Bill Miller is an example of "why Value Investors shouldn't work for Investment Companies"

By definition, value investors buy assets for less than they are worth, and sell when they can get paid more than their assets are worth.

This process causes value investors to buy early and sell early - just because an asset is undervalued doesn't mean it can't become more undervalued and when it's overvalued, it can become more overvalued.

The above is made more significant in rising markets as value investors typically under-perform benchmarks in rising markets but outperform in declining markets. The longer holding periods of value investors makes up for temporary under-performances - making the long term performance of value investors generally better than average.

At the end of May, I posted some reasons why it will be tough for value investors to stay true to their discipline. The current trend is for investors, the media and most importantly INVESTMENT COMPANIES to evaluate performance on a quarterly basis, and on occasion, this causes investors to move money out of under-performing value funds.

There are many different value investing styles - all based on the premise of paying less (price) than what the asset is worth (value).

Bill Miller uses growth - companies he "knows" will grow their earnings sufficiently to make their current price a bargain (this is an approach of a minority of traditional "value" investors because they would say it's too hard to forecast growth in earnings even a few years into the future).

So, it’s my premise that VALUE INVESTORS CAN’T WORK FOR INVESTMENT COMPANIES whose only interest is the return on their capital (obtained by investor fees) not their investors' capital (return on investing).

Bill Miller’s current under-performance has to be causing outflows that are hurting Legg Mason’s fees and I’m sure he is bending to the pressure. They’d rather he match benchmarks all the time than under-perform even in the short term.

I don’t often predict the future (it’s “unknowable”) but I’d say it’s probable Bill will leave Legg Mason at the conclusion of his current contract.