The talk about Fed tapering is not something that needs fearing; it is a sign that economic conditions are better.
Even with the less stimulus there’re good times following for the stocks, according to David Tepper, manager of hedge fund by Appaloosa.
The investors are wallowing in the liquidity that Federal Reserve has pumped out. The balance sheet of bank now has swollen to around $3.4 trillion. Also, the asset prices inflated along with it.
The simple money policies created the environment where the good news is considered bad, and the bad news considered good as that means that easy money would keep on flowing.
Still, Fed is cranking out around $85bn each month for stimulating economy. But on Wednesday, when chairman of Fed, Ben Bernanke did announce money slow might slow down in this year later and markets plummeted when it was known.
The markets of US fell 1.4% this Wednesday before decreasing 2.5% again on Thursday. Tepper said that all concern in market is just because Fed sees economy healthier in future. He explained that economy was getting better, also better are the autos, housing, and that still continues improving. Tepper said that they couldn’t find enough of the people in order to work in the housing. According to him, this is the only factor holding this back at the moment.
He continued saying that if investors truly wish continued strength like this in markets, they do need recognizing that’s only possible when Fed does pull back.
He further explained that if Fed didn’t taper back, they were going to be into the market that’s hyper-drive and that that was backwards argument. He said that to keep markets progressing at steady pace, Fed should taper back.
Markets have been captured so much by fear that a lot of people have missed key point within this taper talk.Bernanke offered the reassurance that when market swings do undermine the growth of US, then Fed would reverse the course and also remove stimulus much gingerly.
It is believed by Tepper that the outlook tends to be so bullish he is scared about being short of anything. According to him, there’s estimated $400bn in the unallocated cash that is looking for some place that it could go, and the socks are one likely home.
Tepper also warned the ones who dare to have the market short to have shovel to take themselves from grave.
Sell off that was prompted by the comments of Bernanke also hit bond market. The yields over Treasurys hit highest level from October 2011.
Tepper also told that bond market was concerned about the strength and one bond of ten-year at 2.4% or even 3% if that was due to the strength ultimately is healthy and that he himself thinks that they need to be tapered and when dust did settle it would be one place, stocks