Saturday, September 27, 2014


It's stuff like this that should have all of us pulling our hair out.

I received a faux editorial-ad that talks up the market skills of billionaire hedge fund manager David Tepper. His firm, Appaloosa Management, manages about $20 billion. Tepper was paid well over $3 billion in 2013.

Below is a snippet of an editorial-ad championing Tepper's market skills. It's partially written in market-speak. My translation follows below.

Recently, at the SkyBridge Alternatives Conference in Las Vegas, [Tepper] said, “The market is kind of dangerous in a way.” He cites a slow growing U.S. economy coupled with a complacent Federal Reserve as the reason for his nervousness. 
And who can blame him with the stock market trading at all time highs.Tepper has proven his ability to accurately time financial markets for maximum gains. Following the subprime crisis, he bought heavy into the financial sector and returned 132% to his investors.  
Then in September 2010, when the Federal Reserve virtually guaranteed a backstop to a fragile economy, he felt his only option was to increase his exposure to stocks — which proved to be the right move.
Today Tepper is more afraid of deflation than inflation, but he’s not recommending investors sell everything and hideout in a bunker with food and guns. He said, “I’m not saying go short, just don’t be too frickin long.” He does, however, feel investors would be wise to raise cash, which is always prudent advice when markets have gone nearly straight up for 5 years.
What the editorial-ad says is Mr. Tepper is worried about a weak economy because the Federal Reserve may no longer be dumping as much cheap money into the market as it has done in the past. At another level it says what I've been saying for years. The market gains we've been seeing are not real. It's all artificially inflated with Fed cash.

There is no magic of the market logic at work here. Tepper is no genius. He simply understands that when the federal government dumps trillions of dollars into the economy "the market" does better.

What makes all of this so frustrating is that the ad congratulates Tepper for having the foresight to buy "into the financial sector" and then the stock market after Washington came to the rescue with bailout cash and cheap money.

So, yeah, we're supposed to be impressed that Tepper - and every other wealth manager for that matter - jumped into a bailed out market that virtually guaranteed both the financial sector and the stock market would succeed.

This isn't extraordinary market foresight. It's common sense, built around bailout cash.

The piece ends with Tepper saying ("I'm not saying go short, just don't be too frickin long") don't put all your eggs in one basket, because no one knows what the Fed is going to do.

In effect, Mr. Tepper is charging his clients 20 percent for "market" successes and advise that, ultimately, are driven by what the federal government does. Take away the bailouts and the Fed's trillion dollar dumps and Tepper's clients are probably suing him instead of worshiping him.

My friends, Tepper isn't a mystical Wall Street guru drawing from market insights only he can see.

Mr. Tepper understands a good market subsidy - the bailouts and cheap Fed money - and is simply reacting to anticipated money flows from bailouts and the Federal Reserve's money dumps. His "insights" come from understanding what the man behind the curtain is doing for our markets.

Tepper making money in our markets is not a product of genius. A monkey throwing darts could have made money in our market over the past 30 years.

The point is, we need to stop worshiping the guys on Wall Street who handle our money. Their genius and successes are a product of bailouts, and trillions in cheap money. The game is rigged.

Today, all Tepper is doing is watching the Fed, and telling us what the simple country farmer has always known. Don't put all your eggs in one basket.

- Mark

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