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Biggs Holds 'Fair Amount of Risk,' Sees No Recession
Bloomberg News, sent from my iPad.
Biggs Holds 'Fair Amount of Risk,' Sees No Recession
Aug. 31 (Bloomberg) -- Barton Biggs said his Traxis Partners LLC hedge fund is holding a "fair amount of risk" because the largest U.S. companies are cheap and odds of the second recession in three years are low.
"This is not a time where you want to be underinvested or net short," meaning having more bets on a decline than a gain, Biggs said during a Bloomberg Television interview today. "The odds of a significant slowdown are one in five, pretty remote." Biggs said he favors "high-quality, big-capitalization stocks in America," as well as oil-services companies and real-estate investment trusts.
Biggs, whose Traxis Partners gained 38 percent in 2009 when he bought shares as the Standard & Poor's 500 Index fell to a 12-year low, said on July 26 that bets stocks will advance made up 75 percent of his fund. That was a reversal from three weeks earlier, when he cut his equity holdings in half to about 35 percent because of concern governments around the world are curtaining stimulus measures too soon. Biggs said today that he was "whipsawed" in July as the S&P 500 surged 6.9 percent.
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., the second-largest U.S. lender by assets, told traders who bet on commodities for the firm's account that their unit will be closed as the company begins to shut down all its 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."
To contact the reporters on this story: Rita Nazareth in New York at rnazareth@bloomberg.net Carol Massar in New York at cmassar@bloomberg.net .
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