Wealth, War and Wisdom

Barton Biggs spent his career at Morgan Stanley and wrote this after retiring to run a hedge fund. It combines two subjects: whether stock markets identified the turning points of the Second World War before contemporaries did, and how wealth was preserved or destroyed through the catastrophe.

The market argument is the more original. Biggs examines the major indices around the war's decisive moments and finds that they turned close to the actual inflection points: the British market bottomed around the time of Dunkirk and the Battle of Britain, the American market around the time of Midway, and the German market peaked around the point of maximum German advance. He treats this as evidence of collective wisdom in markets that no individual commentator displayed at the time. The evidence is suggestive rather than conclusive, and readers should note that the sample is small and the turning points were identified with hindsight.

The wealth preservation material is practical and grim. Biggs examines what happened to different asset classes and holdings across the countries involved: equities generally survived better than bonds, which were destroyed by inflation everywhere; property survived where it was not destroyed or confiscated; gold and jewellery held value but could be taken; foreign holdings survived if the owner reached them; and the people who fared best had diversified across countries and asset types in advance. He argues explicitly for holding assets in multiple jurisdictions and for owning a farm. The book is discursive and the two subjects sit awkwardly together, but the historical material on wealth destruction is not available in this form elsewhere.

Chief global strategist, Morgan Stanley 1973-2003; co-founder, Traxis Partners (1932-2012)

Thirty years of Morgan Stanley global strategy plus Hedgehogging, still the most candid insider account of how hedge fund managers actually behave.

Morgan Stanley, Traxis Partners