It is with a great sense of sorrow that I learned of the passing of industry legend, Barton Biggs. He was 79. I was speaking to him only a few weeks ago when I passed through New York for my strategy seminar, attempting to decipher the medium term trends for these fractious and conflicting markets. It is a reminder of how temporary and fleeting life can be.

Barton was a pioneer in the international investment arena and founding father of the modern hedge fund industry. He became famous for calling market bottoms in 1982, 1987, and 2008. He was a colorful and masterful writer who regularly titillated investors with his iconoclastic and out of consensus ideas. Sound familiar?

Barton grew up as a member of the East coast establishment, his father being the chief investment officer of the Bank of New York. He graduated from Yale in 1955 in creative writing and then did a brief stint in the Marine Corps. He next turned to Wall Street and joined E.F. Hutton as a junior broker (remember ?When E.F. Hutton speaks, people listen??).

In 1965 he spun off to create Fairfield Partners, one of the early long/short US equity hedge funds. After several prosperous years, the fund crashed and burned with the collapse of the ?Nifty 50?. He later told me that was when he first learned of the six standard deviation move. ?The biggest mistake you can make in a bear market is to cover your shorts too soon? he said.

In the mid seventies, he was recruited by a small, white shoed, private partnership called Morgan Stanley & Co. to build up an asset management division from scratch. Barton became my friend and mentor when I joined the firm in the early eighties, and I spent the better part of the decade debating every pebble of the investment landscape with him.

Together, we fought a major uphill battle trying to convince a cautious and blinkered management that the firm?s future lies in international and emerging market equities. Getting them to focus on Toyota and Matsushita instead of General Motors and IBM, we felt like Sisyphus endlessly rolling the boulder up a steep mountain.

Barton persevered, and in the following three decades the business grew to $1 trillion in assets along with a world-class global research department. After Morgan Stanley went public, he became a billionaire in his own right. I bailed to start my own hedge fund a few years later.

In 2003, Barton left (MS) to start a new hedge fund, Traxis Partners. We all thought he was crazy at the time, as it was the last thing you would expect a 71 year old to do. This is a business where 30 year olds regularly drop dead of heart attacks from the stress. That was pure Barton. I heard at one point he reached $5 billion in assets.

He became a regular fixture in the media, offering his wisdom and insights in his characteristic gravelly voice. Always the independent thinker, I know he voted for Obama in the last election, at odds with much of Wall Street.

To listen to my last extended interview with Barton where he gave his global view a few years ago on Hedge Fund Radio, please click here. He was tiring even then, and we had to record the show in 15-minute segments so he could rest in between sessions. But he made the extra effort to give my readers an edge on the market. That was pure Barton too.

Barton will be missed by many.

 

 

Sysiphus

I write this to you from my double suite on the Orient Express crossing the Swiss Alps. My manservant, Charles, is off fetching a cup of tea and steam pressing my white dinner jacket for tonight?s formal dinner.

My first night at the Naval & Military Club in London, a group of British Army officers just back from Afghanistan, and their dates, hosted a blowout black tie homecoming party, complete with disc jockey and disco ball. While singing a drunken and rautious ?Rule Britannia? at 4:00 AM we maxed out the amplifiers and ended up blowing the power, not only for our building, but for the entire block.

Suddenly, our 18th century building was plunged back to the 18th century, meaning no lights, Internet, or flushing toilets. Candelabras solved the first problem, and the Financial Times the second, but when nature called, I had to retire to the pub across the street. Each time I did so, I enjoyed a pint of Fuller?s London Pride, not sure if I was making my problem better or worse. Two days later, two truck sized diesel generators on loan from the army magically showed up and solved the power problem, and we returned to the 20th century.

 

 

The Globe Theater is a magnificent reproduction of the original, which burned down in 1613 during a canon during scene in Henry VIII (click here for the link at http://www.shakespearesglobe.com/ ). Its thatched roof, open air seats, and 12 inch roughhewn oak beams led me to expect The Bard from Stratford-upon-Avon to walk out any moment. Actors tore through the standing crowds, reciting lines, and embracing a startled few theater goers. Half way through As You Like It, I realized that the devotees sitting next to me were mouthing the lines. They had memorized the entire script.

 

 

One afternoon I asked a somewhat doddering old taxi driver to take me to Kensington Palace, who seemed quite impressed. He drove me directly to Harry and Kate?s private entrance. After giving me the gimlet eye, Scotland Yard directed us to the correct entrance for the tourists. I try not to cause international incidents when on vacation, and this time I came close.

England definitely did not show its best face when I walked out of a comedy club into Leicester Square at 2:00 AM. The women were so drunk that they walked barefoot across the vomit covered pavement, unable to walk in high heels.

Another day found me at Christie?s auction house for a private viewing of John James Audubon?s spectacular Birds of America. The multi-volume set was in mint condition, the colors as bright as the day they were printed. Only 70 of the original print run of 140 in 1838 are known to exist. One sold for $11.5 million last year, making it the world?s second most valuable book after the Gutenberg Bible.

 

 

My last morning in London found me desperately hailing a taxi in a torrential downpour. The taxi Gods smiled upon me, and I was soon barreling down the streets of Piccadilly and Westminster on the way to Victoria Station. It seems that a 20 pound tip can move mountains here. I arrived with more than enough time for a pre-prandial glass of Champagne before boarding the Orient Express.

Report from London, Part III will be continued tomorrow.

John Thomas
The Mad Hedge Fund Trader