Economics: Barton Biggs says Make Your Billions “Now” & “Then” Invest in Sufficiency

By Tammy, this blog humanity journalist

Make Your Billions and then Go Sufficiency:

What is it with these people who are rich beyond belief, like the Thai King, but who goes about telling us to turn to sufficiency. Well, Tavivoot is a neo-royalist who strongly believes that only through sufficiency, can capitalism be sustainable.

But then you have a billionair, in US$ terms, like Barton Biggs of Traxis Partners, who says make your billions now and forget about sustainable capitalism, because it all will fall apart and the only way to survive is like the Thai king said, through sufficiency.

The following is by a fan of Biggs:

“The market is only about halfway through what is historically typical of a bear-market recovery—and this time around, the rebound is likely to be even bigger.” — Barton Biggs of Traxis Partners.

Traxis analyzed 14 past bear markets — ranging from gold to US stocks — and found that when markets dipped more than 40%, the average rally off the lows was about 72%.

Since the Dow is up only about 45% and the S&P about 52%, the market still has a lot of room to the upside, Biggs said. But, if you do the math 72% above the S&P 666 low = 1145. That is only +7% from today’s close. Is that “a lot of room to the upside?” Seven percent is 2 weeks of returns nowadays.

“We’ve had a tremendous, an unbelievable decline in both the economy and the stock market, and so I just think we’re going to have a bigger than normal bounce,” Biggs said. “I just think we’ve got further to go.”

One interesting note about Biggs is his long term view. Biggs is also author of the 2008 book Wealth, War and Wisdom. In this book, Biggs has a gloomy outlook for the economic future, and suggests that investors take survivalist measures such as looking into “polar cities” as safe refuges for future survivors of global warming. In the book, Biggs recommends that his readers should “assume the possibility of a breakdown of the civilized infrastructure.”

He goes so far as to recommend planning adaptation strategies now and setting up survival retreats [emphasis mine): “Your safe haven must be self-sufficient and capable of growing some kind of food,” Biggs writes. “It should be well-stocked with seed, fertilizer, canned food, wine, medicine, clothes, etc. Think Swiss Family Robinson. Even in America and Europe there could be moments of riot and rebellion when law and order temporarily completely breaks down.”

But other than that he is bullish. So let us make our mad money as we await “survivalist” camp.

But others say if you follow the volume of trade in some key investments vehicle, and not listen to Barton Biggs, you might not even have the time to make your billions and then head into sufficiency.

The Following is an anti-Biggs guy:

Watching intraday and daily volume on the SPY, USO, and GLD sends some mixed signals when compared to our asset class correlations over the previous 6 months. During this sustained rally off the market lows, we have seen a fairly strong positive correlation between oil and equities, and a slightly weaker but fairly significant positive correlation between gold and equities. Simultaneously, we have seen the U.S. dollar (here UUP serves as a proxy) trade with a negative correlation to all of the above assets, the overarching theme being dollar devaluation from the myriad sources of liquidity in the system and rising inflation expectations due to increased confidence in the renewed flow of business activity. Let’s look at what volume is telling us about the direction for all of these assets.

First, let’s examine the SPY. First off, we can see that despite the impressive rally of the previous few days that equities haven’t yet surpassed their peak of mid-September. We can see that the RSI has experienced a series of lower highs and lower lows since the beginning of August.

In addition, we see that as the rally has proceeded upward, volume has continued to decline while down days have experienced a serious pick-up in volume. Several particularly strong down days saw above-average volume: Sept 1 (328 mil), Sept 17 (229 mil), Sept 30 (254 mil), and Oct 1 (281 mil). Comparatively, the explosive multi-day rally we’re in the midst of has seen significantly below average volume.

This seemingly straight-forward volume picture would indicate that equities could fall in the intermediate term (especially coupled with valuation analysis). This should imply that we’re getting similar bearish signals from oil and gold.

In contrast, volume seems to be giving us bullish signals in commodities. For example, despite recent spikes in volume on both up and down days in the USO, pullbacks on volume have been followed by upward moves on higher volume. This pattern occurred Aug 13-19 and Sept 23-Oct 1. The 5.5% move on Sept 30 is the volume peak of the previous few months at 28.46 mil shares traded. To add to the potentially bullish volume picture, its possible the USO is breaking out from a series of lower highs.

The volume picture on the GLD is even more clearly bullish. Besides a single down move with above average volume on Sept 24, GLD’s volume chart indicates classically positive volume signs: rising volume on rallies, falling volumes on pullbacks, and volume spikes on breakouts. Sept 2 (28 mil), Sept 3 (26 mil), Oct 6 (34 mil), and Oct 8 (24 mil) stand out as examples. The recent historic breakout of gold prices above $1033 is only support for the upward trend.

Finally, an examination of the U.S. dollar Bullish ETF, the UUP completes the picture. In a strange paradox, it seems that the volume picture for the UUP was essentially bullish until the down day on massive volume that we saw today (Oct 8). Although in a downtrend, peaks in the UUP were made under significantly higher volume than the ensuing breakdowns for the past 3 months. June 15, Aug 10, Aug 15, Sept 18, and Sept 24 all stand out as good up days on very strong, above average volume. Yet today, the UUP seemed to break through a multi-year technical level on the highest volume day it has ever had. But! Further inspection of the intraday volume on today’s chart shows that even today, periods of strong volume did not correspond to downward price movement. The only exception to this rule was a powerful down move at 12:28. Elsewhere, spikes in volume occurred during plateaus or short-term price upticks. This pattern may indicate a false breakdown, although this is very speculative.

The confusing volume signals make it challenging to understand correlations going forward, no matter our views on the conditions of the equity markets. Is it possible that our bullish volume in gold and oil will mean a move higher in commodities while the U.S. equities markets moves lower? Its likely that at some point the U.S. economy will be hurt by a lower dollar. Could the weak dollar/strong stocks correlation be falling apart? Or is it possible that bullish volume in the dollar is signaling a false break down and a strengthening of the dollar will coincide with a weaker stock market, yet simultaneously higher gold prices as people continue to fear the unraveling of the global fiat monetary system down the line?

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s