market folly

David Tepper of hedge fund Appaloosa Management appeared on CNBC today to share his thoughts on markets.

In the interview, Tepper talked about the concept of flows and if all the money is flowing one way, then you have to buy the dips.  But if all the money starts flowing the other way, then you've got to sell the rips.

Tepper said, "I'm not probably as bullish as I could be because I have problems with earnings growth, I have problems with multiples... so I can't really call myself a bull.  However, I will say this, if you invest today in the stock market if earnings grow 5.5% per year you will make money at the end of five years."

He also noted that if you're fully invested now, it's not a bad time to take some money off the table.  Tepper also went on to say that if we had a 15-20% correction, "I would buy."

He says that valuations are adjusting to new realities and before "jumping back in the water" he wants to see big stocks with emerging markets components have their P/E's come down and mutual funds with higher cash levels.

Tepper notes that the US is fine with low unemployment and that it's an individual stockpicking moment.  But he also says that you "don't have that cushion of safety" in the stock market right now.

When you have lower global growth, you'll see lower P/E's, Tepper says.  The Appaloosa manager said that Apple (AAPL) has a low multiple and he owns it (though it's only around a 0.75% position for them now that they're just maintaining).  He says it will always have a low multiple because it's a device company with technological risk.  But it has China exposure, which the market dislikes these days. 

He mentioned he no longer owns Alibaba (BABA) as well.  He said he read the Chinese situation wrong and got out in early July.  "They just keep making policy mistake after policy mistake over there," Tepper notes.

Tepper also says that he thinks it's going to be hard to hit earnings estimates next year.  He argued that "flat is not a bad place to be" right now, referring to his exposure levels in equities.  He says he's not a great short seller and doesn't think levels are high enough right now.  But if the Federal Reserve doesn't tighten and the market gets excited about that, then he might bring himself to short.

He again reiterated that, "We don't have a huge equity book" right now.

Tepper then noted: "I have a saying in my office: 'There's a time to make money, and there's a time not to lose money.' What time is this? Not to lose money."


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