David Dreman: It's Time to Buy

There's an endless choice of quality businesses trading at or near liquidation prices.

We have plunged into the worst financial crisis since the 1930s. The leadership of Treasury Secretary Henry Paulson and Federal Reserve Chief Ben S. Bernanke in fighting it has been sluggish and inconsistent. Although we've just elected a new President and Congress, they will take time to develop policies to stimulate the economy and promote liquidity. What's an investor to do?

First, do not flee the market by selling your quality stocks. Yes, it's the worst bear market since 2000--02, and stocks are trading at valuations not seen in decades, but equities will come back. Second, because credit is subject to unpredictable crunches and it's impossible to guess when this bear will end, don't buy on margin. Third, don't hold shares of companies that will need cash to expand or refinance. There is a good chance they won't be able to borrow.

Fourth, keep your bond maturities very short. When governments face economic crisis, they print money. The magnitude of this crisis suggests that the printing presses will be running around the clock for some time. That means we'll see serious inflation when we emerge from the recession. Long-term bond prices could then drop even more than equities already have dropped. Stocks, by contrast, hold their own over long stretches of inflation.

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Robert Rodriguez: We began to commit capital beginning on October 8

In response to collapsing share prices, we began
to commit capital beginning on October 8 and since then
we have spent approximately 22.5% of the Fund’s
September 30 liquidity or 8.6% of assets. This is the
largest amount of capital we have deployed at any point in
the last five years. Why did we begin buying on
October 8? On October 7, Treasury Secretary Paulson for
the first time commented that the U.S. Treasury would
possibly have to deploy CAPITAL in the banking system.
In our minds, this showed that the Federal Reserve and the
U.S. Treasury were finally beginning to understand that
the core issue of this crisis is CAPITAL deficiency and
not LIQUIDITY—more on this later in the credit crisis
commentary section. We began buying because the stocks
we selected appeared to be discounting a very severe
economic and stock market outlook with their depressed
valuations. Initially, our purchases will likely show losses
since we are buying into stock price weakness.
Furthermore, our value screen of the nearly 10,000
companies in the Compustat database showed an
explosion in the number of qualifying companies that
rose to 447, the highest in over twenty years. In June of
2007, this number was 33—a record low number of
qualifiers. Our conviction was enhanced by this positive
outcome that this was an appropriate time to begin
spending some of the Fund’s long-held liquidity, plus the
moths were getting pretty grumpy and tired from being
cooped up in our coin purse for these past five years.
They were yearning to fly free.

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Emerging market guru Mark Mobius punts Brazil

Brazil's financial markets have fallen by 50pc since its all-time high in May. The local currency, the real BRBY, has shed a third of its value since touching a nine-year high in early August and this week a Brazilian trader shot himself on the trading floor at Sao Paulo's Bovespa stock exchange.

Mark Mobius, the emerging market specialist from Templeton Asset Management reckons that Brazil offers a great opportunity for investors with nerve. We asked him why.

What makes Latin America so attractive to investors?
The region's main attraction is its huge consumer market with pent-up demand for goods and services, as well as excellent companies that are at the same time under- leveraged and inexpensive. On top of all that, its natural resources are among the largest in the world.

How resilient can the region be in the context of a global slowdown and which markets are well-armed to resist a slowdown in the global economy?
During the boom in the past five years, Latin American countries have accumulated substantial reserves. Brazil, for example has over US$200 billion in foreign reserves and the government has no foreign net debt. Overall, our main markets, Brazil, Mexico,

Chile, Peru and Panama, have shown stable political environments, responsible fiscal discipline, commitment to a floating exchange rate and honour of contracts in place. All these support the region's strength in times of uncertainty.

In addition to natural resource and agriculture producers, what are the other key drivers of growth in Latin America?

Although the region is the world's largest (and lowest cost producer) of many commodities, the development of the local domestic consumer markets is another important driver. Take Brazil for example, with 190 million people and Mexico with 100 million. Bank loan penetration is still very low in both countries (38% in Brazil and 18% in Mexico) even in comparison to some emerging markets. Thus, this not only reduces the risk of bad debt, it is also a barometer of how under penetrated the countries are in terms of goods and services. Companies have thus been following conservative lending and leveraging policies.

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Bill Miller Third Quarter Commentary

Here is the link

The Year of Wall Street's Fallen Idols

Millions of Americans are reeling from investment losses this year.

For many, the financial cost of the red ink is only part of the misery. They're also kicking themselves for the losses.

Maybe you feel you invested too much. Maybe you feel you should have invested in different assets.

This may prove scant consolation, but it is worth noting: The best of the best have done no better. So go easy on yourself.

This has been Wall Street's year of the fallen idols.

Marty Whitman, the legendary septuagenarian who co-manages Third Avenue Value, has seen crises come and go. There are few you could trust more in a panic. But his fund has almost halved this year. Bill Miller, the famous manager at Legg Mason Value, has fallen by nearly 60%. And that's not even the worst of it. Miller's more flexible, go-anywhere fund, Legg Mason Opportunity Trust, is down by two-thirds since the start of the year.

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Bill Ackman on Charlie Rose

Don't Give Up, Buy Carefully

The Wall Street Journal asked six celebrated mutual-fund managers, who have mostly beaten the Standard and Poor's 500-stock index for 10 years, what they are doing to weather the storm and prepare for an eventual rebound.

These managers -- from the growth-oriented Tom Marsico to value maven Wally Weitz -- are mostly sticking with what they know, adding to positions they already own at cheap prices.

"When you've owned a company like Liberty Media for 15 years, and you can talk to management about what's real and what's not, it's a lot easier in a crisis to buy," says Mr. Weitz, whose Weitz Value fund has gained 3.1% a year for the past decade, far outpacing the annualized loss of 0.2% on the S&P 500.

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Legg Mason: Our managers on the markets

The third quarter of 2008 will be remembered as one that forever
altered the landscape of the U.S. financial system — through the
nationalization of Fannie Mae and Freddie Mac, the seizure of AIG
by the federal government, the conversion of Goldman Sachs and
Morgan Stanley into bank holding companies, and the downfalls
of Lehman Brothers, Washington Mutual and Wachovia. All of
these events were consequences of the bursting of the massive
credit bubble in the U.S. banking system and the spillover from the
significant slowdown in housing that escalated last year.

In these uncertain times, we believe that the insights of industry
veterans who have seen the ups and downs of multiple market
cycles can provide valuable perspective, as we seek to understand
the complex issues facing the economy and capital markets. In this
issue of Briefly Speaking, key portfolio managers and investment
strategists of Legg Mason’s affiliated investment managers offer their
perspective on these unprecedented events, views on the markets,
and strategies for managing assets in their specific area of expertise.

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Bruce Greenwald on Value Investing

Bruce Greenwald, who holds the Robert Heilbrunn Professorship of Finance and Asset Management at Columbia Business School, is coeditor of the forthcoming sixth edition of the value investing classic Graham and Dodd's Security Analysis (McGraw Hill).

After watching stocks plummet this year, he's sizing up the opportunities seen through the lens of value greats like Warren Buffett who perceive a rare chance to start buying on the cheap. Excerpts:

What's the current environment like for a value guy?

I'll tell you the one really nice reason to be a value investor: When things like this happen, you cannot help but go nuts at the opportunity. What this looks like is the end of 1974, where good stocks are selling at three times sustainable earnings and stocks that normally wouldn't have sold at less than 20 times earnings are selling at 10 times earnings. These are exciting times. The short-term issue is that in the near term there will be a painful macroeconomic environment and we don't know how long it will last.

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Legg Mason's Mauboussin: Buy Stock Now

• We are in the midst of a collateral-based financial crisis.
• The conditions are getting set for attractive long-term returns in a number of
asset classes, including equities.
• We draw reassurance from Warren Buffett’s recent comments. Buffett rarely
makes unsolicited calls on the market, and tends to be prescient when he
does.

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David Winters: Getting Super Values on Great Companies

David Winters is as bullish as I've ever heard him. At 46, he has been managing money half his life, but he's never seen values like this. "People are selling excellent companies at whatever prices they can get because they're afraid or because they need the cash," he says. "The opportunities are unprecedented for a long-term investor."

Winters is a canny veteran. Schooled for two decades at the Mutual Series funds (now owned by Franklin Templeton), where he started as an analyst under legendary value investor Michael Price and rose to become chief investment officer, Winters left to launch Wintergreen fund (symbol WGRNX) in 2005. The global fund has beaten the MSCI World stock index by a comfortable margin since its inception in October 2005. Although the fund plunged 34% in 2008 through October 31, it was ahead of the index by nearly six percentage points.

Because Winters buys stocks only when they're cheap, his holdings usually have some warts. Not today. "Everything is for sale, so we can shop at Tiffany's instead of some budget store," he says. "There's been almost no place to hide this year; even the highest-quality stocks have gone down."

In analyzing stocks, Winters looks for good businesses selling at favorably cheap prices and run by good managers whose interests are aligned with those of shareholders. "We've been through an extraordinary period that is now handing us these companies on a platter," says Winters.

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