“It’s very possible, in the great scheme of things, that what we’re seeing is the classic retest from the lows of 10 days ago, ” Biggs said on Bloomberg Television these days. “We may be in the process of making an important bottom. ”
Equities all over the world plunged today, with the Standard & Poor’s 500 Index falling 4. 5 percent to at least one, 140. 65 as of 4 p. m. in New York. The level is at 1. 9 percent of the one-year low of 1, 119. 46 arrived at Aug. 8 and down 16 percent from the 2011 high of 1, 363. sixty one on April 29.
The tumble in stocks shows that investors expect a slowing economy to spur analysts to reduce earnings estimates, he said. Earnings at S&P 500 companies are forecast in order to climb 17 percent to $99. 08 a share in 2011 and fourteen percent to $112. 90 in 2012, estimates compiled by Bloomberg show. The actual index is trading at 12. 4 times profits in the last 12 several weeks, 24 percent below its five-decade average.
“If analysts and investors really thought the S&P earnings estimates, the market wouldn’t be selling where it is actually, ” said Biggs, whose equity purchases prior to the March 2009 market bottom sent his Traxis Partners LP hedge fund to some 39 percent gain that year. “The market is already priced for the 10 or 15 percent decline in earnings. ”
Fund Performance
Biggs operates the Traxis Global Equity Macro Fund, which produced a 2. 2 % profit, net of fees, for investors in 2011 through the end associated with July, according to Adam Jaffe, the company’s chief operating officer. That in contrast to the 3. 3 percent gain for the MSCI All-Country World Index associated with shares in 45 nations, including reinvested dividends.
Equity prices will prove excessive should the economy fall into a recession, he said, a possibility the actual U. S. Federal Reserve should act to prevent with something similar towards the purchase of Treasury bonds it began in 2010.
“We do need something more from the Fed at this point, but are we going to get it? WE don’t know, ” he said. “I’d like to see the Fed make a move drastic, maybe buy a different asset than Treasuries. ”
Biggs, who known as stocks a “strong buy” on Aug. 3, said five days later he'd cut risk in Traxis. Biggs, the former chief global strategist at Morgan Stanley, said he wanted to “get from the way” of the slide that had wiped out almost $2 trillion through U. S. equities over two weeks.