One of Wall Street's living legends, Barton Biggs says that this is the time to be buying stocks around the world and not to be selling them. He is not to be dismissed lightly. For more than 25 years he was in charge of global investing at Morgan Stanley and is credited with a knack of spotting global trends early, which helped investors make big money.
He told Bloomberg Television, ' We're setting up for a really big rally. I don't mean three or four hundred points on the Dow, I mean 1000 points on the Dow. I don't know if we're going to get it next week or the week after. But this thing is getting crazy and is overdone.'
Could he be right again? Consider what's in his favor. Consumer prices remained unchanged in February as against an expected increase of 0.3%. Core inflation, excluding food and energy prices, was also unchanged, the first time it did not increase since November 2006. The University of Michigan consumer sentiment reading fell to 70.5, the lowest since February 1992, but better than the forecast of 69.3. Fed fund futures indicate a 60% chance of a full 1% rate cut at the next Fed meeting on March 18th. That it will be cut by at least 0.75% seems to be a foregone conclusion.S&P has predicted that sub prime mortgage write downs are nearing the end. The facility of raising loans upto $200 billion against illiquid assets will be operational from the 27th of March.The $150 billion economic stimulus plan as well as the effects of earlier interest rate cuts will be visible in the next couple of months. History tells us that similar monetary policy moves have always succeeded in the past in reviving economic activity. Barton Biggs may be correct as usual.