Barton Biggs: Global investment guru noted for his later pessimism
Thursday 26 July 2012
For over 40 years Barton Biggs was the most innovative and successful investment manager on Wall Street, He was also the first "global investment strategist", and one of the first to invest in "emerging economies". In his seventies, however, he became an extreme pessimist, foreseeing the possibility of the collapse of civilisation.
Biggs was an unlikely innovator. He came from a distinguished social background and his first ambition was to be a writer. His grandfather, Hermann M Biggs (who had married a lady named Barton, hence his grandson's Christian name) was a major influence in the eradication of tuberculosis as the top public health official in New York. Biggs' father worked for the Bank of New York for 40 years, latterly as chief investment officer, and, like his father, he was active in public life affairs. During the war he negotiated contracts for the government and was chairman of the Brookings Institution, a pioneering and still-influential liberal think tank.
Barton naturally followed his father to Yale University, where he studied English Literature under the poet Robert Penn Warren and was a member of one of the University's most prestigious secretive clubs, the Elihu Society. After serving in the US Marines for three years he tried creative writing, played semi-professional soccer and taught at a posh secondary school. He always claimed that he had decided to follow his father only after he had been unable to understand a conversation between him and Barton's younger brother Jeremy, who was already an investment manager. Barton followed his father's advice and read Security Analysis by Benjamin Graham, the guru who inspired other notable investors like Warren Buffett. In 1961, after graduating from the Stern Business School with distinction he went to work for EF Hutton, a leading firm of stockbrokers.
His success over the following 40 years was based on ideas many of which sprang either from Graham or from an inherited self-confidence and willingness not to follow the crowd. He dismissed the idea of committee judgements, if only because everyone is compromising, looking for unanimity.
"You have to immunise yourself," he argued, against the prevailing psychological state of the market as well as your own beliefs. "Micro-investing' he said, "is simple but never easy" and was based on good information and quick reactions: "have a knowledge base, follow events," he believed. He also, and crucially, dismissed the idea that the past was any guide to the future. "The next investment cycle," he once wrote, "is a riddle wrapped in an enigma."
His first triumph came in the eight years after 1965 after he had founded one of the first hedge funds, providing him with a wider range of possible investments. Its success led to his recruitment in 1973 by Morgan Stanley as a partner and managing director, the first outsider in the investment bank's history. For the 30 years he was in charge of both research and asset management he accumulated a record of correct forecasts.
In 1980 he scorned the idea that the high inflation rate would continue and was an early believer in the boom of the 1980s when he became an the first serious "global" investor, though one clear-sighted enough to bet against the overheated Japanese market in 1989. Ten years later, at the height of the dot-com boom, he called the market "the biggest bubble in the history of the world", a claim justified nine months late when the market slumped by nearly four-fifths. Again, he perceived that in the 2000s "emerging markets" would climb even more rapidly than Wall Street. His influence became enormous – typically, in 1996 a visit to India led to a rapid growth of American interest. Indeed, as Smart Money magazine put it: "it would not be a stretch to say Biggs wrote the book on emerging market investing".
He retired in 2003 because he said his job had evolved into managing people rather than formulating investment strategy. He then set up the Traxis Partners hedge fund based in Greenwich, Connecticut, because in the words of one of his partners "he enjoyed the intellectual challenge of running a fund". His education in creative writing led him to keep a journal which was later published in a book called Hedgehogging, about hedge funds with their "very brilliant and often eccentric and obsessive people" who "were so competitive and had such massive egos".
Although he did not forecast the meltdown of late 2008 he did call the bottom of the post-crash trough in May 2009. But by then he had become an ultra-pessimist. In another book, Wealth, War and Wisdom, he suggested investors should take survivalist measures against the possibility that "law and order temporarily completely breaks down". This involved safe havens which had to be "self-sufficient and capable of growing some kind of food" and which "should be well-stocked with seed fertilizer, canned food, wine, medicine, clothes, etc." His last literary effort came in 2010 when he published a novel about the stock market entitled A Hedge Fund Tale.
Barton Michael Biggs, investment manager and strategist: born New York City 26 November 1932; married Judith Anne Lund (marriage dissolved; three children); died 14 July 2012.
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