Tags: barton | biggs | stocks | recession

Biggs: Buy Stocks Now as Double-Dip Odds Are Remote

Wednesday, 01 Sep 2010 07:17 AM

Barton Biggs said investors should avoid the mistake he made in July, when the hedge-fund manager slashed his equity holdings in half before redoubling them.

“This is not a time where you want to be underinvested,” Biggs recently said on Bloomberg Television. “The odds of a significant slowdown are one in five, pretty remote.”

Biggs said at the end of June that equities were a bargain, and then reversed course on July 2, saying in an interview that he’d cut stock holdings to about 35 percent of his assets. Three weeks later, he told Bloomberg News that shares made up 75 percent of his Traxis Partners LLC fund as the Standard & Poor’s 500 Index headed for a 6.9 percent July rally.

The 77-year-old manager didn’t disclose his current allocation to equities yesterday. He said he holds a “fair amount of risk” and favors “high-quality, big-capitalization stocks in America,” as well as oil-services companies and real- estate investment trusts.

Traxis gained 38 percent in 2009 after Biggs bought shares as the S&P 500 fell to a 12-year low in March.

He turned more pessimistic on the U.S. economy two months ago after reports showing slower-than-estimated growth in jobs and factory orders cast doubt on the global economic recovery. Biggs said he was concerned governments around the world were curtaining stimulus measures too soon.

Federal Reserve policy makers said Aug. 10 that they would keep securities holdings unchanged. They agreed to put a $2.05 trillion floor on the holdings and buy Treasuries to replace an estimated $395 billion of mortgage assets that would be repaid from August 2010 through the end of 2011.

The Fed bought the housing debt to reduce borrowing costs and revive the economy after the worst downturn since the Great Depression.

The S&P 500 has tumbled 14 percent from its 2010 high in April amid concern the economic recovery in jeopardy. The S&P 100, which comprises 100 of the biggest U.S. companies, trades for 13.06 times earnings from the past 12 months, down from a seven-year high of 21.43 in December.

JPMorgan Chase & Co. told traders who bet on commodities for the firm’s account that their unit will be closed as the company, the second-biggest U.S. bank by assets, starts to shut down all proprietary trading, according to a person briefed on the matter. Biggs said this is the right decision for the financial system.

“I don’t think that commercial banks that are too big to fail should have prop trading,” Biggs said. “The market knows that regulation is going to be tougher. I don’t think it will have a big impact on equity prices.”

© Copyright 2010 Bloomberg News. All rights reserved.

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Barton Biggs said investors should avoid the mistake he made in July, when the hedge-fund manager slashed his equity holdings in half before redoubling them. This is not a time where you want to be underinvested, Biggs recently said on Bloomberg Television. The odds of...
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2010-17-01
Wednesday, 01 Sep 2010 07:17 AM
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