Leon Cooperman: SEC Needs To Investigate Quants, Algos

Leon Cooperman: SEC Needs To Investigate Quants, Algos
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Omega Advisors founder Leon Cooperman blamed officials at the Securities and Exchange Commission for failing to address the impact computerized trading has had on the broader market and how it exacerbates volatility during market swings.

Leon Cooperman Says SEC Needs To Investigate Computerized Trading

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Q3 hedge fund letters, conference, scoops etc

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Hedge fund legend Leon Cooperman says there's no sign of a recession

No country is interested in driving toward recession, says investor Leon Cooperman

No country is interested in driving toward recession, says investor Leon Cooperman


I think your next guest ought to be somebody from the FCC to explain why they have sat back calmly quietly without saying anything and allowing these algorithmic trend following models to wreak havoc with what has up to now been the best capital market in the world. OK. And they don't seem to say anything you know. And then in the mid 1930s the Institute of the uptick rule to deal with the abuses of 29. It worked effectively for 70 odd years. They took it out in 2008 for some unexplainable reason and they created a wild wild west environment the stock market and volatility is destroying confidence. Now what I know from 50 odd years was vesting know Bear markets don't materialize at Immaculate Conception. They come about for certain fundamental reasons that the stock market is seeing. So number one cause a bear market is the stock market smelling an oncoming recession. I won't cite all the economic data but there's just no signs of recession. The ADP flash employment number the economy is growing is going to grow at a slower rate next year than this year.

In all likelihood it's growing. OK. Number two inflation is moderating inflation is now below the Fed's target to surge. It causes because a bear market is a hostile fed. If anything the Fed has been too easy and the level of interest rates are totally non-competitive to the stock market in my opinion any kind of historical context. The 10 year bond is now out this morning that it was2.8 something percent 2 8 7 maybe lower at this moment 2 8 5 as we're looking at well let me give you a statistic in the last 50 or 60 years the S&P multiple average around 15. OK we're using a hundred seventy two dollars in S&P earnings. So the market multiple now is about 15 times.

But in that 50 60 a period with a multiple in the market 15 the 10 year government averaged over six currently less than half of that.

And the average fund fed funds rate was 5 percent currently a little bit over 2 percent. OK. So you know relative to interest rates the stock market's a bargain. Earnings are growing maybe 6 to 8 percent next year. That is very reasonable. As you know I often quote the great line of John Templeton bull markets are born of pessimism growing skepticism mature enough undying euphoria whereas the euphoria. Everybody's looking over their shoulder worried about things. And so you know I have to say that I wouldn't buy my favorite stocks here. OK I know what the issues are. We have an extended profit margins Sopi which tend to be mean reverting but there's no signs of March heading down. The country is possibly moving to the left which is a long term concern that I have that young people today don't embrace capitalism. OK and that's a problem. Third we have a debt problem. There's no question about that. And when that hits and forth we have an unconventional White House that destabilizes people periodically. What.

What if the economy is slowing more dramatically than people think.

And for a variety of reasons that question asked me that question when the market's up 50 S&P points that was down 50. All I know is earnings are coming in better than expected earnings estimates are going up to a two or three companies report this morning. I'm a little out of touch but my team sent me an e-mail. They were better than expected guidance was increased et cetera. You know into that 19 I guess 87 during the portfolio insurance and I guess I should make the point I lived through these periods in the past we had portfolio insurance OK. The market one day dropped 22 percent. Everybody yelled recession is no. No effect on the economy. OK. People are less involved in the stock market today than they were involved back.

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Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver

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