For a 15-year period, from 1991-2005, Bill Miller, portfolio manager of the Legg Mason Value Trust mutual fund, beat the S&P 500 every single year. For the last few years of his streak, Miller was the toast of the investment world as he was the only portfolio manager, whose record was publicly available, to beat the S&P every year for anywhere close to that length of time. He appeared on the cover of countless business magazines, his fund took in billions of dollars from new investors and all the while outsider obsession with his streak grew.
Miller, by all accounts however, remained relatively nonplussed by all the attention; his most common remark on the streak was that it was simply “an accident of the calendar.”
What Miller meant was that if the calendar year ended on any month other than December, his streak would have ended years ago. In other words, looking at 12-month returns of his fund vs. the S&P from January to January or May to May and so on, Miller had nowhere close to a 15-year streak. He also recognized that he didn’t try any harder to pick good stocks at the end of the year than at any other point of the year, acknowledging the degree of randomness inherent in the stock market. He didn't claim to be a “clutch investor.”
Bill Miller knew something about selective endpoints.
I write this as an introduction to the Philadelphia Phillies playoff series because based on my interaction with the fans from my hometown of West Chester, PA, they went into a mini-panic towards the end of September when the Phillies lost eight games in a row. Phillies fans need to relax and take a deep breath. The Phillies won 102 games this year, placing them in the top 2% of all regular season teams since 2000. (They are just the 5th team, out of 300, in the last ten years to win at least 102 games.)
Here’s another way to look at the Phillies losing streak which occurred after they’d not only secured a playoff berth but after they’d locked up home field advantage for the duration of the post season. Aaron Schatz, the creator of the advanced statistical football website footballoutsiders.com notes that NFL teams that go 4-0 in the preseason over the last couple of decades average 7.9 regular season wins and teams that went 0-4 averaged 8.05 wins. (Of course all teams average 8 wins.) His point: Never evaluate a team’s performance on games that are meaningless.
It’s not the 8 game losing streak by a team that won 102 games that was the most notable part of the Phillies 2010 season. No, the amazing part of their year was that managed to maintain the pace of a 100-win team for the first two months of the season with Wilson Valdez, Brian Schneider, and Ben Francisco in the line-up. For the second year in a row, the starting line-up that the Phillies bring to the playoffs is markedly better than the one that got them there.
Last year, the Phillies made it to the playoffs despite the fact that Jamie Moyer and Kyle Kendrick started 51 of the team’s season games. Read that sentence again Phillies fans: Despite Kendrick and Moyer starting nearly 1/3 of their regular season games in 2010, the Phillies made the playoffs. By the time the playoffs started however, the Phillies kept them as far away from the field as I’d keep Mike "The Situation" Sorrentino(*) from my daughters. This year it’s much of the same, only on offense. By a comfortable margin, the eight men that take the field tonight behind Roy Halladay appeared in less regular season games this year for the Phillies than the starters for any other team in the playoffs. That’s neither good nor bad on the surface. In the Phillies case though, it bodes well for their performance because the players that are taking the field – including Chase Utley, Hunter Pence, Carlos Ruiz, and Shane Victorino – are far better players than the ones that replaced them. Replaced them, it bears repeating, on the way to winning 102 games. (*) That's three newsletters and two "The Situation" references. I'm batting .667 in a Jersey Shore fantasy league.
To be sure, the Phillies did themselves no favors sweeping the Braves out of the playoffs, in the process securing themselves a best-of-five match-up with the St. Louis Cardinals. No team should relish playing the highest scoring team in its league in a short series. The Phillies though have the anecdote in the form of unfailingly dominant starting pitchers who are a threat to go deep into any ball game. One of the strengths of the Cardinals line-up is they walk a lot – they tied for 2ndin the National League in taking free passes, behind Colorado. The Phillies however issued by far the fewest walks in baseball, a full 10% less than the next closest staff in the National League, the Milwaukee Brewers. Even more daunting for St. Louis is that Roy Halladay and Cliff Lee were 1 and 2 in the National League for lowest walk rate (among pitchers with a minimum of 100 innings pitched). Cole Hamels was 6th. That’s an area to watch in all the games; if the Cardinals getting more than two walks from the Phillies starting pitchers, they’re asserting their strength and rattling the Phillies pitchers a bit.
On a team featuring the incredible and incredibly consistent Albert Pujols, Matt Holliday, and Lance Berkman you’d expect the Cardinals to pose a considerable home run threat. That’s actually not the case as St. Louis finished just 13th in baseball (6th in the NL) in home runs hit. They do hit a lot of doubles however (6th in baseball, 3rd in the NL) and that could become a problem for Phillies pitchers, none of whom are extreme ground ball pitchers. In fact, only Vance Worely among all Phillies starters has a ground ball rate better than the league average. If St. Louis’ tendency to hit doubles turn into home runs vs. the Phillies fly ball staff, then they’ve maximized their chance to win and the Phillies are in trouble.
On offense the Phillies, as their fans know, are far removed from the team of mashers that carried them to division titles in 2007-2009, even if many of the players are the same. They are league average in just about every way measurable. The Cardinals staff however, ex-Chris Carpenter who can only start one game, isn’t much above league average itself.
The Phillies are going to live and die with their starting pitching. The Cardinals will need to work counts, get walks and then go deep to knock off the Phillies. It’s not impossible but it’s a tough task. The extreme odds for both Game 1 (-220 for the Phillies, or an implied win expectancy of 68%) and the series (a whopping -300 or 75%) are the highest of any playoff match-up. That price is about right -- too high to make Philadelphia a good investment, but reflective of the fact the Phillies are the favorites to emerge from the National League playoffs as the pennant winner. The call here is the Phillies in 4.
As far as calling the next two rounds, right up until they started messing with their pitching staff I thought the Brewers were the right call, considering the stated odds, to meet the Rangers in the World Series. I no longer think that, given the tougher path they have dug for themselves in round one. So the call here is for Philadelphia to meet Texas in the World Series with the Rangers winning in 5.