Hedge fund manager, David Tepper, appeared on Bloomberg TV earlier today where he gushed with bullish optimism and declared that the U.S. was on the verge of an explosion of greatness.
Greatness for whom, that is the question? Maybe greatness for guys like Tepper, who got off easy with only having to fork over a few extra percent in taxes thanks to the recent fiscal cliff deal. Other than that, Tepper and his hedge fund buddies will be left alone to conduct their billion dollar gambling games in the world's financial markets. So when you're paying more for a gallon of gas and a loaf of bread be sure to remember who to thank.
I find it bizarre that Tepper's so optimistic now, even though we've just seen taxes raised on working people, austerty about to happen in the U.S. and a president who's been freshly installed for a second term with entitlement reform on his agenda. Yet despite all this, Tepper says there basically nothoing to be bearish about.
15 comments:
I'd escort Mr Tepper down for a tour of Obama's old stomping grounds around Cottage Grove and 55th St to help disabuse him of this impending greatness he speaks of.
Mike,
If you think that the federal govt is the primary driver of the economy, then I understand your bearishness. However, if you believe, as I do, that the private sector is the primary driver, then there are plenty of reasons to be bullish. It appears that the private sector balance sheet recession has run its course. Both corporate and household balance sheets have largely been repaired. Real estate prices have declined to an affordable level and are starting to rise again. A new cycle of private sector releveraging appears to be upon us, which should far outweigh any public sector austerity. Not that there will be much govt austerity. Watch what they do, not what they say.
Geoff, without an increase in wages (lower and middle class income) there is going to be no new consumer re-leveraging. The deleveraging has not run its course for consumers, and the housing market is bottoming, maybe. The rise is sales has been due to cash purchases and bundled deals to large investors. These properties are being acquired to be flipped. Housing has not dropped into the affordable range for most people without the historically low mortgage rates and as soon as there is a genuine recovery, rates will begin rising, pricing many of the lower 80% out of the market. People who are looking at this as a business cycle are blindsided to what is really happening.
BTW, how many realize that college loans are now the new mortgage that is competing with actual mortgages. And vehicles became the new mortgage several years ago. This is not like the bottom of previous business cycles.
There is a very good chance that what most people have taken for the first leg of new bull market is actually a bear market rally.
Mike - I think I agree with David Tepper and I think Geoff has pretty much nailed the reasons why it might be time to bullish. I would add that C&I loans are making consistent gains, so banks are loosening up on credit. Moreover, I just saw a segment on Bloomberg TV with an interview of a Citigroup economist (sorry didn't catch his name and can't find the video) who was quite bullish based on Citi's corporate profits model which he argues is on the cusp of signaling wage increases. He was making a case for why corporate profits and capital investment has paved the way for more hiring and higher wages.
Geoff and Ed:
Tepper may be right about conditions for folks in his income bracket, however, for the middle class and the poor, there will certainly not be an explosion of greatness, I can assure you.
Just because the stock market is booming, doesn't mean things are great. And household balance sheets have certainly shed a lot of debt, but how much of that was voluntary? If you declared bankruptcy, go try to get credit. Even if you haven't declared bankruptcy, if your credit is impaired, you won't be able to get a loan.
Tom, thanks for your reply. Average hourly earnings are currently growing above 2% YOY, which isn’t too shabby. And to argue that a recovery will cause interest rates to rise, which will in turn kill the recovery is pretty circular. The Fed will likely err on the side of caution and keep rates low well into the recovery, which should provide a solid foundation.
This is just my opinion. Time will tell whether this is the first leg of a new bull or is simply a bear mkt rally.
Someone's long looking for average (read dumb) investors to bail him out.
@Geoff, while there is limited info and data study up on the Long Depression - it's a 15-20 year cycle(if we're luck), not 5 years without MASSIVE government involvement - look at Japan.
BTW, Mike, I really like the contrariness of your Yen call. The fact that so many people are bearish of the Yen for the wrong reasons makes it very tempting for me to join you. However, there are also some legitimate reasons to be bearish, like if Abe really does stimulate fiscally. You need some big brass kahunas to go long. Respect. I'm too chicken.
Sept: 59B surplus
october: 120B deficit
November: 180B deficit
Dec: 20B surplus
jan (so far): 39B deficit
Looks like we may be "living" on Octs and Novs $NFA injections...
Dec and Jan numbers dont look good... we have a $50B/mo tax bill just for SS, not including Medicare and this was before the tax increase in January....
How can the non-govt sector pay these taxes in month 2 if the govt does not give them at least the balances due in month 1?
rsp
Average hourly earnings are currently growing above 2% YOY, which isn’t too shabby
I don't believe in averages, per capita, etc. without seeing how it deconstructs. In an era of extreme inequality averages and per capita are meaningless numbers.
When I was paying attention to analysts, I paid attention to those that looked out the window and especially to those that actually visited firms and interviewed people, instead of those that just looked at reports.
If you lend credence to cycles then we are in a cyclical bull market in secular bear. Historically that means we need one more washout before we enter a secular bull.
That's my read.
Malmo -- I think Obama needs to go back to Cottage Grove and 55th himself and see what's going on.
Geoff -- I agree with Tom re: deleveraging is not anywhere near good enough, particularly with so many bankruptcies. Foreclosures are being held back by the big banks and servicers because it's more profitable to keep them on the books and adding fees than to foreclose and try to sell in this poor market. And austerity has already begun with the end of the payroll tax holiday (what they've done, not just said). And I still believe that Obama will make the Grand Bargain/Betrayal.
Ed -- Of course Citigroup sees it that way, but they're talking their book. And like Tom says, average wages is meaningless, particularly now with such intense inequality.
Sure seems like we've reached a new, lower, flatline. Not a turnaround.
Where's the zooming aggregate demand, and from which segments? The 99%, or the 1%.
This whole discussion is a repeat of things hashed out >2 years ago in the Mosler/Wray/Mitchell MMT blogs.
bought groceries at Kroegers yesterday basic stuff for one person to last about 1-1/2 weeks, and it was 300.00 dollars USD. No inflation here! the gubbament has bullshit numbers on inflation go shadowstats for the real deal on material inflation, now on bloomberg today MCD says higher wages will cut into margins, those must be some real high paying jobs flippin hamburgers and servin up mystery meat pig ribs? Big scare out in Calif last week when the food stamps cards didnt work for a few days! Signs are all around us, I see the high end retailers getting hurt by the internet buyers, xmas just happened and the retailers had a lousy xmas,we are due for a 5% correction soon.
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