July 17 (Bloomberg) -- Barton Biggs, the money manager whose attention to emerging markets during a 30-year career at Morgan Stanley made him one of the first global investment strategists, has died. He was 79.
Biggs died on July 14, Morgan Stanley Chairman and Chief Executive Officer James Gorman said yesterday in a memo to employees obtained by Bloomberg News. The cause was complications from a bacterial infection, according to a person with direct knowledge of the situation who asked not to be named because the matter is private.
The New York native predicted the bull market in U.S. stocks that began in 1982 and warned investors away from Japanese shares in 1989 before they collapsed. He sealed his fame telling investors to sell technology companies as they soared in the late 1990s, a judgment dismissed by the press and other investors until the dot-com bubble burst.
“Barton was an exceptional financial strategist and a great friend,” Julian Robertson, founder of hedge fund Tiger Management LLC, said in a statement. “He had an immense impact on the financial industry for five decades. I shall miss him greatly.”
After retiring from Morgan Stanley in 2003 at age 70, Biggs started Traxis Partners, a hedge fund, with two other Morgan Stanley alumni. While he was blindsided by the credit crisis that sent the Standard & Poor’s 500 Index in 2008 to its biggest annual decline since 1937, he correctly called the bottom in U.S. stocks in March 2009, and Traxis’s flagship fund returned three times the industry average in 2009.
Biggs largely invented the role of chief global strategist, which he assumed at Morgan Stanley in 1985, said Stephen Roach, who joined the firm as an economist in 1982 and became chairman of Morgan Stanley Asia.
“When I joined Morgan Stanley, we were a U.S.-centric business, and within three years, he said, ‘Look, I’m going to step down as U.S. strategist and redefine myself as a global strategist,’” Roach said. “He was way ahead of the pack in discovering and committing himself personally to being one of Wall Street’s first global investors and global strategists.”
Biggs’ calls on U.S. stocks in 1974 and 1982 established his reputation as a prognosticator.
In 1974 he recommended industrial and natural resources stocks instead of the so-called Nifty 50 large companies, which subsequently collapsed. In 1982, he said U.S. stocks were beginning a major bull market. The S&P 500 rose for eight consecutive years.
He warned investors away from Japanese stocks in 1989 as the Nikkei-225 stock index approached a peak from which it is down more than 77 percent.
He grew increasingly bearish on U.S. equities as the Dow Jones Industrial Average posted annual gains that averaged 25 percent from 1995 to 1999. In a July 1999 Bloomberg Television interview, Biggs said the U.S. stock market was “the biggest bubble in the history of the world.”
Biggs’s view proved right when the Nasdaq Composite Index tumbled 78 percent starting in March 2000.
“I think of an icon, of someone who was always very delighted to cause people to think rather than just react,” Michael Holland, chairman of New York-based Holland & Co., said yesterday in an interview on Bloomberg Radio’s “Bloomberg Surveillance.” Holland remembered socializing with Biggs and Louis Rukeyser, the late host of “Wall Street Week,” the investing program on PBS.
“I think of a dinner in Rye, New York, at a fancy restaurant with Louis Rukeyser and his wife and Barton Biggs and his wife and my wife and myself as one of the great evenings of entertainment and wisdom that I’ve experienced,” Holland said. “He’s left a treasure behind.”
For three years, Biggs’s reports regularly cited his bullish plumber to illustrate the conventional wisdom of common investors. In 2000 he acknowledged that he had fabricated all the quotes but the first one, “Buy the dips,” which the plumber had told him while unclogging a sink at Biggs’s Sun Valley, Idaho, vacation home in 1997. After Bloomberg News identified the plumber, Biggs apologized and said he had used him as a literary device.
In March 2003, Biggs predicted gains of as much as 50 percent in U.S. stocks, more for emerging markets. The S&P 500 climbed as much as 88 percent, while the MSCI Emerging Markets Index rose more than fourfold.
“He was totally independent,” John Mack, former Morgan Stanley CEO, said yesterday in a telephone interview. “He thought out of the box, and he got people to think out of the box. That’s how I’ll remember him, always as someone who was taking a much broader view or something that others had not thought of.”
Biggs, who majored in English and studied creative writing at Yale University, wrote a memoir, “Hedgehogging,” published in 2006. “Wealth, War and Wisdom,” published in 2008, explored how financial markets discounted major turns of events during World War II. He also wrote a novel about a money manager during the boom-and-bust first decade of the 21st century.
“There have been many bear markets that we’ve all lived through, but this has been the most severe, and certainly has had the most personal effects on people’s lives,” Biggs said in 2009, discussing his novel. “I’m interested as to how hubris and arrogance have destroyed people’s lives, and not just the lives of the hedge-fund money managers, but the lives of their wives, children, dogs and everything else.”
Barton Michael Biggs was born on Nov. 26, 1932, in New York City, named for his maternal grandmother, whose last name was Barton. He was raised on Manhattan’s East Side and in Washington. His paternal grandfather, Hermann M. Biggs, was the top public-health official in New York and instituted measures that stopped the spread of tuberculosis.
His father, William Biggs, held positions including chief investment officer at Bank of New York from 1931 until his death in 1974, according to his obituary in the New York Times. In Washington, the elder Biggs renegotiated defense contracts for the government during World War II and was executive committee chairman of the Brookings Institution, the public-policy research organization.
Barton Biggs, who was given a portfolio of about 15 stocks worth about $150,000 when he turned 18, he had little interest in financial matters.
After his graduation in 1955 from Yale, his father’s alma mater, he served three peacetime years with the U.S. Marines, taught English at a private school and wrote short stories that publishers rejected.
Bored and feeling left out of dinner-table conversation between his father and younger brother, Jeremy, who worked for a pension fund, Biggs chose his career.
On his father’s advice, he twice read “Security Analysis,” the guide to value investing by Benjamin Graham and David Dodd first published in 1934. He enrolled in business school at New York University, graduated with distinction, and went to work as an analyst at E.F. Hutton, then the most prestigious retail brokerage, in 1961 through a family connection.
Hedge funds, mostly private pools of capital whose managers participate substantially in the profits from their speculation on whether asset prices will rise or fall, were in their infancy. Biggs helped start one of the first, Fairfield Partners, in 1965. The fund returned 133 percent over the eight years he was there, compared with 19 percent for the S&P 500.
In May 1973 he accepted a partnership offer from Morgan Stanley to create equity research and investment management divisions. While he was best known for the strategist role, Biggs also led Morgan Stanley’s investment management arm and managed money personally.
In “Hedgehogging,” Biggs wrote that he overheard derogatory comments at a conference in August 1999 after he predicted a panic in technology stocks. Clients withdrew money managed by Morgan Stanley, and Biggs in particular, in the months before equities began their plunge, he said.
Biggs was voted among the top three U.S. portfolio strategists in Institutional Investor magazine’s poll every year from 1976 to 1984. His global asset-allocation team garnered the top ranking in 1998 and 1999, and his global equity strategy team was first in 2000 and 2001.
The record reflected his work ethic, Byron Wien, the vice chairman of Blackstone Advisory Partners LP who worked at Morgan Stanley with Biggs, said yesterday in a radio interview on “Bloomberg Surveillance” with Tom Keene and Ken Prewitt.
“I remember once when Phantom of the Opera opened in London and it was a big hit and I managed to get tickets for it and I took him,” Wien said. “He took a stack of research materials to read during the intermission. It was classic. Now that I remember that story, that describes it better than anything I could tell you.”
A lifelong fitness buff, he read stacks of reports while exercising in the Morgan Stanley gym, Roach said. In addition to playing tennis, he routinely climbed mountains in the 12,000 to 15,000 foot range, including Mont Blanc and the Matterhorn in the Alps and Mount Rainier in Washington State, until 2008.
Biggs and his wife, Judith Anne Lund, had three children. The marriage ended in divorce.
To contact the reporter on this story: Elizabeth Stanton in New York at email@example.com