Tags: federal reserve | bernanke | barton biggs

Biggs: Bernanke 'Absolutely Right' With Easing Decision

Friday, 05 Nov 2010 01:52 PM

Federal Reserve Chairman Ben S. Bernanke’s decision to purchase Treasuries to boost the U.S. economy was “absolutely right,” hedge-fund manager Barton Biggs said.

“We still are in a very precarious situation,” Biggs, the managing partner of New York-based Traxis Partners LLC and former chairman of Morgan Stanley Asset Management, said in an interview today on Bloomberg Television’s “In the Loop” with Betty Liu. “The economy could easily tip back into a double dip, and Bernanke did what he had to do.”

The Standard & Poor’s 500 Index broke through its April peak yesterday, rising to the highest level since September 2008 after the Fed said it will buy an additional $600 billion of Treasuries through June, expanding record stimulus and risking its credibility in a bid to reduce unemployment and avert deflation. Policy makers, setting a pace of about $75 billion of purchases a month, “will adjust the program as needed,” the Fed’s Open Market Committee said two days ago.

“We’re going to have higher stock prices for a while,” Biggs said. Bernanke has “gotten the stock market up, which is what he wants to do. The stock market is an important symbol of confidence.”

S&P Rally

The S&P 500 has rallied 17 percent since Bernanke indicated in August that he had the tools to prevent another recession. This week, The central bank left unchanged its pledge to keep interest rates low for an “extended period” after Bernanke said it could be modified in some way. While Bernanke’s near- zero rates policy and $1.7 trillion in asset purchases helped end the recession, the Fed said progress was “disappointingly slow” in bringing down joblessness close to a 26-year high.

Biggs said last month that U.S. stocks may gain 10 percent after the Fed announcement and that a bubble, or unsustainable rally, is occurring in emerging markets.

The MSCI Emerging Markets Index of equities in 21 nations has gained 35 percent since its 2010 low in May, and surged more than 150 percent since October 2008, when it reached the weakest level in four years. The Shanghai Composite Index has rallied 32 percent since reaching its 2010 low on July 5, while Brazil’s Bovespa index has jumped 25 percent since May 20.

“We probably are going to have a bigger bubble because of what Bernanke has done,” Biggs said today. “But it’s not my job to try to correct the past. I’m just saying what he’s done is the right thing now and it’s fueling liquidity.”

Biggs said in August that investors should avoid the mistake he made in July, when he cut equity holdings in half to about 35 percent of his assets. Traxis gained 38 percent in 2009 after Biggs bought shares as the S&P 500 fell to a 12-year low in March.


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Federal Reserve Chairman Ben S. Bernanke s decision to purchase Treasuries to boost the U.S. economy was absolutely right, hedge-fund manager Barton Biggs said. We still are in a very precarious situation, Biggs, the managing partner of New York-based Traxis Partners...
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2010-52-05
Friday, 05 Nov 2010 01:52 PM
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