Barton Biggs

Stories by Barton Biggs

  • The Next Frontier Could Be in Iraq

    It’s not too much of a stretch to suggest that Iraq could be the next Saudi Arabia, the biggest oil producer in the world.
  • Barton Biggs Says Markets Will Rise

    As Spring begins to come to the Northern hemisphere, green shoots are appearing not just in the shrubbery but in sickly economies. I'm not saying that there won't be some cold and rainy days in the months to come, but for the moment, it seems, winter is over. Obviously this is a big deal for real people and for beleaguered stock markets. The prospect of an economic ice age was what terrified investors, and the feeling now, that the world has averted depression, is a big reason equities in many parts of the world are in a sustained rally.As of the end of last week, there had been 40 upticks in key indicators of economic activity around the world. The United States, China and the developing economies are leading the renaissance, which is consistent with past recoveries. Europe and Japan are lagging, although they too are showing a few (albeit still feeble) signs of life. Of course, just as one robin doesn't make a spring, there are a number of key indicators, particularly those...
  • Barton Biggs On Why Markets Will Rally

    A legendary Wall Street bull makes the case for how aggressive government rescue efforts and super-cheap stocks could revive markets, fast.
  • Barton Biggs Turns Bearish

    Throwing money at the problem and propping up greedy banks is like trying to put out a fire by pouring gasoline on it.
  • Hedge Funds Fall Hard And Fast

    The hedge-fund industry in the future will be much smaller and less leveraged, and have considerably lower fees.
  • The Affinity Ponzi Scheme

    It's incredible that Madoff could have sucked so many rich and very sophisticated people into his Ponzi scheme.
  • Don’t Follow The Momentum

    The ECB is talking about raising rates even as the Fed is committed to cutting. Markets don't like the lack of coordination.
  • Global Investor: Don’t Wait To Hit Bottom

    As this is written, the financial panic of 2008 is in full swing. Equity markets around the world are being slaughtered by waves of selling. The most recent debacle is the forced fire sale of Bear Stearns, but we can be sure that tomorrow and the day after tomorrow there will be additional disasters as financial institutions, hedge funds and individuals rush to de-leverage, setting off a vicious cycle.Wise men to whom we should listen respectfully (such as George Soros) are saying this is the end of the 60-year post-World War II supercycle, and the secular abyss looms. However, after living through (and surviving) nine panics over the past 45 years, my intuition is that we are close to the end of this one, and that markets around the world are poised for a rally that could be as violent as the decline. It sounds dramatic, but the Dow Jones industrial average could rise a thousand points. Here are the reasons why:First, stocks around the world are cheap. We employ a variety of...
  • Avoiding The Abyss

    The U.S. stock market has just had its worst January start in history, and other bourses around the world are struggling. Yet by most standards, stocks are undervalued versus inflation and interest rates, and are cheaper than they were in 2002. There are vast amounts of cash on the sidelines, and investor-sentiment measures are very depressed. Meanwhile, the subprime-mortgage disaster continues, and an increasing number of economists are forecasting a recession in the United States this year. Even more frightening, many respected gurus are wringing their hands and warning that the housing and stock-market party bubbles have well and truly burst, and an abyss looms.The case for the abyss is straightforward: the subprime-mortgage disaster has already seriously weakened U.S. and European financial institutions, and plunging home prices in English-speaking countries are increasing the damage. The bears argue that the U.S. economy is now either in or on the verge of a recession, and the...
  • Mind Buffett, Don’t Panic

    A year from now, stocks, the dollar and U.S. inflation will be higher, and oil, gold, the euro and the pound will be lower.
  • How to Beat Inflation

    Alan Greenspan, the former chairman of the federal reserve, in his new book and in the excerpt printed in newsweek, writes that he believes America is on the verge of a gradual rise in inflation to a trend-line rate of 4 to 5 percent or higher. This forecast has received virtually no atten tion in the media barrage that has been focused on "The Maestro," but if he is right, it has immense implications for everyone with some wealth and retirement funds.Greenspan writes that the long period of disinflation that began in the mid-1980s and that generated prosperity and a bull market in stocks and bonds is over. "To day's relative fiscal quiescence masks a pending tsunami. It will hit as a significant proportion of the nation's highly produc tive population retires to become recipients of our federal pay-as-you-go health and re tirement system, rather than contributors to it." Benefit funding for boomers is inade quate, and Greenspan is clearly not opti mistic that a dysfunctional,...
  • Barton Biggs: Why Markets Are So Shaky

    Since mid-July, equity and fixed-income markets across the world have endured sickening declines and startling volatility. Major financial institutions have suffered grievous wounds, and numerous lesser bodies have drifted to the surface belly-up. On Aug. 28, a beautiful, relatively rumorless, late summer day, the Dow Jones Industrial Average abruptly collapsed 280 points,with the volume in falling stocks 10 times that of rising shares. Most of this rout came in the last two hours of trading. The next day there was a massive surge up of 247 points, again concentrated in the final hours. And so it has gone. The number of extreme days in the last six weeks is unprecedented, begging an explanation.First, volatility breeds fear and therefore more volatility. The giant hedge funds and proprietary trading desks are run by people who, like us, are susceptible to fear and greed. Most are not particularly intellectual, analytical or studious. They rely on their intuitions, and their basic...
  • Barton Biggs: Echoing the Crash of '87

    I'm still bullish about stocks, but there is one spooky memory that perches in my mind like the canary in the coal mine. It relates to the U.S. stock market in 1987, and the October crash that shook the world. Then, as now, the American stock market drove the world, and a bust here caused a bust there. Even as I write this, I can't help but think of an old Russian saying, "Ignore the past and you will lose an eye; dwell on the past and you will lose both of them." So keep that in mind as you read on.Still, the historical similarities are eerie. By 1986 and 1987, stock prices had made a strong recovery from the stagflation and the extended, painful bear market of the 1970s to 1982. Both the U.S. bull market and the economy had been rising for almost five years, and were starting to look long in the tooth, while inflation and interest rates had been declining, and price-earnings ratios had been rising.In addition, there was talk of trouble brewing in the American savings-and-loan...
  • Biggs: Russia's Stock Market Slide is All About Rhetoric

    Russian President Vladimir Putin is in the world's doghouse because he does not appreciate sanctimonious lectures or missile batteries on his border. He and President George W. Bush patched things up a bit at the G8 summit last week, but the tension remains. Ironically, we as investors should be grateful. As a result of this alleged increase in political risk, the Russian stock market and its oil stocks in particular have been falling even as both emerging markets and energy equities have climbed. After a week in Russia, I am convinced there is no business reason for this stumble; it's all about the media rhetoric.There is a presidential election in Russia next year, and Putin will stand down. However, he has made it clear he will continue to be the power behind the throne. He is passionately committed to restoring Russia to its former position of pre-eminence as a world power, economically and politically. Putin wants to be the modern reincarnation of Peter the Great. Indeed, I am...
  • Global Investor: Blue Chips Are A Bargain

    It's a very odd thing. The hundred biggest capitalization stocks on the New York Stock Exchange are doing great by any measure, yet they have never been so undervalued. These blue-chip multinationals are household names like Microsoft and Johnson & Johnson, and they are surely the most intensively covered group of stocks in the whole wide investment world.Yet, if you ask me, the supposedly hyperefficient capital markets have this asset class priced way too low. And that presents a big opportunity.Consider the performance of the S&P 100. These companies have had superior returns on equity of 19.9 percent, versus 14.7 percent for the next thousand largest companies. They have stronger balance sheets, higher profit margins and are creating massive amounts of free cash flow--more than they can fruitfully spend on research and investment. They are using this surplus to retire debt, raise their dividends and purchase their own shares. Their dividend yield is roughly 2 percent, and...
  • Global Investor: Why Bears Are Wrong

    It was a good year for world equity markets. most major indexes were up in the mid-double digits, and many emerging markets did even better. Some investors (including yours truly) expect this year to be more of the same. So, why are so many pros so cautious about 2007? Legendary investors such as George Soros, Julian Robertson and Jeremy Grantham are downright bearish. Wall Street strategists David Rosenberg of Merrill Lynch and Stephen Roach of Morgan Stanley are all muttering impending gloom and doom. Hedge funds, supposedly the best and the brightest, have kept their net long positions at very moderate levels and have not chased the current rally.Many of the best economists are no cheerier. Jim Walker, the highly regarded "Austrian school" thinker for CLSA, the Asia-focused brokerage house, looks for growth to slow precipitately in China and America, while much of the rest of the world slips into recession, resulting in substantial earnings disappointments.Treasury bond yields...
  • Global Investor: Handicapping The Hedge Hogs

    Why have a couple of billion-dollar hedge funds suddenly exploded? Is this the beginning of the end for the so-called hedge-fund bubble? I am not unbiased, since I run a hedge fund myself. But for what it's worth, here's what I think. Investors have exalted expectations of hedge funds because of the high fees--typically 1.5 percent of assets and 20 percent of profits.This year the S&P 500 is up 8 percent, while hedge funds are up 7.2 percent (on the HFRI index). Not scintillating. The problem: too many hedge funds are doing the same thing, and market volatility has been low. Volatility is what drives performance because hedge funds can leap in and out of the game, profiting from wild swings in markets. With volatility low, ambitious (or should I say greedy?) funds are trying to perform by leveraging up positions or going into exotic asset classes. There are about 300 hundred-billion-dollar hedge funds, and most trades are so crowded that no matter how athletic you are, it's hard...
  • Behind the Fear In the Markets

    Why are the equity markets so paranoid? They're up one day, down the next, and I suspect that this volatility is attributable not so much to fundamental changes in the economic or business outlook as to hedge-fund sociology.First, the recent history. At the end of October equity markets around the world began to rise. By late April things were getting a little crazy. The pros were putting money into exotic bonds and equities in places like Turkey, Russia and Brazil. Japanese retail investors, who hadn't bought stocks for a decade, subscribed for a billion dollars of a new India Fund. By May 9 risky assets had posted big gains, with small New Era tech stocks and the raunchiest bourses in the emerging markets showing the fattest returns.The next day, out of a clear blue sky, markets from New York to Timbuktu plunged. The emerging markets index plummeted 24 percent, but much worse declines were not uncommon: the leading media company in Turkey fell 70 percent in dollar terms. By late...
  • Global Investor: Barton Biggs

    Hedge funds, like Moby Dick, are mysterious and potentially threatening, but are they the principal cause of the speculation and mad volatility in commodity prices we've seen in recent years? A lot of market watchers seem to think so, but I don't. Instead, my guess is that the culprit is more a case of what might be called "institutional envy" or, more precisely, "endowment envy."During the late 1990s and the three-year bear market that ended in 2003, large, institutional portfolios--which were traditionally invested in stocks and bonds--suffered. They missed the huge gains in venture capital and private equity in the second half of the 1990s, bought into technology and In-ternet stocks just before they crashed, and were criticized for being unimaginative, stodgy and prone to debilitating committee-think.At the same time, two new tribes of heroes were rising in the investment world--hedge funds and college endowments. In the devastation of the bear market, hedge funds prospered. For...