Barton Biggs, the long-time Morgan Stanley global strategerist now doing a hedge fund manager impersonation, hit Fortune this week with a soft-core piece posing as “the enlightened...opinions of aged participant about the unknown.” Without stopping to debate the highly arguable characterization of Biggs as a ‘Hedge fund star,’ or even the value of anybody’s opinions about “the unknown,” let’s move along to the underlying thesis: “Fears are overblown.”
Everyone’s worried that hedge fund investors will pull their money out en masse and ignite another market selloff. That's not how it looks to one insider.
So let’s review some of Bigg’s notable early-rather-than-wrong calls of recent years.
July 2001
Barton M. Biggs believes “hedge-fund mania now grips the U.S. and Europe.” It is “rapidly assuming all the classic characteristics of a bubble,” contended the chief global strategist and chairman of Morgan Stanley Investment Management Inc, New York, in a Global Strategy report to clients.
Two years later, and with the alleged “hedge fund bubble” having only inflated in the wake of the 2002-2002 bear market, Biggs established Traxis Partners.
August 2004
Hedge funds started a year ago by a leading investment strategist, Barton M. Biggs, have been stung by losses this year, partly because of a bearish bet on the price of oil at a time when the commodity’s prices are setting records...Yesterday, crude oil for September delivery settled at a record $48.70 a barrel on the New York Mercantile Exchange. Futures prices have climbed more than $10 a barrel since the end of June.
In his letter to investors, Mr. Biggs said he thought the price of oil should be closer to $30 to $34 a barrel. So convinced is Mr. Biggs of his investment thesis that he increased the size of his bet in July, even as prices were rising. “When the price of an investment goes against us, unless the fundamentals have changed, our inclination is to buy more,” he said in the letter.
May 2008
Well, not Biggs, but Cyril Moulle-Berteaux, described as “managing partner of Traxis Partners LP,” cooked up some housing recovery hash for The Wall Street Journal’s op-ed page featuring these among other gems:
Inventories will drop even faster to 400,000 – or seven months of supply – by the end of 2008. This shift in inventories will have a significant impact on prices, although house prices won't stop falling entirely until inventories reach five months of supply sometime in 2009. A five-month supply has historically signaled tightness in the housing market...
...We are of course experiencing a serious housing bust, with serious economic consequences that are still unfolding. The odds are that the reverberations will lead to subtrend growth for a couple of years. Nonetheless, housing led us into this credit crisis and this recession. It is likely to lead us out. And that process is underway, right now.
More disturbing yet: NakedShorts agrees with Biggs’ tenet that the worst of the hedge fund selling is probably done, and would further aver that reports of its contribution to the recent market declines have mostly been at least somewhat overblown.
But that bit about “The bottom of a bear market by definition has to be the point of maximum bearishness, and I think we’re there.” Not while Bart & The Bottom Callers are still flapping their gums.
