The Tepper Top: Appaloosa Founder's Bullishness Fizzles

"The 17-year river [of reserve currency buildup and QE around the world] is no longer flowing," warns Appaloosa's David Tepper, and "turbulence" is now the norm.

Yesterday we cautioned that today's Tepper appearance may not be the euphoric 'buy it all' event that so many people hoped for (especially since a month ago we laid out Tepper's 13F where dramatic changes and a substantial derisking hinted to us that Tepper may have called the market top with this positions).

Sure enough Tepper is worried about the Quantitative Tightening we have recently exposed (and here), saying "people claim China and EM won't make a difference... they are wrong... you can't have it both ways," and the shift will be much faster than anyone expects. As we previously explained...

Let’s start with risk assets, proxied by global equity prices. It would appear at  first glance that the correlation is negative in that when central bank liquidity is expanding, equities are falling and vice versa. Of course this likely suggests a policy response in that central banks are typically “late” so that they react once equities are falling and then equities tend to recover.


If we shift liquidity forward 6 quarters we can see that the market “leads” anticipated” additional liquidity by something similar.


This is very worrying now in that it suggests that equity price appreciation could decelerate easily to -20 or even 40 percent based on near zero central bank liquidity, assuming similar multipliers to the post crisis period.

When the flows change, you have to change positions - VIX 22 is too low - "expect surging vol", 18x PE is too high - "margins are set to drop - I have problems with earnings growth and problems with multiples" - "Flat stocks is not a bad place to be."

As Tepper concludes "we don't have a cushion of safety in the stock market anymore."



Tepper speaks...


Or put another way...

Tepper's market-topping conclusion: unless central banks are on our side again, then "every rally should be sold."