Investor says markets too perilous for retail players

Thomas Coyle

27 August 2009

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 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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