It has been a while since Tepper warned of "nervous time [9]" and told his hedge fund pals "don't be too freakin' long."
Since then the manipulated equity market bubble has gone straight up with every single dip bought massively by the algos, in the process surely eliminating any nervous thoughts Tepper may have had. So in a world starved for pundit philosophy, Bloomberg just reported that the bond market bubble is about to pop, at least according to the folicularly challenged billionaire. The reason, paradoxically enough, the ECB's decision to monetize private assets and cut rates.
BREAKING: Tepper: ECB decision means "beginning of the end" of bond market bubble
— Bloomberg TV (@BloombergTV) September 4, 2014 [10]
Empirically, Tepper may be right: in the past every time a central bank has launched a massive easing program (think QE1, QE2, Twist, QE3, etc.) it resulted in aggressive stock buying offset by bond selling. The issue is when said programs came to an end, and led to major selloffs in equities, pushing bonds to newer and lower record low yields. So perhaps for the time being, we may have seen the lows in the 10Year and in the periphery. The question is what happens when Europe's latest "Private QE" operation comes to an end: just how massive will the bond bid be when all the money currently invested in risk assets decided to shift out all in one move.
More importantly, it also explains why central banks now have to work in a constant, staggered basis when easing, as the global capital markets simply can not exist in a world in which every single central bank stops cold turkey with the "market" manipulation and/or liquidity injections.
* * *
In May of last year, Appaloosa's David Tepper explained "as long as the central banks are worried about deflation, I am not worried about inflation." However, it appears the the $20 billion fund manager has changed his tune, noting in a Bloomberg TV interview that "“Draghi wants inflation in the Euro zone. He will not stop." Having slammed Draghi in May for being "really far behind the curve," Tepper now believes the ECB Chief's actions mean "it’s the beginning of the end of the bond market rally... We are done."
"What the ECB did today is very important; they want growth, an increase in the money supply, and inflation. Basically what it all means for the market is higher equity prices and the beginning of the end of the world bond market bubble."
* * *
Finally, one wonders: just what will be the catalyst that forces equity investor David Tepper to see the end of the equity bubble?
