I only recall meeting Barton Biggs once (via a Green room somewhere), but his legend preceded him.

This list of quotes (Thanks J!) should give you a solid basis as to his thought process and investment philosophy:

* “Good information, thoughtful analysis, quick but not impulsive reactions, and knowledge of the historic interaction between companies, sectors, countries, and asset classes under similar circumstances in the past are all important ingredients in getting the legendary ‘it’ right that we all strive so desperately for.”

* “[T]here are no relationships or equations that always work. Quantitatively based solutions and asset-allocation equations invariably fail as they are designed to capture what would have worked in the previous cycle whereas the next one remains a riddle wrapped in an enigma. The successful macro investor must be some magical mixture of an acute analyst, an investment scholar, a listener, a historian, a river boat gambler, and be a voracious reader.Reading is crucial. Charlie Munger, a great investor and a very sagacious old guy, said it best: ‘I have said that in my whole life, I have known no wise person, over a broad subject matter who didn’t read all the time — none, zero. Now I know all kinds of shrewd people who by staying within a narrow area do very well without reading. But investment is a broad area. So if you think you’re going to be good at it and not read all the time you have a different idea than I do.’”

* “[T]he investment process is only half the battle. The other weighty component is struggling with yourself, and immunizing yourself from the psychological effects of the swings of markets, career risk, the pressure of benchmarks, competition, and the loneliness of the long distance runner.”

* “I’ve come to believe a personal investment diary is a step in the right direction in coping with these pressures, in getting to know yourself and improving your investment behavior.”

* “As I reflect on this crisis period so stuffed with opportunity but also so full of pain and terror, I am struck with how hard it is to be an investor and a fiduciary.”

* “The history of the world is one of progress, and as a congenital optimist, I believe in equities. Fundamentally, in the long run, you want to be an owner, not a lender. However, you always have to bear in mind that this time truly may be different as Reinhart and Rogoff so eloquently preach. Remember the 1930s, Japan in the late 1990s, and then, of course, as Rogoff said once with a sly smile, there is that period of human history known as ‘The Dark Ages and it lasted three hundred years.’”

* “Mr. Market is a manic depressive with huge mood swings, and you should bet against him, not with him, particularly when he is raving.”

* “As investors, we also always have to be aware of our innate and very human tendency to be fighting the last war. We forget that Mr. Market is an ingenious sadist, and that he delights in torturing us in different ways.”

* “Buffett, a man, like me, who believes in America and the Tooth Fairy, presents the dilemma best. It’s as though you are in business with a partner who has a bi-polar personality. When your partner is deeply distressed, depressed, and in a dark mood and offers to sell his share of the business at a huge discount, you should buy it. When he is ebullient and optimistic and wants to buy your share from you at an exorbitant premium, you should oblige him. As usual, Buffett makes it sound easier than it is because measuring the level of intensity of the mood swings of your bipolar partner is far from an exact science.”

* “Fifty some years ago, Sir Alec Cairncross doodled it best:

A trend is a trend is a trend
But the question is, will it bend?
Will it alter its course
Through some unforeseen force
And come to a premature end?

* “Nations, institutions, and individuals always have had and still have a powerful tendency to prepare themselves to fight the last war.”

* “[W]hat’s the moral of this story? Know thyself and know thy foibles. Study the history of your emotions and your actions.”

* “At the extreme moments of fear and greed, the power of the daily price momentum and the mood and passions of ‘the crowd’ are tremendously important psychological influences on you. It takes a strong, self-confident, emotionally mature person to stand firm against disdain, mockery, and repudiation when the market itself seems to be absolutely confirming that you are both mad and wrong.”

* “Also, be obsessive in making sure your facts are right and that you haven’t missed or misunderstood something. Beware of committing to mechanistic investing rules such as stop-loss limits or other formulas. Work very hard to better understand how you as an investor react to both prosperity and adversity, and particularly to the market’s manic swings, both euphoric and traumatic. Keep an investment diary and re-read it from time to time but particularly at moments when there is tremendous exuberance and also panic. We are in a very emotional business, and any wisdom we can extract from our own experience is very valuable.”

* “Understanding the effect of emotion on your actions has never been more important than it is now. In the midst of this great financial and economic crisis that grips the world, Central Banks are printing money in one form or another. This makes our investment world even more prone to bubbles and panics than it has been in the past. Either plague can kill you.”

Great stuff. Thanks for sending!



UPDATE: As I should have suspected, Doug Kass published a version of this earlier this week

Category: Apprenticed Investor, Investing, Psychology, Rules

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8 Responses to “Words of Wisdom by the late Barton Biggs”

  1. AHodge says:

    I kept a “diary” i am trying to turn it into a book on shortselling the great recession
    if nothing else
    if you emailed a lot
    you can go back and reconstruct your future- ignorant feel through the fog state of mind when you traded. you can also go back and reconstruct why you lost on every losing trade.

  2. Clay says:

    So easy to talk a great game, so hard to play one (and perhaps he did). Would love to know his batting average over the years.

  3. Robert M says:

    This one went into the trading strategy notebook. I like it is so old school; as PBS used to say on their children’s programming, “Reading is Fundamental”

  4. DrungoHazewood says:

    Work very hard to better understand how you as an investor react to both prosperity and adversity

  5. Disinfectant says:

    Do a search of Barton Biggs on bloomberg.com. You will find that over the past couple of years, he was always on the wrong side of the market moves. Very emotional, responding solely to whether the market was up or down. No idea if that is what he’s always done or whether he moved closer to the manic herd as he aged (usually goes the other way), but it was just pitiful to read about him making the wrong move over and over again.

    Talk is cheap. Everyone in the investment business can come up with a list of the “right things to do” and I know many of them, but almost none of them follow through. Plenty of people get an A+ when given a multiple choice test of what they should do as investors, but in a real-time test with real money on the line, a weak will turns that theoretical A+ into an F.

  6. [...] Barton Biggs, “As I reflect on this crisis period so stuffed with opportunity but also so full of pain and terror, I am struck with how hard it is to be an investor and a fiduciary.”  (Big Picture) [...]

  7. [...] for coming up with solid investment guidelines during interviews and his writing. You can read a good collection of those thoughts here. “[T]here are no relationships or equations that always work. Quantitatively based solutions and [...]

  8. [...] Words of wisdom by the late Barton Biggs (Barry Ritholtz) [...]