This sort of crazy prices, these traded that. So there seems to be a lot of speculative excess that get in the way of the the technological story underneath. Yeah. And I think you bring up a good point with regard to the United States and the deficits not making a big impact.
And that's because we are the best house in a bad neighborhood from a fiat perspective. I mean, we have the the reason that America is the most desired place to be from an immigration perspective. I think we have, you know, four times multiples the number of immigrants as the next four closest countries combined.
Again, that comes down to stability of process, rule of law and property rights. Right? And so if there's now a form of currency that wasn't possible 50, 20 years ago, call it that has more stability, a process and more certainty around property rights over the long term, I think it's an education issue as much as anything else.
Interesting. And people may not come around to that view. But from my perspective, the quantitative inevitability of the technology is pretty compelling When you look at just the Bitcoin versus gold rate. Gold's done amazing in the past year. I get it. It's a deep part of the debasement trade Bitcoin hasn't.
But when you think about, you know, as if gold is the predominant check and balance on fiat fiats, a lack of accountability, and then you look at the functional attributes of bitcoin, it's so far superior to gold. Get a trade to limit the economy to how much yellow metal we scrape out of the ground each year.
It never made any sense, right? But then it's a little bit of a leap to right now we're going replace metal dragged to the ground, which happened to be formed in the collision of neutron stars a couple of hundred million years ago, billion years ago, with a digital platform. I understand why people are skeptical.
I just look at it as a big company. And if you want to bet on one of the big mega caps, well, maybe there's ten, 12 or 15 of them. This is another one. Yeah. But so from my value oriented perspective, that comparison to gold, right? Functional equivalence, if not functional superiority, I would say right for bitcoin.
If you map the market cap of gold right now to Bitcoin, Bitcoin would trade at $1.7 million a coin if everyone felt that way. They don't, obviously, but I think over a long period of time they'll get there. So. So let's talk about what's going on in the current environment. If you look at today's markets, where do you see things that are very much mispriced either by asset class after geography factor, whatever, what's out there that's not fully priced or what's out there that's overpriced?
Yeah, I think aspects of the current environment remind us of 1999, right? So you've had a narrative driven performance led by A.I.. You have a very narrow market, for the most part with Max seven leading huge returns to momentum, the momentum factor last year. But then if you look at the actual macroeconomic backdrop, you're seeing deregulation, you are seeing weaker dollar and you're seeing economic acceleration potentially in the U.S.
And so when you think about all those things combined and you look at what happened between call it 1999 and 2000 all the way until 0607, you had the market go effectively nowhere for seven years. I mean, it went down and bounced around. Right? I think valuation heading into that period was very high.
But what did really well during that period actually small mid-cap value. And if you look at the relative valuation discrepancies today between SMID value and large growth, they're right at the same sort of extremes that occurred in 1999. And so you have same valuation extremes, you have compelling valuations and a lot of the small cap, mid-cap value space and you have an economic acceleration backdrop.
So that means that a lot of more cyclically oriented things, value oriented names that are, you know, care more about what's going on, the economy, there's a much lower hurdle rate for those guys to exceed the expectations embedded in the valuations right over the next 5 to 7 years than there are in the massive AI space.
So so let's talk a little bit. About small and mid-cap value. Last year we only saw two. That's 2025. We only saw two of the seven mag seven outperform the S&P 500, which tends to suggest, hey, maybe this is broadening out. We're going to see more mid-caps and more small caps. The value skeptics are going to say, Hey, we've had so many false starts in value.
It's been 15 years of growth winning. How do you respond to that? Yeah, I think those snap backs can be violent, right? We actually had one of our research providers recently calls mid-cap value a quote unquote inferior asset class. I mean, that sounds like capitulation to me. There's a lot of under love stuff out there that's really interesting.
So and sectors energy is interesting to me right now. You know, if you look at its weight in the market, it's three or 4%. But if you look at its free cash flow contribution over the next year to the market, it's going to be 10 to 12% most likely. What's that historic relationship look like? I don't know if it's that large, but to be honest, that gap.
And so, you know, energy's under a lot of its underperform for so long. It's not the best industry from a capital allocation alignment perspective, but it's gotten a lot better over the past few years. And I think you could see those types of stocks do really well. You know, sadly, I do think it's a really cheap call option on global strife right now.
Energy prices, you know, they're pretty bouncing, pretty close. The marginal cost of production, which is shocking when you think about Russia and Ukraine and Gaza and Israel and what's going on in Venezuela and who knows what's going to happen by the time this comes out, we can own Greenland. So given given all of that, what is it what does it mean to see despite all this ju geopolitical turmoil, energy prices are almost reasonable.
Yeah, they are. They've started to turn up and energy's done well over the past few weeks. It could continue to do really well. So that's why we're overweight energy. What other sectors do you like in the financials? We're still overweight. I think you're going to continue to see Curve steepening. And that should be decent earnings growth in those.
I think utilities are finally attractively valued again at, you know, 10 to 13 times earnings and a lot of cases with very clear growth pathways. And I'd say little risk. You know, we don't have enough energy in the country and utilities are pretty attractive here, especially as AI and data centers continue to come online.
You take a very concentrated position, at least compared to traditional value managers. How do you what's the framework for thinking about this? How do you position size these? Is this just strictly a function of, hey, we're not closet indexers, we have a high active share, and when we have high conviction, we really we go all in to follow the poker analogy.
Yeah, that's a good way of putting it. I mean, if you consider that most stocks underperformed the index for their lifetime in it. It's an interesting exercise to come at it from the entire other side and to say, okay, what are the 10 to 15 names that you think have the highest probability of actually outperforming instead of effectively what most active managers do is they have these risk constraints and they can only overweight certain sectors a little bit or so.
You know, the closer you are to the benchmark, the more likely you are to underperform it. Right. Because you're just layering higher fees on something that looks more like the benchmark. So, you know, we're very comfortable taking bets entirely outside of the index with the obvious caveat that there are going to be periods when we're going to underperform meaningfully just because we're taking entirely different risks and there will be some peers re outperform by a lot.
So I think that's really the only way to do it is, is to not be a closet index or essentially. Yeah, and you have to match the investment process to your IP. So, you know, for us thinking that the edge is on the 37th page of the Excel spreadsheets, just not realistic. Right? If you're Fidelity and you've got a guy that's been following a certain industry for a long period of time and really understands the nuances of every single company and what could change, you know, that might make sense, but it just depends on what you're trying to do and you have to match up those two things.
So so we've been kind of dancing around AI throughout this conversation. So let's talk about that a little bit. Are you thinking of AI as its own investment entity or are you thinking of it as disrupting traditional business models? Are you thinking of other businesses? Forget the MAX seven the the MEG 493 as being the beneficiaries of A.I.
to be more productive, efficient, profitable? How are you thinking about AI as an investor? I think it's all of those things. Yeah, it's it's all those things. So I use it all day, every day. I mean, how do you. That was really my next question. How do you use I throughout the day for your process, both for selecting investments and just managing a large investment firm?
Well, it's an enormous timesaver, and it's not necessarily always a time saver on the investment front, although it often is, it can just be a time saver personally. Like if you have an interpersonal issue that is weighing on you, sometimes you throw it in the air and you get a better answer than you could have gotten from asking your, you know, three closest friends and move on.
So if you're thinking in units of time, it's a huge timesaver. For me personally, I think a lot of life is about asking the right questions and you've got a pretty good set of answers there or method for answering questions you pointed out earlier. It can be wrong often and you have to consider that.
But it's got a lot of good perspectives in there that can bring to bear on a lot of different things. So what what tools do you use? What's your favorite? I at the moment we we have chat, CBT and Gemini going Jim for business, both for business and then we're also adding Claude here. So I just, I just put Claude on a couple of desktops and a laptop and the coding side of it is really fascinating and I, I can see why people are concerned that this could replace certain at least menial kind of work, grinding work like, oh it does is so much faster and better than I could ever grind down on my own.
Um, yeah, clouds kind of especially Cloud pro. It's really kind of impressive. And the question is, is 200 a month a lot? Is that not a lot? Is that a fair price? I think it sounds like a lot of money compared to what is perplexity 20 bucks a month and that seems like free practically for that much power.
So you're using it everywhere? Yeah. What are you hearing from your peers? Is this the sort of thing that everybody has gone all in on is the fear. Hey, if we don't do this, our competitors are. So we better step up. I don't know if it's fear just as much as the ability to cover so much more ground in the same amount of time or less.
You know, it's just a super powerful technology and we use it a lot. Really, really interesting. So we're talking about the current environment. AI is obviously a game changer, but we've gone through a few decades of major regime changes. We had the era of monetary policy and then starting in 2020, we've had the era of fiscal policy.
When you're when you're looking at central banks and the government higher for longer zero interest rates or all these different things. How do these geopolitical variables affect how you think about putting capital to work, how you think about risk? Well, I think one really big picture change sort of going back over the past decade to today is coming out of the financial crisis.
Capital effectively had no cost. I mean, you saw the insane amount of money, money printing that occurred, but that's because that was to offset a huge hole in CapEx that had gone into housing that wasn't necessarily needed. Right. And we had to work that out from a demand supply demand perspective.
And we've now done that. But if you go back and read what the Fed said, there was a study that came out of, I think the San Francisco Fed where they used computers to look at the language that was used in meetings, right. About how to set rates. And what they found was that the 2% inflation number, that's kind of the bogey supposed to be a quote unquote symmetrical goal.
It wasn't symmetrical at all on the way. They were setting rates for the between 2010 roughly and call it 2020 or so. And so that has an enormous implication, I think, for the way all kinds of different assets perform. And I think that's why massive growth had the run it did over the past decade. Right.
Because when capital has no cost, you're willing to look out a huge distance, embrace more risk because what do you what are you going to get one and a half 2%. That doesn't make sense otherwise. Exactly. And so that's why huge growth had the run. It did because capital had no opportunity cost. And now if you look at where we are with mortgages at 6% and capital actually has a cost, again, it has major implications for the kinds of assets that are likely to do well in the future.
And it comes back to the whole thing we talked about earlier around smart value cap, more capital intensive things, potentially having a better decade now that capital has a cost again. Let me let me share a favorite factoid with you. Former Fed vice chair Roger Ferguson wrote a white paper on the origination of the 2% target.
Mm hmm. And he traced it back to some random television interview in the 1980s in New Zealand where someone threw out 2%. And that was it. It just magically stuck. And you could find that you can find that paper online. It's pretty hilarious. It's just such a random number that doesn't like. It's not there's no underlying thesis for why it's two and not three or one.
It's just it just seems like, Yeah, that sounds about right. Well, I think it's got to actually be higher than that if you think about it, because certainly in an era of fiscal rather than monetary stimulus. Right, you're going to just inherently have higher prices. Right. Well, I mean, if you think about the fact that most consumers overwhelming saving vehicle is their home.
Okay. What's the blended rate on mortgages right now out there? That's just in the system. Yeah, well, half half the individuals own homes. There are no mortgages. And the remaining half, it's a crazy set of numbers of two and a half. Three, three and a half. Four? Yeah. Everybody was smart, locked in a fixed rate before the pandemic.
Well, so if house prices in the aggregate don't appreciate by more than that interest rate. Right. People are going broke in their primary savings vehicles. So housing actually does need to increase in value over a long period of time where people slowly go broke. So a lot of sense. Yeah. So I think the 2% is I know it was thrown out there, but I think it actually has to be higher over the long term to kind of make the math work for most people.
I couldn't agree more. All right. I only have you for a limited amount of time. Let's jump to our favorite questions. Some of which I know the answers to. Starting with who were your mentors who helped shape your career? Wow. So Mr. Keeney was my dad's original business partner. Uh huh. And he's a fascinating human.
Worked until the day he died in 92. Wow. An incredibly nice human being. I don't think I ever said a bad word about anyone. One of the things that was so interesting to me about Mr. Keeney is he didn't start his career at Legg Mason in research until he was 50. Wow. So, you know, a lot of people, young people think, oh, here I am, locked in this career.
There's always time to switch. And then he hopped over at 52 to start this role where he had a prolific career and influenced a lot of people and did that for 40 something years. Wow. So he was a very smart guy, generous to a fault. One of my favorite stories about him and him and my dad were hanging out for lunch one day downtown Baltimore.
And, you know, some a homeless person comes up and says starts with the story, I haven't eaten in this many days and blah, blah, blah. And Mr. Kinney is sitting there listening to it and gets out his wallet and he gives her, you know, I think it's like a $50 bill. Suddenly inflation adjusted. He says, Oh, ma'am, you're just.
Just go get yourself some hot soup. Take care of yourself. And she looks at it. She looks back at him, she looks at me. She goes to hell with soup. I'm going to get me some whiskey. But, you know, so he was incredibly generous. Human being. Contributed a lot to animal welfare stuff. I'm a big believer in animal welfare causes.
So he was an influence on me. I can also think of a handful of times just from business school that's not necessarily an individual mentor, but just one liners from business school that I remember over the years. So that line I gave you earlier about Ken French and how long it takes for a manager to prove whether or not his work is statistically valuable or not.
The other one liner, he told us, is never payload for a mutual fund. He said If there's one thing you take away from my class, it's never pay a load on an investment fund. And that's certainly still true today. Yeah, absolutely. Let's talk about books. What are some of your favorites? What are you reading right now?
Yeah, right now I'm reading a book called The Measuring Instinct. Mm hmm. By I think it's Rebecca Goldstein, but it's a fascinating book on the mattering the Mattering Instinct. And it's about people's desire to matter and what that means. So there's a lot of psychology and there's a lot of philosophy in it.
The basic premise is that we're all just trying to overcome entropy so that the tendency for disorder and systems increase and we're all going to die eventually. And I was going to say it's a losing battle. But while we're here. Exactly. Well, let's do something interesting, Right? So that's what I'm reading now.
I just read prior to this, let them the Mel Robbins book. Mm hmm. So it's one of the I think it's a best selling book last year. Right. And so I can sum that one up pretty succinctly. And it's focus on what you can control and don't let anything else get to you. Sounds like good advice. It's good advice.
And I mentioned that to my dad and he sees me reading it and he's like, Haven't you ever read Marcus Aurelius Meditations? This is not a new idea. This isn't created the idea of controlling what's within your control. 3000, 2000 years ago. Exactly. And I have read that. And that's a phenomenal book as well.
It's just good to have more modern stories that you can relate to. What's keeping you entertained these days? What are you streaming? Either podcasts or, you know, Netflix or whatever? That's one of my things I don't really do is isn't that no Netflix? No, I watch competitive events. I watch sports.
I watch, you know, an occasional stand up comedy show, but I don't watch the series. Did you see The Australian Open this year? I did. I watched some of that was pretty awesome. I have the finals DVR and I haven't I haven't watched it yet. But I know you're a tennis guy. Yeah. It's rare to find someone who can take Djokovic and put him back on his heels.
Yeah, well, the Djokovic sinner match. Which match was pretty awesome. Yeah. Yeah, I saved these. I watched them, like, months later when I get around to it. Yeah, I do golf. So that's. That's something I've just started taking. I'm terrible. You know, I'm an 18 handicap. High variance, 18. So I can have some pretty good days.
But it's interesting because there's a similarity to investing in golf, which is golf. So you get better at golf by narrowing your misses. And I think that's also true with investing. You start narrowing the misses. It's a way to get. Charley Ellis made the same argument with tennis. Most tennis players lose because they make all these unforced errors other than the pros.
Most of us would be better off being less bad rather than trying to be more good, if that makes any sense. Absolutely. You can shave a lot of strokes doing that. Yeah. Final two questions. What sort of advice would you give to a recent college grad interested in a career in either investing or value or what have you?
Choose your dad. Well, that certainly helps. I love what your father said to you in terms of create future optionality by studying and doing well in school. I've never quite heard it phrased that way, but that really sums up why do I have to study algebra? Because you're just creating optionality. Investing is about optionality and creating more options for yourself down the road.
And so anytime you can invest in yourself and create additional options is a good thing to do. Yeah, to say the very least. And our final question, what do you know about the world of investing valuations, portfolio management today that would have been useful when you were first getting started 20 years ago or so?
Well, you know, we were talking about books earlier. I personally think that the best book on personal finance is The Psychology of Money by Morgan Housel So if you haven't read that anyone that gets a bank account should be required to read that and just internalize the concepts. I know if you've been in the industry, while not all of its new, but it's a lot of it's a really good reminder on how you should behave to create wealth over the long term for yourself.
Absolutely. Bill, thank you for coming in and for being so generous with your time. We have been speaking with Bill Miller, the fourth. He is the chief investment officer and portfolio manager at Miller Value Funds. If you enjoyed this conversation, well, check out any of the 600 we've done over the past 12 years.
You can find those wherever you find your favorite podcasts iTunes, Spotify, Bloomberg, YouTube. I would be remiss if I didn't thank the crack team that helps put these conversations together each week. Alexis Noriega is my video producer. Shawn Rousseau is my researcher and Luke is my producer. I'm Barry Ritholtz. You've been listening to Masters in Business on Bloomberg Radio.
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