In the 1954 classic “Lord of the Flies” a group of English schoolboys are stranded on a deserted island. Lacking adult supervision the lads attempt to impose some form of social order. Among these doomed strategies is the passing of a conch shell, the bearer of which has the right to speak to the group without interruption.
Last week in Las Vegas a group of wealthy financial professionals gathered, largely without spousal supervision and took turns vying for the collective attention of their peers and assembled media. Wednesday evening billionaire David Tepper grabbed the conch (in this case a mic) and passed his judgement on the markets.
“I am nervous,” said Tepper, who runs the $20 billion Appaloosa Management. “I think it’s nervous time.”
The S&P 500 (^GSPC) promptly dumped 1.5%. Main Street can kneel at the feet of Warren Buffett but as far as Wall Street’s active savages are concerned, Mr. Tepper has the conch when it comes to diagnosing the state of the U.S. market.
In the attached clip Josh Brown, CEO of Ritholtz Wealth Management and co-Author of the book Clash of the Financial Pundits says Tepper deserves respect because of his long-term track record, but he’s got total command of the room because of his astonishing $3.5 billion salary last year.
“We tend to gravitate towards the opinions of people who’ve been right recently. Whether or not that’s such a great idea is something we talk about in the book but (Tepper) has been extraordinarily right in the post-crisis period,” Brown explains.
Tepper got the rally right and made a ton of money because of it. Now he’s pulling in his horns a bit, suggesting gains are going to be harder to come by than they have been in recent years.
Brown says it’s not just Tepper, but also David Einhorn and others who are expressing the same generally cautious view. Not all of them have the power to send stocks crumbling but certainly taken as a whole they are impossible to ignore. The fact is the economic data that was getting cranked up nicely at the end of last year hit the wall over the winter.
Could weather be the blame? Probably, but with a more than 30% gain last year any slowdown in the earnings picture makes selling the better part of valor. Considering the assortment of discredited rogues and buffoons who’ve held sway over the public mood, only to cost followers untold riches, Tepper and Einhorn’s guarded skepticism capturing so much mind share is one of the healthier factors working in the stock market’s favor.
Brown says doom and gloom is out of favor, and those who see nothing but flowers come across as either insane or talking their books. “The bond kings are no longer influential. We don’t have the cheap strategists at brokerage firms… no one is listening to those guys anymore.
“We don’t have perma-bulls or perma-bears; these guys are not getting attention. I think sobering remarks from pundits who play both sides of the markets are what people are paying attention to right now and I like it.”
It’s the golden age of punditry, folks. Enjoy it while it lasts. History suggests being rational is a liability when it comes to holding sway over the mindset of investing masses for very long.
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