Wednesday, December 3, 2008

Barton Biggs massively bullish but not ready to buy?

Barton Biggs is a very smart investor dude, and he wrote a very persuasive article in the FT last week on the case for being bullish on equities: "We are in for the mother of all bear market rallies." His logic is sound. Sentiment is at rock bottom; fear is at the massive panic stage; valuations are dirt cheap; the market decline has been as bad as we've ever seen; confidence has been ravaged; government stimulus has been unprecedented; deleveraging-related selling is almost over; hedge fund liquidity is at a record high.

Problem is, he's not a buyer yet. "I would like to see the credit markets unclog and spreads come in more. I want the markets to stop going down on bad corporate and macro-economic news."

Seems to me, though, that the market is no longer going into a tailspin on bad economic news. For example, yesterday the market rallied on bad auto sales numbers. I think the market has been putting in a bottom since October 10th. Lots of things have been getting better on the margin since then: swap spreads, agency spreads, implied volatility, energy prices, commodity prices, and the dollar. I too would like to see more improvement in short-maturity swap spreads and agency spreads. But sometimes, even though things don't work out perfectly, they still work out.

UPDATE: The Fed's Beige Book released about 30 minutes ago was chock full of awful news, yet since its release the market is up, another sign that the market has likely bottomed. Here's the WSJ blurb: "Through late last month, nearly every area of the U.S. reported sales declines, drops in manufacturing activity, weakening real estate markets, tighter lending and deteriorating labor markets, according to the Fed's survey of regional economic activity released Wednesday. Most sectors that had been bright spots until recently -- such as agriculture and energy -- also softened as commodity prices declined."


krispyhoochie said...

Hi Scott,

Just a note to let you know that I read your blog everyday and find It most informative. I use it to help me with my investment descisions. The current Idea floating around in my head is shorting the 30 year U.S treasury bond. I am always interested in what you have to say on the subject and, if you have in invested in etf's like tbt or short TLT via options.

On another note I was in Argentina not long ago on my honeymoon, what A beautiful country. I made a large investment in a company called cresud based in Argentina so I am current about the argentinian economy. Your Wife must think It's crazy as do most argentinians.

Anyway keep writing It is helping me in this crazy time.



Scott Grannis said...

Thanks! Beware of Argentine investments, though. The government, especially the current one, can be treacherous. You can make lots of money for years in Argentina, only to see it wiped out overnight by some government thievery. It's a wonderful country, the people are fantastic, the food is awesome, but the government is as bad as everything else is good.