Plumber Beating Bearish Strategist
By Tom Cahill
New York, May 12 (Bloomberg) -- Barton Biggs, Morgan Stanley Dean Witter & Co.'s chief equity strategist, periodically cites in his weekly strategy reports the stock market wisdom of an unlikely source: his plumber.
The plumber, Ron Valentine, came to the rescue during a dinner party at the Sun Valley, Idaho, vacation home of Biggs, one of Wall Street's most outspoken bears. ``I recognized him because he's always on TV, bad-mouthing the market,'' Valentine said. So, after unclogging the kitchen sink, the plumber offered some un- solicited advice on the stock market: buy the dips.
That was over Labor Day weekend, 1997. Soon after, Biggs recalled the exchange in a report distributed to clients and the press titled ``The Plumber Who Buys the Dips.''
Valentine -- who has never been identified by name in the reports -- said Biggs hasn't seen or spoken to him since their first meeting. Still, Biggs's reports continue to quote the plumber's views on stocks as if the two periodically chat about the market. Biggs declined to comment about his use of the plumber.
Valentine said he learned about his first appearance in a Biggs report when a friend sent him a copy of a New York Times story referring to it. Valentine said it didn't bother him except for one quote attributed to the plumber: ``I've got $300,000 in the market on margin,'' meaning borrowed money.
``Everything I own is paid for -- my home, my car; I definitely didn't buy any stocks on margin and never have,'' Valentine said. ``I guess (Biggs) decided he'd just make things interesting and make it seem like these common people were taking these chances, which I don't do.'' Valentine, who lives down the road from Biggs's Sun Valley home, said he didn't convey his objections to the market analyst.
Strategist vs Plumber
Valentine -- in real life and in the Biggs reports -- has remained steadfastly bullish on U.S. stocks, reaping rewards as the Standard & Poor's 500 Index has gained 53 percent since August 1997, about the time he cleared Biggs's drain.
Biggs, on the other hand, has been wrong. In the July 19, 1993, edition of Forbes magazine, he said stocks would fall 20 to 50 percent. Instead, the S&P 500 and the Dow Jones Industrials Average have more than tripled.
In his report dated Aug. 9, 1999, Biggs wrote: ``I saw my plumber in Sun Valley last week, and he told me he had given up even part-time plumbing for trading the stock market. He said something like: `I'm through with flushing out toilets in rich people's homes. I can make a lot more money trading stocks without getting an aching back, and I want a big house, too, with college kids doing my lawn and some dummy fixing my toilets.'''
Stock market advice from a plumber could be viewed as a clear sign of a market top, like the stock tips from shoeshine boys that, according to legend, prompted Joseph P. Kennedy Sr. and Bernard Baruch to sell before the 1929 crash. Yet Biggs concedes that so far, the plumber's view of the market is winning.
Biggs's `Benign Scenario'
``For years now, he has been right, and only a succession of failed rallies will change his mind,'' Biggs wrote of the plumber in a report last month.
Biggs went on to describe his own ``benign scenario'' where the Nasdaq tumbles 45 percent and the Dow Jones Industrial Average and S&P 500 fall 20 percent.
The plumber, who knows something about gravity, brushed off Biggs' predictions of a stock market tumble. ``For years he's been negative and (the market) has been doing very good,'' said Valentine.
Valentine declined to give the size of his portfolio but said among the dozen or so stocks he now owns are some market laggards such as Ford Motor Co. and Bank of America Corp., and a smattering of technology shares such as Hewlett-Packard Co., Lucent Technologies Inc., DellComputer Corp. and Nortel Networks Corp.
Led by a quadrupling of shares in Nortel, North America's No. 2 phone equipment maker, a portfolio of those shares bought when Valentine met Biggs in 1997 would have gained 117 percent, more than doubling the gain in the S&P 500 index in the same period.
``I've done pretty well,'' said Valentine, who puts his age at ``more than 55'' and describes himself as semi-retired. ``For just a normal person and a plumber, very well.''
Based on their one meeting, Valentine said Biggs ``seemed like a nice man. I'm sure he knows what he's doing.'' The plumber even expressed some sympathy for Biggs.
``He's been wrong for so long time, maybe he'll be right now,'' Valentine said. ``But I sure hope not.''
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