Biggs and me

Posted on Tuesday, 6 July 2010 [GMT +1]

In another life I worked for Morgan Stanley. So did Barton Biggs and both of us are now founders of our own businesses (mine is the specialist advisory boutique 'Building Value'; his is the hedge fund, 'Traxis Partners'). Okay, he is truly famous and richer, but he is also old at, 77, for this or any other industry. That said, he is also lucid, energetic and listened to avidly by investors. So when he says that he intends to sell about half of his stock investments – you take notice. This follows a 5% fall in the S&P 500 to 1,022.58 last week (and its lowest since 4 September) and a 4.5% slide in the Dow to 9,686 (the Index last fell for seven days in the month following the collapse of Lehman Brothers).

Headlines are one thing but the small print another and, here, Mr Biggs said that stocks may still rise. He also compared the current market to the end of the 1982 recession when the S&P 500 declined 13%. “This is what always happens at this stage of the cycle and we are at exactly the same stage in the cycle as we were in 1982, using the exact kind of words: ‘the US economy is collapsing, the World is collapsing and it is the worst time since the Great Depression’. Blah blah blah”.

I particularly like the “blah, blah, blah’ and would apply this to what people are saying about China. Here the stock market is off more than 28% this year so far and looks set to close, today, at a 16 month low. Worries persist about an economic slow down and company fund raising (including the $20 billion sought by Agribank). Goldman Sachs, amongst others, has also cut its GDP forecasts (11.4 to 10.1% this year) and there is yet another bearish survey, this time on services. “Blah, Blah, Blah”. At least Morgan Stanley plus Templeton and JPMorgan are looking through the rhetoric.

Shanghai Composite:
Today: -1.49% at 2,347.46 at 13.07
Last week: -6.7%
YTD: -28.4%

Hang Seng:
Today: -0.23% at 19,859.94 at 12.35
Last week: -3.8%
YTD: -9.2%

Oil:
$72.51
Gold:
$1213.70
Euro/$
1.2543

• HSBC Services Index slides to 15 month low
• China growth forecast cut by Goldman Sachs; and others
• China academic sees Q2 growth at 10.6%
• China raises growth rate for LAST YEAR from 8.7 to 9.1%
• Additional stimulus may prove to be rash, says Legislator
• Money rate drops as Wen targets “relatively fast” growth
• PBOC signals that any big moves in the Yuan are unwelcome
• Property prices face correction, says Minister
• China’s real estate market is a long term play, says Woori
• China’s population to hit 1.39 billion by 2015, says Xinhua
• Stocks look oversold says Morgan Stanley
• Emerging markets are still in “bull phase”, says Mobius
• Emerging markets: “extraordinary” opportunity, says JPM
• Bank of China to raise $8.9bn as ICBC looks for $3.2bn
• China must address wage gaps to sustain growth: China Daily
• GM’s H1 sales in China surge past the US
• Car sales growth rate slowed in June.