David Tepper "Fed is not going to cut stimulus near term"

[Ash1972]

Quote from m22au:

I have had similar thoughts over the past year or two. However maybe it's QE combined with the following two factors:

(1) Momentum ("Where else do you put your money with interest rates so low?")

(2) The belief that should equities decline by a big amount (let's say 10%) that the Fed will increase its QE program to an amount more than $85 billion a month, which is supportive for risk assets.

My thoughts:

1) When investors reject a safe couple of percent per annum in exchange for big stock market returns, this is exuberance. In fact it is what's known as the "cash is trash" bubble mentality. If you remember, back in 2009 when investors <i>should</i> have been loading up on shares they only thing they wanted was cash and equivalents.

2) Once again this is "this time it's different" thinking. There is no government action, new technology or social change that can keep the stock market up forever. That's been true since the stock market started 350 years ago.

 

[Swan Noir]

I'm not an equity investor/trader but I simply do not get the attitude that seems to say I should not be long a market that is in a prolonged bull market just because that bull market will someday end.

The guys here that are long and have some skill will observe the individual stocks that run out of steam, watch them make a feeble attempt at the old high and fail. They will sell those stocks and when they see that has happened with enough reasonably well run companys they will decide the bull is dying and they will look for spots to get out of the balance of their positions and may, at some point, even rush that process just a bit. But they will be very careful not to rush it much. All that is is classic late bull market common sense trading. They know the blow off lasts longer than any reasonable man can imagine so they use past performance instead of reason. Reason is simply a very expensive way to trade. Good traders trade what they see not what they want to see.

After a bit more observation they will look for shorts. Why should they cash in while the bull runs strong? Please ... someone explain the logic to me.

 

[pfranz]

Quote from m22au:

I have had similar thoughts over the past year or two. However maybe it's QE combined with the following two factors:

(1) Momentum ("Where else do you put your money with interest rates so low?")

(2) The belief that should equities decline by a big amount (let's say 10%) that the Fed will increase its QE program to an amount more than $85 billion a month, which is supportive for risk assets.

(3) FED (and probably BCE,BOJ,and other central banks) manipulation of markets, probably in an agreement with major market players (Goldman Sachs, Soros...)

By the way, Tepper had made an estimate of how much money investors had kept aside of market and would be forced to put in it again in the end. That's what made him think that rise would continue.
Of course no market goes up forever, but the end for this doesn't look near.

 

[m22au]

Quote from Swan Noir:

I'm not an equity investor/trader but ....

Maybe it just depends on an individual's timeframe.

I'm sure that talented traders with timeframes measured in hours or days could have made great money buying momentum stocks in February 2000.

But for those with longer timeframes, it would have been a bit silly.

Also it depends on one's stock selection. The difference in performance between SCTY and JCP in recent weeks and months is quite obvious. Both a bull buying SCTY and a bear shorting JCP would have done well with those trades.

 

[denner]

Quote from m22au:



(2) The belief that should equities decline by a big amount (let's say 10%) that the Fed will increase its QE program to an amount more than $85 billion a month, which is supportive for risk assets.

That's your answer right there.

We have to remember the number of times the market had sharp pullbacks over the past 3+ years (in the midst of this unprecedented monetary policy)...each time it was the "market" testing the willingness of the Fed to pull back the reigns on this grand experiment.

Each and every time they blinked...gave in to the demands for ever more accomodative policy. This past episode has proven once and for all that they will NEVER reverse course. And yes, any significant sell-off would imply upping the ante for the nth time.

 

[Ash1972]

It's amazing how many people here think it's different this time. Please, for god's sake, look at market HISTORY, ideally over a multi century period.

Every speculative bubble pops. There hasn't been a single exception so far, and this is not one either.

 

[m22au]

Quote from Ash1972:

It's amazing how many people here think it's different this time. Please, for god's sake, look at market HISTORY, ideally over a multi century period.

Every speculative bubble pops. There hasn't been a single exception so far, and this is not one either.

It depends what you mean by "speculative bubble".

If you have very high inflation / hyperinflation (although the US is not there yet), then stocks usually do extremely well. You could characterise the increase in Venezuelan stocks as 'speculative'

http://www.zerohedge.com/news/2013-10-18/sorry-russell-2000-caracas-stock-market-shows-how-its-done

but ultimately it makes sense if the currency is being debased.

Is the movement in the Caracas index a "speculative bubble"? Or just people protecting their purchasing power?

What is different in 2013 in the US is that you have the Fed providing $85 billion a month. And participants believing they'll be there with more on any significant pullback.

There is the chance that I'm wrong and that equities can decline in the coming months despite the Fed being helpful. But if the Fed has its printing press, and Bernanke/Yellen are ready to use it, then this is likely to be supportive for equities.

 

[eurusdzn]

Seems it is different this time. Easing into a surging equity market. Thats different.
Input costs(most commodities) and money proxies / metals relatively weak despite easing.
Thats different. Bond market... Not really anymore is it?
I am not a big critic of fed monetary police since QE1. I do wish they would not be so hypersensitive and accomodatibe to the sp500s small reactions/pullbacks.
The stock market is not downside sensitive to events and this dampening continues.
I think central banks that prove they will act on their own behalf and coordinate when necessary can continue to put a floor under the last man standing ( equities). They have been for two years now as QE has been inefective towards anything but stocks. Yet the recovery hope can is kicked to 2014. I think the fed still weighs recession fear higher than
the effect of their actions.
Why cant they continue to repress/ manipulate / manage the stock market.
I dont think the last 30 or so years of how the market "reacts" apply any more.
350 years? QE and the last 5 are all thet matter to me. I am trying to forget the previous 30 years.
QE forever..

Ps. I hope i am still rational. I see the problem banks and some big companies having problems and DVD renters are carryimg the market.
Remember 1999 when all concerns were going up but there were three major waves.
Internets failed first followed by semis amd biotechs. Some similarities here.

 

[denner]

Quote from Ash1972:

It's amazing how many people here think it's different this time. Please, for god's sake, look at market HISTORY, ideally over a multi century period.

Every speculative bubble pops. There hasn't been a single exception so far, and this is not one either.

The difference is that in prior asset bubbles, the Fed would EVENTUALLY ACT. As we've seen these past 5 years and running, there is very little that will get these bureaucrats to reign in the excessive liquidity. We get the non-stop double talk about the dual mandate, the good cop/bad cop routine with some hawkish commentary balanced with dovish commentary, an annual circle jerk whereby the bureaucrats tell us that "seriously, this time we MAY be LESS accomodative...the market sells off for a few weeks and they change their tune..

Economic data becomes completely irrelevant, especially in light of their multi-year ZIRP extensions.

Even if some of us seem to imply that it's "different this time"...well it most certainly is...regardless of the fact that all asset bubbles eventually collapse. At this point in time, many of us just marvel at just how far these central planners are willing to push the envelope to create this illusion of false prosperity.

 

[bighog]

The bottom line. The absolute bottom line.

There are many, many thought processes about what the fed has been doing by traders, investors, economists, politicians etc,etc.

The REAL reason zooms right over their heads not because they can not understand why, but because they do not want to face the fact itself.

DEFLATION is the why. Wage deflation has been declining for years. The question to be answered is this: How can anyone expect inflation to increase prices when consumer demand is in the tank because smaller and smaller paychecks every week relative to the value of the dollar and PPP (purchasing power parity) as the prices rise at the grocery store, insurance for car, home, price of a new car, etc, etc.....etc.

Sure, many at the top get wage increases, sure stocks keep going up because the fed THOUGHT by raising asset prices we would get the famous "trickle down" to regular folks. That did not and will not happen because the greedy fucks at the top want it all.

Bottom line "we have NOT seen the bottom yet"......... :eek:

PS: Tepper is a realist, he manages his fund as HE sees inside the "situation awareness" instead of trying to explain the reasons WHY to others. He just acts on the end process of what the fed is trying to get across to the whole economy...........he does not act on what others think........