He and his team are trying to determine whether there has been a secular change in the global economy because of pressure from the economic rise of China and India. If so, stocks that look expensive by traditional measures may still be relatively inexpensive, he says.

“I don’t know what the answer is, but we should find it out within very short order because the global economy is clearly slowing,” he says. “Usually that leads to a drop-off in demand for stuff: oil and stuff like that, so those prices should begin to come down.”

Still, broader diversification does not really appeal to him.

“I have never found it a useful policy because what it guarantees is that you will be in the worst sectors of the market as a matter of policy,” he said. “That is why so many managers are justly criticized as closet indexers because they don’t get too far away from the index because they are afraid to be wrong. My view is that being wrong is part of the business. You need to focus on making the best investments you can, instead of trying to smooth things out.”

IN the meantime, Mr. Miller is clear-eyed about some errors in judgment, particularly those that resulted in overexposure to the housing and financial sectors.

For example, Legg Mason began buying Countrywide in 2004, when the stock was in the $20s. “We said: O.K., the Fed is raising interest rates. That is bad for housing,” he recalled. “We studied housing stocks in other countries. We looked at the U.K. experience, the Scandinavian experience, places where governments had raised interest rates. And the answer was that stocks underperformed for about a year and then outperformed.”

What Mr. Miller missed, he acknowledges, was that lending standards had become much more relaxed in the United States than they were in other countries. As for Bear Stearns, he views its demise as a classic run on the bank. While some investors consider Wall Street firms to be inscrutable black boxes, Mr. Miller takes a wider view.

“To a certain extent almost every company is a black box,” he says. “How many people know what is going on inside General Electric? As of March 14, Jeffrey Immelt did not even know what was going on,” he adds, referring to a Webcast in which Mr. Immelt, G.E.’s chief executive, was optimistic about the company’s performance a month before it reported disappointing quarterly earnings.