Where The Bulls Aren't
EDITOR'S NOTE
Well, now we can add Stan Druckenmiller and David Tepper to the list of Big Name Bears on the market.
Druckenmiller, in remarks Tuesday evening, said "the risk-reward for equity is maybe as bad as I've seen it in my career." Tepper told Scott Wapner on Halftime Report yesterday that this is "maybe the second-most overvalued stock market I've ever seen," behind the 1999 dotcom bubble. They join Sam Zell, Paul Singer, Paul Tudor Jones, Leon Cooperman, Carl Icahn, and Mark Cuban on the list of Big Name Bears.
This hasn't escaped the notice of President Trump, who yesterday morning tweeted "When the so-called "rich guys" speak negatively about the market, you must always remember that some are betting big against it, and make a lot of money if it goes down. Then they go positive, get big publicity, and make it going up. They get you both ways. Barely legal?"
And Jurrien Timmer of Fidelity pointed this out on our show yesterday as well. Timmer said the market doesn't seem insanely overvalued to him, because it's basically tracking the markdown in future S&P 500 earnings. The S&P is off roughly 15% from the highs, and earnings estimates for 2022 have also come down about 15%. Basically, if you're in the "swoosh" camp (yes, that's the latest consensus "shape" for the recovery), Timmer says the S&P makes sense between 2500 and 2800.
But he also said--and this seemed to catch the ire of Peter Schiff--that all of this goes back to six weeks ago when the Fed launched its humongous liquidity provisions, asset buying, and lending programs which "removed the left tail [of risk], essentially," and set us on the path to a swoosh, if not a V, recovery.
And Timmer thinks that is why Warren Buffett and Sam Zell in particular aren't making big splashy buys right now. Buffett "didn't have any really juicy bargains to buy...because the Fed didn't allow bargain-basement prices to come in and cause bankruptcies that Buffett and Zell can swoop up," Timmer said.
I think that makes a lot of sense. It's why Bill Miller--one of the few Big Names who was very bullish (on our show) right near the bottom--is less bullish now; because the rebound in stocks has been even swifter than he expected. In other words, if Big Names are bearish because the Fed's response has worked, that's very different than them being bearish because they think it hasn't worked or will hurt more than help (which is more the Druckenmiller and Paul Singer camp).
What do I think of the Fed's actions? The liquidity measures--all of the emergency lending facilities that got up and running quickly--make a lot of sense to me and immediately helped stop the market panic. The asset purchases I am much warier of. And the lending/grant programs seem doomed from the start. They are absolutely needed, don't get me wrong; but they really should have come from the traditional government side.
The whole response, I think, ought to feel more FEMA-like, because we basically just had an invisible tidal wave flatten the country. It's why I keep calling the government's relief efforts relief, not "bailouts" or "stimulus."
But there's one thing, going back to the Big Names, that keeps bugging me. The market overall may be well off the lows, but the hotels, cruise ships, and especially the airlines are still seriously ailing. The airlines are certainly more of a "juicy bargain" now than where Buffett presumably sold them. So if these investors really thought the crisis was over, these would seem very attractive buying targets (which in fact is what Bill Miller said this week).
The fact that the likes of Buffett and Zell are not buying here tells me they really do think much worse, at least for certain industries, is still to come.
See you at 1 p.m...
Kelly
P.S. Click here for The Exchange as a podcast
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