December 15, 2009
Barton Biggs runs Traxis Partners, a multi-billion dollar macro economic hedge fund based in New York City.Â He was formerly the Chief Global Strategist for Morgan Stanley and was with that firm for 30 years.Â He was often ranked as the number-one US investment strategist by the Institutional Investor magazine poll.Â His most recent book, Wealth, War & Wisdom, is available via the link below.
We spoke with Biggs on December 8.
In your book, you say investors should worry about truly worst-case scenarios, which you call the â€śbarbarians at the gateâ€ť that could lead to a breakdown of civilizationâ€™s infrastructure.Â In this context, what concerns you most in todayâ€™s environment?
I am most concerned whether, for any reason â€“ newer and bigger credit problems than we now envision, or the amount of deleveraging that still has to occur â€“ we could go into a double-dip in the economy.Â Obviously, a lot of the ammunition [specifically fiscal and monetary supply options] has been spent.Â You could certainly make the case, as some of the bears do, like Roubini, that we could get into a cascading stock market and economic decline.Â Along with that could come some very serious anarchy.
We have to be alert to the canaries in the coal mine, such as what was going on in Iceland and Turkey in 2007 and in the mortgage industry in the US beginning in 2002.
Is whatâ€™s happening now in Dubai and Greece, for example, a canary in the coal mine?Â In Greece, there is real chaos and anarchy, with mobs on the street.Â If Dubai goes down the drain, thereâ€™s going to be serious trouble, because they have a million or so imported workers from third-world countries.Â They are working their butts off, and they have been cheated for years, in terms of what they are paid and their food allowances.Â There are going to be real problems there.Â
You can make the case that it is not inconceivable that the barbarians could be at the gate in Europe, Japan and the US.Â Itâ€™s one chance in ten thatâ€™s going to happen but, as a person with wealth, you must ask what type of insurance to take out against that.
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