No recovery till carnage of the RE slaughter is hosed into the gutter. Despite the stock market's advance since mid March and a lot of chatter about an economic rebound, there will in fact be no sustainable U.S. capital-market recovery until battered residential and commercial real-estate holdings are written down to realistic values and sold to banks, hedge funds and insurance companies -- a process that will result in the bankruptcy of hundreds of already technically insolvent financial institutions. So says senior energy-industry executive and institutional investor Karl Miller, who yesterday issued a warning through his advisors to the effect that "U.S. equity-market valuations are overdone and the U.S. energy industry is at major risk."

Miller, formerly chairman and CEO of the New York-based energy-investment manager MMC Energy, is on medical leave until 2010.

Scathing

The "recovery" as it's shaping up -- one based on negative net worth, wholesale U.S.-government support for retail and institutional marketplaces, and "a ludicrous renewable-energy plan and an unrealistic and unachievable healthcare proposal" -- is a no-starter, in Miller's opinion.

Though the major banks, hedge funds, and private equity funds -- which Millers views as insolvent on a majority of their asset-based holdings -- need a rising equity market to float their portfolios, Miller says retail investors should steer clear of equity and debt markets for now.

"Retail investors should not be lured into purchasing equity or fixed-income instruments until we essentially bankrupt the U.S. banking system and hit the reboot button, which will have the effect of flushing out the illiquid hedge and private-equity funds [that] are hanging on by a thread," Miller warns.

"Sell the financial-equity investments and get to the sidelines quickly, as the carnage is coming and is not for the faint of heart," adds Miller. "It is best left to true distressed asset buyers and operators who know how to clean up what has become the largest financial and asset disaster in U.S. history.

Miller also reiterates his personal "sell" recommendation on renewable-energy companies on the grounds that neither the U.S. financial system nor the country's physical infrastructure is in shape to support them.

"The U.S. renewable-energy industry is on its rear end; one need only ask [U.S. energy financier] T. Boone Pickens, who spent millions on marketing a renewable energy plan only to fail dramatically," says Miller. "If anyone wants to purchase distressed wind turbines, Mr. Pickens has hundreds of turbines with nowhere to go."

Neither Pickens, who is chairman of Dallas-based BP Capital, nor his publicist responded to requests for comment on Miller's statement. -FWR

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