Confessions of a Bull.

madhedgefundtrader's picture

Confessions of a Bull. Barton Biggs, founder of mega hedge fund Traxis Partners, spent an hour outlining his current investment strategy with me. Barton is a man of strong opinions, backed with intensive research, which he communicates with his characteristic gravel voice. I spent the better part of the eighties debating every pebble of the investment landscape with Barton. As I recall, “what to do about Japan?” was the topic of the day, and I was bullish.

Today, Barton can say with “real certainty” that large cap multinational equities are the cheapest they have been in 30 years using sophisticated models that analyze price/sales, price/free cash flow, price/earnings, and a whole host of other metrics. Looking just at price/book ratios, these stocks have been this cheap only three times in the last 120 years.

Big cap technology stocks, like Microsoft (MSFT), Intel (INTC), Cisco (CSCO), and Oracle (ORCL) are at the top of his list. Other multinationals with plenty of emerging market exposure are attractive, such as Caterpillar (CAT). The easy way in here is to simply buy the S&P 100 ETF (OEF). The market is now at a 15-16 multiple, discounting S&P 500 earnings for 2010 at $75/share. A stronger than expected economy will take that figure as high as $90/share, which the market is not expecting at all.

The grizzled old Wall Street Veteran sees the US as half way through an economic recovery, and the main benchmark indexes could surprise to the upside, as they have such heavy big cap weightings. He would avoid domestic companies, such as those in real estate, as the environment for stocks generally is poor. He foresees a “new normal” of a lot of volatility in stocks for the next 4-5 years. Longer term he sees US GDP growth downshifting from the heady 3.8% annual growth rate of the last decade to only 2.5 % in this one. But big cap multinationals should be able to bring in a reliable 5%-6% annual return on top of inflation.

Looking at the world as a whole, Barton thinks Asia is the place to be. A mammoth bubble may be developing in China (FXI), but it is at least 3-5 years off, and there will be plenty of money to be made until then. India (PIN) is another big pick because it is ten years behind China, and has yet to experience its big growth spurt. South Korea (EWY), Thailand (THD), Taiwan (EWT), H-shares in Hong Kong (EWH), and Turkey (TUR) are also lining up in Barton’s sites. Looking at a 1%-1.5% growth rate, things look grim for Europe, with the possible exceptions of Poland (PLND) and Russia (RSX). Traxis is short Brazil (EWZ), because it has already had a great run, and because the country still faces some severe social problems.

Commodities had their run last year, and won’t do much from here, but they aren’t going to crash either. He sees oil (USO) grinding up because the cost of new sources is becoming astronomically high. Barton avoids gold because it has no yield or PE, and would rather not be associated with the crazies that inhabit that space. Bonds (TBF) will be deflation driven for the next year, but are definitely not for your “Rip Van Winkle” investor, as they represent poor value for money. Real estate is dead money. To hear my interview with Barton at length on Hedge Fund Radio, please click at

For more iconoclastic and out of consensus analysis, you can always visit me at , where the conventional wisdom is mercilessly flailed and tortured daily.

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SmalleyD's picture

Interesting. Barton Biggs was the guy who adviced his big clients in mid-2008 of the "possibility of a breakdown of the civilized infrastructure." Here's another guy who tells the morts one thing and the well connected another.

Anonymous's picture

DOW 36,000!!1!1!

Anonymous's picture

Isn't this the guy who said last year to buy a rural retreat to sit out TEOTWAWKI?

I'll bet he's shorting half-built cabins as we speak.

Anonymous's picture

market up today on very low volume. rest of world sells, so of course we go up. market oversold to the extnet i haven't seen in months by indicators.

yes market may go up, but if so a function of the also trades borrowing at zero percent from the fed because all mutual fund investors are fully in.

GS is short Gold's picture

I'd be more inclined to give Biggs credibility if he could overcome his stuttering problem.

Anonymous's picture

This was a joke, right?

Still, Dow back at 10,600 today so maybe it's not...


abemko's picture

If I want "diversity" of opinion like madhedgefundtrader, I'll just watch that dip-shit Cramer. Please, please don't degrade the quality of Zerohedge. In his last insightful "all is well, the economy is booming and invest your money with me" nonsense, the guy could not even cut and paste the correct unemployment data from the recent BLS report. Now we have "real certainty" and "sophisticated models". What is this Dora the Explorer and Blues Clues for investors?

RockyRacoon's picture

...using sophisticated models that analyze price/sales, price/free cash flow, price/earnings, and a whole host of other metrics.


Yeah, those "models" have worked so well for us so far, eh?

Models supposedly remove human bias from the equations.... but the models are built by humans with bias.

doublethink's picture


The grizzled old Wall Street Veteran sees the US as half way through an economic recovery, and the main benchmark indexes could surprise to the upside....


The old man never looked at charts?




Anonymous's picture

Am Indian and follow Indian news and markets - inflation out there is getting out of control is what I see. Artificially low rates are causing rampant speculation in prices. I dont see an easy upwards trajectory for growth. Besides Indian markets are NOT correlated with the economy since 1982 - thats whe the 401k started here and Americans went berserk !!

Anonymous's picture

do people pay this asshole for advice?

RSDallas's picture

I listened to this yesterday and thought it was a good interview.  I don't know much about Barton but I have come to the following conclusion based on what I have learned about his (and many other analyst's) past predictions .  Nobody really knows  what is going to happen or for how long or when things will change. 

I do think he's correct (I didn't call it before it happened) about the multi nationals.  The multinationals have definitely capitalized on stunning growth from the Asian growth story.  I never would have thought that any developing country could have provided the fuel to the US stock market.

I don't think he has studied the factors that created the growth in the Asian markets, or maybe he has and he just is not commenting on it and is riding out the wave!  The United States and Europe, "have been" (past tense) the drivers of the world economic growth.  Well this has ground to an almost complete stop.  You can especially see this in Europe as well as Japan for the last 20 years. Why?  Because of Debt, Debt, Debt.  The US and the European Countries and Japan will not see sustained growth until the debt is allowed to clear.  Note the word "sustained".  It doesn't mean the US market won't experience some "strong" rallies, but they won't build on each other, they will only melt away and then re-appear.  Please refer to a 20 year graph of the Japanese markets. 

The emerging markets are a different story.  Their consumer base has little to no debt to speak of and a lot of savings (relative to earnings).  Now, with this in mind, my concern has been that he emerging markets have been on a tear primarily due to the MASSIVE stimulus efforts by their respective governments.  This can not and will not last and my guess is that we are closer to experiencing what will happen when the Asian governments quit spending than we are of seeing higher highs in our stock market.  Someone has to buy something for growth to occur.  Well, who really is buying anything right now? The WORLDS governments. 

I would be more optimistic if the US and Europe were truly deleveraging and allowing their assets to be priced at today's true market value.  But we are not!  No one is talking about the fact that if our banks were to mark their real estate (residential & commercial) to today's market that they would flat ass be broke, insolvent, bankrupt.  In other words everyone's paper money (notes located at our banking institutions throughout the United States) would disappear, poof, vanish in thin air if the banks were marking their assets to today's market prices.  THIS IS A SCARY FACT! For the life of me, I don't know why this is not getting more press?

The bottom line is that the US and the European Countries have kicked the can so far and so long that we are now finding ourselves in a situation where the creditor is beginning to voice their concern about the level of debt in these economies.  Remember, there is ALWAYS "talk" before their is action.  Kinda like there is often a fire where there is smoke and the WORLD is definitely TALKING!  Will we listen?  I don't know, but I do know that we will eventually be FORCED to listen.  This is when thing will become unconscionable!

jc125d's picture


 (hy??'br?s) n. Overbearing pride or presumption; arrogance

Anonymous's picture

hmmm, hubris? sounds like madhedgefundtrader....

DoctoRx's picture

Biggs hates gold in part because "crazies" own gold.  Yes, crazies such as every major national government, the IMF, John Paulson, George Soros, David Einhorn, Bill Fleckenstein.  What a collection of nutcases!

sawyer's picture
From Wikipedia, the free encyclopedia            

Barton M. Biggs runs Traxis Partners, a multi-billion dollar hedge fund based in New York City. He formerly held the title of "chief global strategist" for Morgan Stanley and was with that firm for 30 years.

Biggs has appeared numerous times on CNBC and was a member of the Barron's Roundtable.

His influence could be seen when, in 1996, some traders were surprised that India funds suddenly became popular. "Barton Biggs is there, having a look around," one trader said. "Do you need to know more?"[1]

Biggs was named by Institutional Investor magazine to its "All-America Research Team" 10 times, and he was voted the top global strategist and first in global asset allocation from 1996 to 2000 by the magazine's "Investor Global Research Team" poll.[2]

"He's the ultimate big-picture man," according to a piece at the Web site of Smart Money magazine. "As the global investment strategist for Morgan Stanley, Barton Biggs is without question the premier prognosticator on the international scene and a mover of markets from Argentina to Hong Kong. It wouldn't be a stretch to say Biggs wrote the book on emerging-market investing."[1]

Correct Calls
  • He called the technology bubble and recession that followed a full year before it burst. (International Herald Tribune, 10/3/1998)
[edit] Mistakes
  • Biggs badly missed the true nature of the economy's problems leading to the 2008-9 recession:

Barton Biggs's Traxis Fund LP tumbled 10 percent in the first half of the year, hurt by bets that U.S. shares would appreciate. As recently as May, Biggs, 75, said the U.S. economy will grow in the second half of 2008, the Standard & Poor's 500 Index may climb to a record and commodity prices will retreat as much as 30 percent. [3]

  • He said he was bullish on Mexico shortly before the peso crashed in 1994.[1
  • Calling the tech bubble a YEAR before is perceived as a positive!!??
  • Completely missed the financial crisis now there is someone you can trust with your money...

  • Anonymous's picture

    Funny, I thought the were cheaper a year ago. thanks for pointing that out to me. now cheaper than s&P at 660 with dollar lower.

    You must be paying for you time on this site, because nobody with a rational mind would let you post other wise.

    john_connor's picture

    Biggs talking his book.  Yawn.

    10044's picture

    Damn, I did promise myself not to read anymore sht this guy puts waste of 2 mins, I could've bought some more gold eagles instead...

    bigkahuna's picture

    If anyone steps forward and calls the gold bugs "crazies" especially in light of the yella metal's run-up over the last ten years-I tend question their motive. I reserve my name calling for politicians:-)

    Anonymous's picture

    Stocks may be historically 'cheap' but how will they perform under sovereign default?

    yy's picture

    What a waste of bits, even if free.

    There is nothing but one talking his book.

    I woudn't have expected such lack of insights at Zerohedge. Oh well.

    aus_punter's picture

    the tone of this post is so fucking condescending

    P/BV should be low during asset price deflation

    Anonymous's picture

    "Large cap multinational equities are the cheapest they have ever been."

    So apple at 220 is cheaper than it was a year ago when it traded $78.

    Anonymous's picture

    Mr. Biggs was extremely bullish in early 2008. Simply stated, he is long and now loud.

    ghostfaceinvestah's picture


    "Now, Mr. Biggs, 75 years old, believes the worst is over for the economy and for the stock market. While the market is likely to move sideways for the rest of 2008, he says there will be no recession -- and with the remaining poisons purged from the system, stocks should move upward next year."

    nathan1234's picture

    All built on the foundations of fraud accounting.

    The Governments hand in glove - bought and paid for.

    Tell me- If i have a mortgage worth $1 million on my house could I revalue at $2 million and sell it to the Fed directly?

    Will solve my problem and will bring liquidity to the markets and country.


    Cognitive Dissonance's picture

    "All built on the foundations of fraud accounting."

    The term "fraud" implies a basis in reality, or at least something stationary, sturdy, immovable by which to measure the "fraud". Since we have completely divorced ourselves from any old standard and have entered the Twilight Zone of perception equals reality, there is no such thing as fraud.

    If nearly everyone wants to ignore something, does that something exist in the minds of the majority? No!

    girl money's picture

    A stronger than expected economy will take that figure as high as $90/share, which the market is not expecting at all.

    Can someone please reconcile a "stronger than expected economy" with the fact that another "extension of extended" unemployment benefits was needed for a million long-term unemployed?

    Can someone please reconcile a "stronger than expected economy" with the fact that 8-9 million foreclosures are being held off the market, and now banks are being told to go ahead with short sales?

    Can someone please reconcile a "stronger than expected economy" with the fact that the FDIC is begging pension funds to invest in failing financial institutions?

    It's also nonsense to talk about a GDP downshift for the next freakin' DECADE, and then assume S&P 2010 earnings at $75/share are some kind of bargain.

    SO -- I call BS on the "stronger than expected economy" assumption.

    I'm also wondering if Mr. Barton Biggs bought at the tippy top of our newly-formed double top and is looking for a merciful exit.

    What's for sale in this stock market?


    ... "but I don't like SPAM"... 

    Anonymous's picture

    @girl money:

    You go, girl - I couldn't have come up with a better BS-calling what's-gonna-drive-this-alleged-robust-recovery rant myself.

    You have to admit, Mr. Biggs does have a great porn-star name, though ... Maybe he's simply peddling financial porn? You know, the "with my big swinging always-long dick I can conquer the world" school of eCONomics.

    danimal's picture

    I would reconcile that most people (especially here) expect the world to end, so by that measure, we should have a stronger than expected economy.

    Anonymous's picture

    Reconcile this: Unemployment is 1 percent. Yields are double digits and many PE's single digits. Some listed companies have balance sheets with the "liabilities" section either difficult to spot or just completely missing. And record reserves. T-H-A-I-L-A-N-D. forget about the politics.

    Anonymous's picture

    What is Biggs track record?

    Some of these old bulls of Wall Street somehow seem to be able to get their views noticed no matter how wrong they have been their entire lives.

    Besides his own testimony, have you verified whether or not he has made any money?

    Anonymous's picture

    Hey bull, how many cows?

    wake the roach's picture

    "He sees oil (USO) grinding up because the cost of new sources is becoming astronomically high"


    Ah, oil... The achilles heel of any sustained global recovery...

    dnarby's picture

    Natural gas will be competing with oil.  The great fracking race is on.  Plus, who wants to bet there might be a lot more oil in the 'Stans?

    I agree with Barton that bluest of blue chips are valued much lower than near-peers, as the DJIA has a P/E of 17 compared to 91(!) on the S&P (per Hussman)

    But I suspect that 17 P/E will not be maintained going forward, and will have to drop to historical bear market levels of ~6-9 before it's truly a 'buy'., so I fail to see how he can possibly claim these stocks are as cheap as they have been in 120 years.  Possibly this was the case in March '09, but clearly not '10, and there's no guarantee they won't be an even better buy in '11 or '12.

    Despite his historical 120 year claim, Barton appears to be suffering from "recency bias" per Hussman's recent observations.

    "Basically, trends, technicals and market internals have played a larger role in post-war data, and particularly since 1995, allowing the market to periodically tolerate valuations that would have collapsed much sooner in earlier times. Still, valuations have remained important in determining the extent to which market returns are durable. Ultimately, valuations have determined long-term returns regardless of what portion of history you examine. Speculative advances in richly valued markets are invariably surrendered later."

    ...Not to mention 95% of those stocks weren't in existance 120 years ago! XD