It was May 1996. I was en route to Mexico for a vacation when the market experienced a bit of a seizure.
After a particularly nasty day, Morgan Stanley’s Byron Wien and Barton Biggs were interviewed. While their words escape me now, I remember thinking to myself that they were quite certain about the fate of the market.
1996 also began well for Wien, but his infamous May call that the Dow would fall 1,000 points still haunts him. “I underestimated the market’s inherent momentum,” he now says. “Maybe I’m a year early, but unfortunately I don’t have too many years left.” — SmartMoney.com
In 1996, Biggs was bearish on U.S. stocks and bullish on emerging markets (surprise!). While his big calls in places like Russia (up 112% through October) and China (up 67%) were paying off, he was amiss domestically on stocks and the Comex gold price. His subpar performance over the past few years placed him near the bottom of our pundit pack. — SmartMoney.com
As usual, the market defied them both.
Fast forward to 2007. I am in Heathrow airport. I should be shopping, but instead, I flip through financial pornography at the newsstand, John Allen Paulos-style.
And look who is at it again.
The Spooky Echoes of ’87
July 16, 2007 issue – I’m still bullish about stocks, but there is one spooky memory that perches in my mind like the canary in the coal mine. It relates to the U.S. stock market in 1987, and the October crash that shook the world. Then, as now, the American stock market drove the world, and a bust here caused a bust there. Even as I write this, I can’t help but think of an old Russian saying, “Ignore the past and you will lose an eye; dwell on the past and you will lose both of them.” So keep that in mind as you read on. — Barton Biggs, Global Investor column, Newsweek
The Contra Contrarian
May 14-21, 2007 issue – Equity markets around the world are flirting coquettishly with new highs, but this old head and a lot of younger, hairier skulls are puzzled by the sentiment of the aggressive big money. We all pay a lot of attention to this sentiment, because as contrarians, we believe that a strong consensus of investors is almost always wrong.
That warm sense of everything going well is usually the body temperature at the center of the herd. Invariably, the majority is wildly bullish and fully invested at the top of a market and are gloomy and have a lot of cash and short positions at the bottom.
The trouble with being a contrarian these days is figuring out which way the crowd is going. I’m very bullish on U.S. and global equities, emerging markets and technology. But is everyone else as well? Sentiment is very mixed. In other words, there is no clear signal to move against. — Barton Biggs, Global Investor column, Newsweek
Let me say that I am not singling out Mr. Biggs; there is a veritable industry built around market prognostication. But what makes it interesting is that downside predictions are aired often and when they turn out to be wrong, forgiveness is easy to come by.
The true professional works hard to perfect his form. Predictions are clouded by Greenspeak. It takes real talent to do the raindance until it rains, but why not do something more useful, such as provide people with real solutions to their portfolio problems?
Or maybe I missed the point. There is no such thing as bad publicity. Dire predictions work on a Machiavellian level: scare them, and they will come (to your hedge fund).