October 20, 2015

Bill Miller vs Doug Kass

T. Rowe Price's Brian Rogers and former Legg Mason executive Bill Miller -- whom I call "The Sunshine Boys" because it seems like they never met a market that they didn't like -- were on CNBC's Squawk Box this morning.

I debated Bill back in 2007 on the subject of the mortgage market's government-sponsored enterprises (Fannie Mae and Freddie Mac). He owned tons of housing-related shares and I was short (large). The rest is history.

This morning, Miller and Rogers were -- not surprisingly -- huge bulls. I just don't understand how one can be so self-confident given that there are so many possible economic, profit and market outcomes (many of them adverse).

The chasm between the real economy and financial-asset prices has never been so wide. Don't earnings per share have to catch up to valuations? The consensus 2015 EPS for the S&P 500 a year ago was $135 a share, but Goldman Sachs is now estimating $110 a share. 

Why should we be comfortable with the 2016 consensus of 10% growth if Wall Street's 2015 projections were so far off of the mark? How can you be confident when S&P 500 earnings estimates have dropped so steeply over the past year?