Prove Yourself Smarter Than Your Local Billionaire
In this week's issue of "Are You Smarter Than Your Local Billionaire?" we examine a few words from a Mr. David Tepper. Tepper, for those who've been stuck in an Excel template for the last 5 years, is the founder of Appaloosa Management and the guy who the New York Times named in March of this year as the top-earning hedge fund manager in the world in 2009.
For further musings on Tepper, I refer you all to this New York Magazine profile on Tepper, which is fascinating and portrays Tepper as a guy who has, for various reasons (professional and otherwise), had issues with being Fuck-You rich. The title of the article is "Ready to Be Rich," and while part of me thinks (while sarcastically clapping), "well, we're all so happy for you, David, that you're finally ready to embrace your piles and piles of f*cking money," the guy has made some very smart (and ballsy) bets, routinely brings astronomical returns for his investors, and very likely deserves his revered status among distressed-debt (and every other group of) investors.
Regardless of Tepper's personal quirks, the guy is notoriously shy about granting interviews, so when he goes on CNBC and offers a few soundbytes, you seize the opportunity. Especially when he displays some optimism(!):
QE.“Either the economy is going to get better by itself in the next three months...What assets are going to do well? Stocks are going to do well, bonds won't do so well, gold won't do as well, or the economy is not going to pick up in the next three months and the Fed is going to come in with"Then what's going to do well? Everything, in the near term (though) not bonds...So let's see what I got—I got two different situations: One, the economy gets better by itself, stocks are better, bonds are worse, gold is probably worse. The other situation is the fed comes in with money."
So, essentially, Tepper is saying that all asset classes are going up whether the economy recovers or not -- and the guy may very well be right in assuming that, in nominal terms, the major averages will lift when and if the Fed does it a little easing ... but, being a pro investor, the guy is only concerned with near-term nominal performance (which I would argue is a macro problem in our economic psychology) ... and perhaps the very inflation Tepper speaks of that will boost all yachts on a rising tide might still KO the underlying economy-thingy? ... Fed hubris ... continuing to believe it can keep long-term interest rates from rising ... bonds could wake up ... yadda yadda ...
But, I want to stay out of this, and I want to hear your thoughts -- I want to see you guys prove yourselves smarter than Tepper, as ridiculous as that task may seem. Hey, even if you think he's right, prove him wrong, maybe I'll send him your resume.
And, if you get nervous at any point, just look at the accompanying picture of Example #1 of the Great Nerd Fro -- an elusive and endangered specie.
It's smarter to be lucky than it is lucky to be smart.
Just sayin'.
compound growth of 30%. Is that for real? This was a really awkward interview.
haha just got to the "hi mom" part
The interview is definitely awkward. The idea that the best hedge fund managers are a little crazy isn't too far off. While I agree that assets will appreciate in nominal terms, I'd say it might be a couple years before that happens, and you might not want to be long risk assets for those years (or short Treasuries for that matter). Long-dated options seem like a good bet, especially considering how low vol has been lately.
My CAGR for the past 10 years was 34%.
Yet, you aren't a billionaire?!?
Regards
Double posted.
Woops
Gate, you're 29. You can't count CAGR on your $1000 in assets that you had to start. This guy had 30% cagr for 17 years on millions to start.
Wrong. I started out investing at a real young age as a hobby and held a methodical system when selecting stocks. My absolute returns are over 2600% (yeah you read it right : Two thousand Six hundred percent) and again a CAGR of over 33%.
I started out with a very little capital. And my portfolio is still doing great. I made over 103% last year.
Dude, you didn't even come remotely close to addressing what BCbanker wrote.
Congrats on your great returns. That being said, don't get too over confident. Also, what you are doing with a small about of money does not scale up when you are managing billions. You are talking about apples and oranges.
I agree with what you are saying. I consider the relative small size of capital I have under management as an advantage.
More like apples and aircraft carriers
Absolutely, you are much more nimble. That is the curse of successful money managers.
Right. But I am far from the billions being managed by that guy, so there is plenty of money to be made. Patience is the name of the game. And even if one manages billions the example to look at is Buffet. One buys companies whole sale instead of playing the speculator/trader game.
Thanks for the advice Anthony
BCbanker was implying that those returns are extremely hard to replicate with the capital base Druckenmiller had, ie. hundreds of millions. That being said, props on your returns.
Tepper forgot secret option number 3: That QE 2 (when it happens), fails. I mean, 0% interest rates and QE 1 worked so well to keep things afloat, but this time will be different!
Seriously, things aren't looking so good. Price stocks in gold and you will see a bear market.
Doug Kass is skeptical of Tepper's views on QE2: http://www.thestreet.com/story/10878684/1/kass-quantitative-wheezing.ht…
I actually found the interview quite entertaining.
How does one justify 30% returns with Bonds?
Consequuntur sed eum cupiditate incidunt velit nemo. Perferendis voluptatem animi ad voluptatem quo. Perferendis laboriosam praesentium commodi ut ipsam. Facilis consequatur qui aut dolore tempora tenetur. Reiciendis sed nostrum qui vel est aut ea quibusdam. Voluptas doloribus ipsum aut velit cumque nisi.
Fugit suscipit sit perferendis iusto voluptates dolorum nulla qui. Deserunt et consequatur suscipit distinctio qui.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...