Legg Mason Goes From Bad to Worse

If Bill Miller was a golfer, he would not be able to sink a 6-inch putt. The former legend of Legg Mason (LM-NYSE) took it on the chin again yesterday, with his positions in Yahoo! (YHOO-NASDAQ) and Countrywide Financial (CFC-NYSE) leading the way down. But he has more than a case of the yips; with performance numbers that would get any mutual fund managers in America fired, and Miller finds has found himself in pretty much every shitshow the big cap world has to offer.

He is also very puzzled, but that is not stopping him from offering M&A advice:

``I'm more puzzled by Microsoft's not going up to $37 than Yahoo's wanting to walk away,'' Miller said yesterday in an interview. Legg Mason held 83.8 million Yahoo shares as of December, or 6.3 percent of the total, Bloomberg data show.....``If they want to be a viable competitor, I would expect them to come back,'' said Miller, 58, whose 15-year record of beating the Standard & Poor's 500 Index ended in 2006. ``Microsoft needs Yahoo much more than Yahoo needs Microsoft.'' Bloomberg

And while Miller is sporting numbers that make him look stupid, chances are he will keep his job for the time being, despite the $17 billion in equity outflows the firm witnessed in the first quarter:

Assets under management fell 4.8 percent in the quarter to $950.1 billion as investors withdrew $19.2 billion and market losses reduced assets by $28.5 billion. Equity outflows were $17 billion while bond funds lost $7 billion. Investors put $5 billion into money funds.

Analysts were left scratching their head over the outflows:

``The biggest surprise was how big the outflows were in the equity products,’’ Roger Smith, an analyst at Fox-Pitt Kelton Cochran Caronia Waller in New York, said in an interview. ``Their operating income was much worse than what we were’’ expecting.

Cleary the Fox-Pitt analyst did not have money in Value Trust; if so he would see firsthand how bad Miller has been. The outflows should be no surprise, and will continue long after the performance turns, assuming it does..

The recent departure of Brian Posner from Legg’s Clearbridge arm also stands out; he was a poor choice to run the division in the first place. Who hired him?

Bruce Sherman at Legg’s Private Capital Management has been a disaster; thank god for Chuck Royce and his talented crew. They would seem to be the only ones at the firm that know how to run money.

Of course, the issues in Legg’s money market funds are icing on the cake:

Legg Mason has set aside almost $2 billion since November to prop up three money funds against losses on subprime-backed debt issued by structured investment vehicles, or SIVs.

Legg is going to raise $1 billion in equity units; hopefully the activist investors buying the stock recently have signed off on the capital raise.

It is getting ugly down in Baltimore, and if Countrywide’s takeover price is renegotiated, Miller’s might want to hide from his Value Trust shareholders. He has been buying the stock all the way down, and is looking less like legend and more like a kook with every passing trading day.

Bill Miller Says Microsoft Will Come Back to Yahoo
Bloomberg

Legg Mason Posts Loss on Costs to Protect Money Funds
Bloomberg
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The content contained in this blog represents the opinions of 1440 Wall Street. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author. No Position

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