In August 2000, Barton Biggs-global strategist of Morgan Stanley
and a man widely pilloried for failing to embrace the New Economy-debated James
K. Glassman, the author of the Net-loving treatise Dow 36,000 , in Sun Valley, the Idaho plutocrat’s playground.
Following the debate, the audience voted on the winner. Mr.
Glassman took it in a landslide.
“It came out like 85-3 for him,” Mr. Biggs said the other day. At
a dinner following the debate, he said, someone came up to his wife Judith and
told her, “I’m worried about your husband. I think he’s lost touch with things.
He’s out of date.”
But Mr. Biggs held firm. “My whole argument was that while the
Internet was a wonderful thing, it wasn’t as important as any of the great
advances of the 20th century,” he said. “I think the example I used was air
conditioning …. Everyone there laughed at me.”
The strategist had gotten
such ribbing, however. During the late 1990’s, Mr. Biggs resembled the
crotchety uncle sitting alone in the corner at a family dinner. He was the old
coot mumbling about how none of the valuations for technology stocks made sense
while everyone else was trading tips on Webvan. He was a bear on tech who had
the audacity to admit on national television that he was “befuddled” by the
continued upswing of the markets.
But even as the dot-com boom continued, Mr. Biggs held firm, just
as he did at the Sun Valley debate. “We got underweight with tech in December
of 1999, and the market peaked in March of 2000,” he said. “So that sounds
great, right? Four months early. But in those four months, it went up 30 to 40
percent. It was painful being early.”
It sure was. Byron Wien, Morgan Stanley’s former U.S. strategist,
put it this way: “When you’re bearish and early and people see that the market
keeps going up and up, you look silly.
“But,” Mr. Wien continued, “you want to be early, because there’s
time to act.”
And that, of course, is why Barton Biggs, after looking more
curmudgeonly than everyone else, now looks smarter than everyone else. On a
recent afternoon, The Observer went
to pick the brain of Mr. Biggs at his midtown office. He had just completed a
conference call and sat in an Aero chair in his light blue shirt, drinking from
a bottle of water.
On that day, the Dow Jones industrial average would close at
9,907.26, the Nasdaq composite at 1,911.24. The markets had been pummeled by
hints of accounting discrepancies that went beyond Enron. And government
intervention-the equivalent of kryptonite for a man like Mr. Biggs-seemed to
loom on the horizon.
“The worst thing that can happen from all of this is we have a
whole series of Enrons,” he said, arms folded behind the back of his head. “If
that’s the case, we’ll have a major reaction to that. Corporate earnings will
be downgraded in a major way; the public will lose faith in the earnings and
[price-earnings] ratios. You’ll have a double lethal hit from earnings and
And the best thing that could
“You would hope,” Mr. Biggs said, “that this kind of aggressive
accounting is isolated, and that the various corporate boards put through
reforms to restore transparency through the private system rather than through
Once again, Mr. Biggs seemed a man on the outside with his
opinion. Everyone else seems to be banging pots together to help bring back
government oversight over business in a big way. But at 69 years old, Mr. Biggs
has seen enough and done enough not to care what everyone else is doing. He is,
after all, the man most responsible for the creation of the modern Morgan
Stanley. A creative-writing major at Yale and a former Marine who once had
aspirations of becoming a magazine journalist, Mr. Biggs joined the firm in
1973, when it was just an investment bank with 280 employees. In creating a
research division, he helped build a Morgan suited for the larger world. In
1984, Mr. Biggs lured Mr. Wien to take his spot as the firm’s U.S. strategist-thus
giving Morgan two of investing’s more thoughtful minds to direct its strategy
on international and domestic markets. The 1997 merger with Dean Witter gave
the firm 60,000 employees.
And yet the world of investing for the masses seems-on the
surface, at least-to be quickly going away. Doctors have gone back to being
doctors; lawyers are practicing law again. You can actually walk into a bar at,
say, 5 in the evening without running into a television showing CNBC.
Mr. Biggs, though, was quick to dismiss the notion that the era
of popular investing might really be at an end.
“I don’t think it’s over,” he said. “In a modern capitalist
world, the broader ownership of equities is going to continue for, God knows,
maybe the whole century. In the long term, you want to be in equities.
“The problem,” Mr. Biggs continued, “is that the long term is
very hard for people. People can say they’re taking the long view, but they
aren’t. They never have and never will, because they tend to get loaded up on
stocks when a bubble’s going.”
For his part, Mr. Biggs
said retirement wasn’t in his short-term plans.
“I like the game,” he said. “And I’m not interested in playing
golf. I’ve climbed most of the mountains, the trophy peaks, in the world. If I
climb anything higher, I’d probably kill myself-which I’m not interested in