David Tepper, co-founder of the hedge fund Appaloosa Management, considers the recent ECB announcement and sees a market environment change as do other hedge funds and financial analysts.
David Tepper: ECB’s announcement is very important
“What the ECB did today was very important,” he was quoted as saying on a Bloomberg report with Stephanie Ruhle. “They want growth, an increase in the money supply and inflation,” which is similar to the core moves by the US Federal Reserve in how it managed economic stimulus. “We are done.” Tepper, in similar fashion to other market analysts, is considering the ramifications of loss money across the Eurozone and is drawing similar conclusions with a Barclays report, but he is taking the issue one step further. “What it means is higher (EU) equity prices,” Tepper noted, then turning to the U.S. extension of the prediction considered the “bond bubble,” an issue that hedge fund yield curve and volatility traders have been closely watching. The ECB announcement is clear, Tepper asserts, and it means “the beginning of the end of the world bond market bubble.”
David Tepper’s analysis for his investments
When pressed on what this analysis meant for his investments, Tepper was reported to have said the statement was clear on his positioning. It likely means he is long European equities with a potential currency hedge and a position selling US long duration bonds. The report notes Tepper had previously warned attendees he was nervous about financial markets due to the lack of economic expansion and the ECB was struggling to revive growth. The hedge fund billionaire noted the ECB was “really far behind the curve” and should boost its stimulus program.
Draghi calling for inflation is the beginning of the end for the current market phase, and his move is receiving international support. In a press release Christine Lagarde, Managing Director of the International Monetary Fund (IMF), was excited about the prospects of U.S. style stimulus being lavished on the Eurozone. “We strongly welcome the measures taken by the ECB, which will help to counteract the dangers posed by an extended period of low inflation,” Lagarde was quoted as saying in a statement, being careful to use the words “low inflation” rather than the more alarming “deflation” descriptor. ECB President Draghi is apparently responding to stagnate Eurozone inflation was just 0.3 percent last month, well below the ECB’s 2 percent target, the report noted. Inflation numbers picked up in the US and Japan as a result of simulative efforts, most evident in commodity prices. Prices of U.S.-based commodities, however, could begin to enter an unusual period of time. As the U.S. simulative effort potentially leads to a cooling, the primary reaction could be seen in how commodity prices react to a stronger U.S. dollar. As the ECB cranks up the printing presses to flood markets with liquidity, the euro currency is likely to trend lower while the U.S. dollar is likely to climb. A higher U.S. dollar is typically a negative for U.S. based commodities, particularly agricultural commodities.