Once again, Barton Biggs, co-founder of Traxis Partners, has changed his viewpoint on the economy. In an interview with Bloomberg yesterday, he has become bullish, reversing his bearish stance earlier this month. His timing has been pretty good.
A few weeks back, I wrote a piece entitled Biggs vs. Paulson vs. Krugman: The Battle of the Best comparing several respected finance gurus, one of which was Barton Biggs, who stated that he was short term bearish on the economy and was selling a significant chunk of his technology positions. Biggs did not want exposure to the volatile markets, fearful of the heightening deficit, and went to cash. Only a few days prior to this statement, he stated he was going to stick with his positions, and exploit any bargains that screen in his radar.
At the end of May, I wrote a piece entitled Barton Biggs of Traxis Sees Bounce Back in which the hedge fund legend was short term bullish. During this course of time, the markets were extremely oversold and Biggs felt that the markets were ready to turn green.
I’ve been following Barton Biggs for a while, he’s got a pretty good track record. In 2009, his timing was nearly impeccable, his fund was up about 38% after taking advantage of cheap stocks and anticipating a rally. In the beginning of July, he reduced his exposure as the markets became extremely volatile. We are currently in a bullish tape, and Biggs has identified a number of opportunities.
Biggs believes that positive macroeconomic data points are pointing to bullish growth opportunities for the United States and forecasts a positive turn of events. With many of the large companies reporting positive earnings, and the S&P rallying over 8% this month, he believes that the big name companies will benefit significantly from the inflection, including Proctor & Gamble (NYSE:PG), Cisco (NASDAQ:CSCO), Caterpillar (NYSE:CAT), and Microsoft (NASDAQ:MSFT).
Of course no one knows for sure whether Biggs is right, but recent data and earnings reports are pointing to a more optimistic outlook. We do however, need to keep in mind that global risk is still high, and there are many challenges ahead of us which may not be resolved until 2011, or even 2012. Being extremely bullish in an extremely low interest rate environment may cause inflationary pressures faster than we think.
It’s always good news to hear influential market figures optimistic on the economy, but we should always keep in mind the potential bearish scenario. Yes, Biggs has a near perfect scorecard when it comes to predicting the markets, but he’s still human and prone to being wrong. This is a very important week for economic data such as Consumer Confidence, Job Claims, and GDP numbers.
Biggs is certainly optimistic but Robin Griffiths, technical strategist at Cazenove Capital, feels the opposite. He expects the current rally to only last a few days and expects the S&P 500 to hit 940. He advocates taking advantage of the current equities rally to take profits and stick to the bond market. Obviously both cannot be right, but they do present compelling arguments for their viewpoints.