Barton Biggs: EM pioneer who called the dotcom crash
Inigo Kelsey Jul 17, 2012
Barton Biggs died on 14 July at the age of 79. Biggs, who spent a long career as a global chief strategist for Morgan Stanley, founded one of the first hedge funds, Fairfield Partners, in 1965. The fund returned 133% over the following eight years, compared with 19% for the S&P 500.
He joined Morgan Stanley in 1973, and his attention to emerging markets eventually saw him become one of the bank’s first chief global strategists. He encouraged the bank to focus on China and other developing nations.
He wasn’t ignorant of the risks and was clear about the need for transparency, stability and caution when betting on the developing world. But he was also clear on the drivers of global growth: low-cost labour, a strong central government, and ambitious, hard-working people.
“He thought out of the box, and he got people to think out of the box. That's how I'll remember him, always as someone who was taking a much broader view or something that others had not thought of,” John Mack, former CEO of Morgan Stanley, told Bloomberg.
However, Biggs was probably best known for his investment predictions. He predicted the bull market in US stocks that began in 1982, and warned investors against buying Japanese stocks in 1989 – just before they crashed.
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His most notable prediction though came in 1997 when he warned that internet stocks would “come to a very bad end”. At the time his view was widely criticised as the dotcom mania was in full swing. As he put it in his 2006 memoir, Hedgehogging: “I took a lot of grief in late 1999 and spring 2000 because I became bearish on technology stocks too early.”
However, Biggs’s stance proved right when the Nasdaq composite index - which eventually fell by 78% - began to slump in March 2000.
Of course, he didn’t get everything right. After retiring from Morgan Stanley in 2003 at the age of 70, Biggs started Traxis Partners, a hedge fund, with two other Morgan Stanley alumni. He largely missed the start of the credit crunch, but did correctly call the bottom of the crisis in March 2009. As a result, his flagship fund returned three times the industry average in 2009.
One of Biggs’s final predictions came in May, when he said that the euro would not survive in the long run. “Europe is definitely going to survive, but I mean, the whole euro-bloc concept I'm afraid is flawed, and I don't think you want to be around while it's breaking up," he said.
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