Biggs Worried About Falling U.S. Home Prices, Overall Remains Bullish

Mar 25 2011 | 9:21am ET

Barton Biggs, managing partner of Traxis Partners and a pioneering investor in international and emerging markets, is concerned about the housing market, but overall he is positive about the U.S. economy. He is 90% net long, convinced that the two-year old bull market still has a way to go because the U.S. has gone from a “snap back” recovery to a self-sustaining one.

“I think we’re still in a cyclical bull market that began in March of 2009, and right now I feel pretty bullish,” Biggs told a group of 90 investors and managers on Wednesday at the FINforums Global Macro and Geopolitical Risk event in New York.  However, he said there were some “macro black swans” that were impacting global macro investors, citing the crises in Saudi Arabia and Bahrain, and falling home prices here in the U.S.

“The data that came out two days ago show that housing prices are continuing to fall, they fell almost 3% in February and they went to a new low for this whole cycle…I’m really concerned about it, as everyone should be because it represents 50% of the average American’s net worth.”

On a brighter note, Biggs supports Federal Reserve Chairman Ben Bernanke’s efforts to stimulate the U.S. economy and said it would be “good news” if the Fed provided another round of quantitative easing to stabilize the ailing housing industry.   

“Maybe the good news about this weakness in house prices is that we’re going to get QE3 because I don’t believe for a moment that if house prices continue to fall for another two to three months that Bernanke is going to end QE2.”

Looking at other parts of the world, Biggs remains “very bullish” on China, citing its projected 7-8% growth rate over the next five years.

“All things considered, China has made an incredibly successful transition…successfully managing a soft landing of its economy” after years of robust growth, he said.

And across the pond, Biggs worries that the Europeans aren’t going to do anything about the sovereign debt crisis.

“That is a serious problem that is getting worse rather than better,” he said, “and the solution they are proposing, as George Soros pointed out [Tuesday] in the Financial Times, is going to be a solution that if they go through with it, is that there are going to be two parts of Europe, a Northern part which is able to finance at very favorable terms, and which has reasonably fast growth and relatively low inflation, and a Southern part that is all these sick economies, and the markets aren’t going to like this.”


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