Biggs sees U.S. market extending slump, Europe economy worsening

Biggs sees U.S. market extending slump, Europe economy worsening
Pain across the pond will drag down U.S. market for weeks to come, says investor Barton Biggs
JUL 16, 2012
Barton Biggs, the hedge-fund manager who raised bets on equities before the Standard & Poor’s 500 Index rallied this year, said the U.S. market may slump three or four more weeks as Europe’s economy worsens. “I don’t think that this correction we’re in is quite over yet,” Biggs said today in an interview on Bloomberg Radio’s “The Hays Advantage” with Kathleen Hays. “I just don’t think it’s gone far enough. Europe is still a shipwreck, and the U.S. economy has drifted into this soft patch.” The S&P 500 dipped 3.3 percent from an April 2 peak through yesterday as political uncertainty in France and the Netherlands intensified concern over Europe’s sovereign debt crisis. Biggs said Europe is likely to switch emphasis to fiscal stimulation to boost growth as its citizens continue to rebel against austerity measures. Biggs said he has taken short positions on German and French indexes, betting they will decline, because the political rhetoric and economic data from Europe signal a change of course and a deeper slump. The U.K. economy shrank in the first quarter as Britain slid into its first double-dip recession since the 1970s, forcing Prime Minister David Cameron to defend his spending cuts in Parliament. Gross domestic product fell 0.2 percent from the fourth quarter, when it declined 0.3 percent, the Office for National Statistics said today in London. Withstanding Pressure The U.S. is still primed to withstand pressure from Europe as shown by stronger-than-expected retail sales and declining consumer debt levels, according to Biggs. Retail sales rose 0.8 percent in March, three times as much as economists projected. Consumer borrowing rose less than forecast in February, restrained by a drop in credit-card debt. Federal Reserve policy makers said today they expect growth to slowly accelerate and cut their 2012 unemployment forecast to 7.8 percent to 8 percent from an earlier forecast of at least 8.2 percent, while saying borrowing costs are likely to remain exceptionally low at least through late 2014. The S&P 500 rose 1.1 percent to 1,287.61 at 2:43 p.m. in New York. “I’m relatively convinced that the U.S. is not going to roll into a double-dip,” Biggs said. The market will end its slump because “I don’t think it’s truly justified.” Biggs said he doesn’t plan to change his mix of investments as the U.S. exits its current “soft patch.” He said he is “heavily” invested in technology stocks, owns oil service and industrial machinery stocks, and will maintain his positions to China. --Bloomberg News--

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