Diary of a Hedgehog: Biggs' Final Words on the Markets

Lest We Forget

Recovering from a hip replacement operation and in rehab I am not in the best of spirits. Once again I resort to poetry. Close friends running hedge funds were telling me of their market-inflicted afflictions, which ranged from insomnia to diarrhea. I actually made money in July but lost 4% in August.

August 30, 2011

We are not likely to soon forget the fear of those weeks in August when the HFT ruled the world. The ebb and flow of the battle for investment survival have been sleep depriving and agonizing because there is always a chance that our system is so fragile that it will careen over the cliff and we must always remember that the battle is about enhancing the purchasing power of capital but also about survival of your and our money.

The investment situation today is both perilous and rife with opportunities. On one side looms the abyss of bungling incompetence, a double dip, and a frightening fall back to the lows; on the other, “broad, sun-lit uplands.” In East of Eden, John Steinbeck’s great saga of the 1930s dust bowl and the Aggies, a recurring, powerful message it preaches is that “it never failed that during the dry years the people forgot the rich years and during the wet years they lost all memory of the dry years.” We as investors have to be careful not to fall into the same trap, and it might not be a tender one because a violent move up to equilibrium ...