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Biggs on Finance, Economics, and the Stock Market: Barton's Market Chronicles from the Morgan Stanley Years

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Insider insights from a Wall Street legend

Barton Biggs was one of the greats. He founded one of the first-ever hedge funds, created a top-ranked investment research department on Wall Street, predicted the dot-com bust, and guided readers of his weekly research notes to investment success. With their enduring wit, intelligence, and humanity, the investor letters Biggs wrote during his 38 years at Morgan Stanley were celebrated throughout the industry. Released from the archives in response to popular demand, the best of these letters are collected for the first time in Biggs on Finance, Economics, and the Stock Market.

Biggs had a reputation for being ahead of the forecasting game, and readers of this book will find out why. His predictions were often controversial, and more often than not, they were spot-on. But most important, Biggs had an investing philosophy that endured through his five-decade career. Based on self-awareness, historical knowledge, and taking the long view, this is a strategy that any investor would be wise to emulate.

Barton Biggs always had a way with words. The world is fortunate that he used his gift to drill into the core of finance and investing, and we are doubly fortunate to have access to his invaluable archives.

Praise for Biggs on Finance, Economics, and the Stock Market

“Barton Biggs’ reputation as an independent and visionary thinker left a lasting impression on Morgan Stanley and fundamentally defined the way the Firm approaches Research, the department that he in fact founded. These writings represent the best of Barton—a strategist ahead of his time who was able to look past the mechanics of the markets and traditional methods of analysis and take a more philosophical approach to investing.”
—JOHN MACK, Former Chairman and CEO, Morgan Stanley

“Barton Biggs was a true thought leader in the industry. One of the first to look at investing from a global perspective, he championed a culture of innovative analysis and research throughout his time at Morgan Stanley. His colorful prose provided readers with more than investing advice; it was a lens through which to evaluate and contemplate not only market behavior, but society on the whole. Barton’s approach was revolutionary in many ways, and for this reason, his perspective and insights on the markets still ring true today.”
—THOMAS NIDES, Vice Chairman, Morgan Stanley

“Barton Biggs made many lasting contributions to Morgan Stanley during his time at the firm, including establishing our Research Department. His consistent ability to identify ideas and themes about markets enabled investors to think of things they otherwise wouldn’t have. To this day, Morgan Stanley has a culture where analysts, and in turn their clients, are in constant intellectual pursuit. Barton motivated his colleagues and readers to take an inquisitive perspective and his example continues to inform and inspire how Morgan Stanley develops its research offering today.”
—ADAM PARKER, Chief US Equities Strategist, Morgan Stanley

“Barton will always remain an inspiration for us because of his independent thinking, his curiosity, his prose, and his love of the debate culture that became the brand of Morgan Stanley’s macro research.”
— JOACHIM FELS, Chief Global Economist, Morgan Stanley


BARTON BIGGS was a well-known figure in the investment world. Before running multi-billion-dollar hedge fund Traxis Partners, Biggs spent three decades as a senior partner at Morgan Stanley. Biggs was selected 10 times for Institutional Investor’s “All-America Research Team,” and made over 300 television appearances before he passed away in 2012.

Introduction xi

Section 1: What’s Old is New Again 1

Section 1A: Market History and the Long View 3

In Search of History and a Word Processor That Works 3

Kondratieff and the Long Cycle 5

The Phony War 9

Ancient History 12

History, Market Deaths, and the Cult of the Equity 16

Section 1B: Fire and Ice 21

The Fire and Ice Debate 21

Ice Creeps On 26

A World Lit Only by Fire? 29

Section 1C: Bubbles and Panics 33

Manias, Panics, Crashes 33

Tulipomania 36

Anarchy 39

Life on the Good Ship Swine 43

The New New Thing 46

When? 50

Section 1D: Wars and Rumors of War 55

The Last Supper 55

The Beam That Broke the Camel’s Back 59

Bioterrorism and the Case for Higher P/E Ratios? 61

Section 1E: Geopolitics 65

Popcorn and the Decline of the West 65

Diary of Mikhail S. Gorbachev--Sunday, May 4, 1986 69

Close-Up 72

Diary of Mikhail Gorbachev, May 1987 75

The Diary of Deng Xiaoping: Wistful and Wishful Musings 78

Bottomless Pits and Nuts with Missiles 81

Diary of Saddam Hussein 83

Islamic Fundamentalism 86

Section 2: Economics and Investing 91

Section 2A: Economics and Policy 95

The Evolution of the Supply Side 95

The Tax Cut Misconception 98

Running the Movie of the Seventies Backward 100

The Piper Must Still Be Paid 103

The Old President with the Right Intuitions 116

What Kind of People Are We? 119

Emerging Markets Are Only for the Brave 122

Section 2B: Investment Discipline & Tactics 127

Discipline and Reading 127

How to Lose the Winner’s Game 130

You Gotta Believe 133

Section 2C: Market Psychology and Investing Philosophy 135

Contrarianism 135

Electronic War Rooms and Lying in the Sun 140

God Is a Mathematician? The Fibonacci Numbers 143

Beware of Linear Thinkers: Chaos on the Upside 146

How George Soros Makes Money: The Theory He Says Guides Him 148

The Horse Whisperers 151

Mr. Market Is a Manic-Depressive 155

Section 2D: Alternative Investments 159

Filthy Lucre 159

The Bull Market in Art: Mania or Magnificent Obsession? 162

Jewelry Is a Girl’s Best Friend 165

Section 2E: Market Predictions 169

First Class on the Titanic 169

“It’s a Bull Market, You Know . . .” 171

Beware the Conventional Wisdom . . . 175

Dear Diary: Up with Which I Have to Put 177

Praise the Lord and Pass the Ammunition 180

“Even Monkeys Fall from Trees” 183

Big Fish Do Not Live in Small Ponds 188

Section 3: The Global View 193

Section 3A: China and Hong Kong 197

Buy Hong Kong 197

Own Hong Kong Big 201

More on China 204

China: “The New Emperors” and the Risk/Reward Equation 208

How Fast Is China Really Growing? 212

China Tales 215

A China Traveler’s Tales 218

China Cooling, Us Heating 221

Section 3B: India 225

India Tilts to the Right and the Stock Market Explodes 225

India for the 1990s 228

Great Expectations 231

India: You Have to Go There to Understand 234

Section 3C: Japan 237

More on Japan 237

Long Trips 240

Japan Inc. Wants a Higher Yen 242

Japan Bought High and Will Sell Low 245

Section 3D: Europe, Middle East, Africa 249

In the Eye of the Storm 249

You Gotta Own Some Germany 253

Militant Fundamentalism Spoils the Middle East Story 256

Section 3E: Latin America 259

South America for the Nineties 259

No More Siestas 263

Argentina: The Magic Show 268

Buy Mexico and Brazil 271

Case Study: Peru 275

Mexico Will Make It 278

Mexico: Virtuous or Vicious Circle? 282

Brazil: An Act of Faith 286

Section 3F: East Asia 289

The Best-Managed Country in the World 289

Korea: Fat Premiums, Thin Pickings 293

Camelot 296

Letter from Myanmar 299

Victory Has a Thousand Fathers 302

Section 3G: Emerging Markets Roundup 307

A Bigger, Faster World 307

Jewel in the Portfolio 311

Section 4: Characters and Culture 315

Section 4A: Lunches with Luminaries 317

Investment Alchemy 317

Lunch with the Global Investor 321

Vanity Fair 325

Heroine Worship 327

Poker Games on the Titanic and Sir John 330

Section 4B: Jim the Trigger 333

The Summer of 83 333

The Trigger Comes Back for Lunch 336

U3 or “Many Shall Be Restored That Are Now Fallen and . . .” 339

The Trigger Finds an Arb 341

The Trigger Comes to Lunch 344

Investment Life Its Own Self 347

A Country of His Own 350

Talking Technology with Jim the Trigger 354

Section 5: Travelogues 359

Africa 361

The Idaho High Country 364

Making a New High on Your Own Time 367

Stretching the Mid-Life Envelope 370

Japanese Landscapes 373

The Snows of Kilimanjaro 377

Pitfalls in Tokyo, Sand Traps in Colorado 381

Section 6: Books and Letters 385

Section 6A: Book Reviews 387

“Groupthink” and What to Do about It 387

Captain Money and the Golden Girl Ponzi 391

The Alchemy of Finance 395

I Wish We Didn’t Have to Play for George Steinbrenner 398

Noise and Babble 401

Section 6B: Biggs’s Reading List 405

Too Much to Read 405

“Books, We Know, Are a Substantial World . . .” 408