Legendary fund manager Bill Miller can still draw a crowd, even after a couple of disappointing years.

The manager of Legg Mason's ( LM) ( LMVTX) Value Trust (LMVTX) fund, who beat the S&P 500 for 15 years in a row until his streak ended in 2006, spoke to the press Tuesday about his concerns that the mortgage crisis could push the U.S. economy into recession and his views that, in the long term, many financial, consumer and homebuilder stocks are still good investments.

Value Trust is well off the S&P's performance this year, too. But to underscore how exceptional that 15-year run is, the funds with the longest active streaks beating the S&P 500 are at only eight years .

Miller's exceptional long-term performance means, among other things, that a lot of market watchers pay attention to what he says.

A View of the Credit Markets

The longer the credit markets stay disrupted, the greater the global risks, Miller observes, and he says that if the Fed and other central banks get really aggressive, they could probably "clear it up really quickly," but they're trying to make sure they don't create inflation problems down the road.

"Housing we don't care about" so much, he says, noting that housing is a small part of the overall economy, but "we do care about consumption and credit." For things to return to normal, "you first have to have a market for triple-A-rated mortgage-backed securities," he says. "No one's originating those loans."

Financials Harking Back

Miller sees the current economic situation as very similar to that of 1990. He notes that financial stocks are trading below their 1990 value, and that year also saw a bottom in the housing market by some measures.

"Things won't come back the same way" they were before the credit-market crisis, he says. He says the ultimate measure for the financial stocks will be "what these guys can earn on a sustainable basis."

And in the credit markets, "there's no reason to own Treasuries when U.S. financials have such high yields."

"I think you're going to see mergers in finance" once things stabilize, Miller says. He mentions the European banks such as Santander: "Why wouldn't they come in and buy" a U.S. financial name, especially "with the dollar so depressed?"

How Citigroup Can Regroup

Citigroup ( C) "is a hugely valuable asset," Miller says of the banking behemoth that has come under such fire for poor performance lately. As it searches for a new CEO, Miller says he would "want somebody to run Citi the way Mark Hurd ran Hewlett," because he feels Hurd's attitude was to try to simplify his company's too-complex processes.

He doesn't necessarily want someone to come in and overhaul Citi, even though it has been hit by criticism about being too sprawling.

Citi accounted for 2.5% of Value Trust's holdings as of Sept. 30, according to information on Legg Mason's Web site.

Miller also cites Freddie Mac ( FRE) as a temporary victim of the crisis, noting that the mortgage finance company took huge mark-to-market losses when the credit markets dried up over the summer, forcing it to write down the value of some of its assets. These assets are now valued so cheaply that Miller believes Freddie could get a boost when credit markets return to normal.

"In a year or so, Freddie will work all that stuff back again" higher, he says, once buyers return to the market.

Building Up Homebuilders

"I'm pretty confident about adding the homebuilders," Miller says, because he sees housing as central to the U.S. social structure in that most people want to own houses. And unlike an area such as structured credit, where it's tough to determine what the size of the market should be, people have some idea of the size of the housing market.

He believes the markets have become extremely emotional, citing homebuilder Standard Pacific's ( SPR) sale of bonds on Oct. 31 -- after the credit crunch -- at par, and the fact that those bonds were trading last week at 38 cents on the dollar.

He notes that Pulte Homes ( PHM) and others are "all generating a ton of cash." Also, "they're finally going to an asset-light strategy," he says, citing Lennar's ( LEN) sale of land to a venture it created with a Morgan Stanley ( MS) unit.

Pulte accounted for 0.76% of Value Trust's holdings as of Sept. 30.

The Next Market Leadership

The leadership in the market is going to shift, Miller predicts, saying he is betting on the places where there's fear in the market. He explains that financial and consumer stocks have taken a beating, and stocks such as J.C. Penney ( JCP) and Sears Holdings ( SHLD) seem cheap.

Sears accounted for 3.18% of Value Trust's holdings as of Sept. 30.

"U.S. megacap in the best risk/reward trade-off in the market, with the dollar cheaper," he says.