I allocate at least two hours each day to reading, where “reading” means serious reading. So, books or long magazine articles. Not news “stories.”
When you’re in that habit, it occurs to you how many astoundingly interesting people there are in the world. And also how much they have to offer.
It also occurs to you how relatively trivial, uninteresting, and, dare I say it, unintelligent, so many of the investing world’s most revered figures really are.
Don’t get me wrong. I don’t mean “unintelligent” in the sense that they aren’t some modicum of smart. But they aren’t as “strictly smart” (so to speak) as the literal rocket scientists Wall Street started buying many years ago, and when it comes to profundity, you can forget it.
I was in stitches late last month when the financial universe was “disappointed” in Warren Buffett’s purportedly “tone deaf” annual letter, which the media mercilessly criticized for being devoid of insight into the human suffering caused by the pandemic. Market participants also decried Buffett’s letter for being similarly bereft regarding America’s reckoning with two centuries of racial injustice.
It was sad, in a way. I felt suddenly sorry for everyone. I simply can’t fathom operating in a cognitive frame of reference so narrow that I would look to Buffett for solace or any real insight into the world.
As I wrote on social media, it probably seemed strange to people outside of the financial universe that anyone would be particularly concerned with Buffett’s apparent lack of insight into the most vexing issues of our time. Buffett, I not-so-gently reminded folks, is no Marcus Aurelius. Rather, he’s just a guy who made some money. Yes, he made a lot of it, but that’s no reason to expect him to deliver the definitive take on what, by many accounts, was the most trying year for humanity since the second world war.
With that in mind, CNBC on Monday celebrated what I would describe as a kind of bizarre annual ritual wherein Joe Kernen recounts a recent exchange with David Tepper. It’s like listening to someone who thinks they’ve received a divine message. Only the deity is playing a joke, speaking nonsense to the mortal for amusement.
Last year, for example, Kernen told of a letter from Tepper which included kernels of wisdom like “I love riding a horse that’s running” and “At some point… I will slow down that horse and eventually get off.”
Imagine God speaking to the prophets: “I like eating toast when it’s warm. At some point, I’ll butter that toast.”
This year, Tepper was just as profound. So, not very.
“I did get to talk to David Tepper last night — at length — and he more or less initiated the conversation,” Kernen told CNBC’s viewers. “He described his stance on the market as — there’s an aviation term where you push the throttle all the way to the wall and there’s these little knobs, if you will, on each side of the aviation throttle and the knobs go to the wall,” Kernen explained, gesticulating, before expressing dismay that the network wouldn’t let him use the aviation term on television. “He said that at the lows on Friday, he actually pushed it through the wall,” Kernen said, of Tepper.
There was a “very specific reason” for Tepper’s decision to… well, to grab ahold of the throttle and knobs. Kernen described Tepper’s rationale as “pretty arcane.” Apparently, the concept of foreign demand for Treasurys when US yields rise is what counts as “arcane” in Kernen’s world.
In his conversation with Kernen, Tepper mentioned Friday’s remarks from Haruhiko Kuroda, who decided to send a message to would-be JGB vigilantes. Those who missed that can read the full story (linked below) but the gist of it is just that Kuroda appeared to rule out a widening of the band for Japanese yields. When combined with the backup in US rates, the read-through is that demand from Japanese investors could cap the selloff in Treasurys.
Read more: Who’s Boss
After a lengthy period of the Japanese being net sellers, they’ll now become buyers, Tepper reckons. Kernen attempted some clumsy editorializing. “It has to do with currency-hedged positions,” he said.
For what it’s worth, this dynamic was becoming obvious late last month. I mentioned it in “How Much Repricing Is Allowed?”
Potential foreign demand “takes a major risk off the table,” Tepper told Kernen, effectively calling an end to the selloff in US bonds on behalf of Japanese investors.
“Basically I think rates have temporarily made the most of the move and should be more stable in the next few months, which makes it safer to be in stocks for now,” Tepper went on to say, adding that “it’s very difficult to be bearish.”
Believe it or not, Kernen’s recounting of Tepper’s remarks not only helped US equities firm up on Monday morning, but in fact pushed them squarely into positive territory and likely saved the market from a deeper swoon, even as tech losses weighed.
Mohamed El-Erian called the above “great reporting by Joe.”
“David is right,” El-Erian said, live on the same CNBC program. “US yields are now attractive to foreign buyers and to liability-matching flows, so there’s a self-correcting element in the marketplace.”
Is there anything faulty about this thesis? Well, no. But there’s nothing profound about it either. This is the kind of thing that analysts mention in passing, and it’s been getting nods in sales communications for weeks. To hear Kernen tell it, this was a revelation for the ages that could only emanate from the mind of Tepper and, crucially, could only be revealed during one of their “exclusive” chats.
Coming full circle, let me leave you with something I was reading last night, apparently around the same time David was regaling Joe with a simplistic narrative about foreign demand capping a Treasury selloff. It’s from Nicole Eisenman:
I am not a cynical person. I think art is a creative, hopeful, optimistic position to work. It’s something that Sarah and I talk about, because Sarah’s a critic, and it’s a different mind-set. It’s a darker place. It’s not cynical, but she doesn’t need—she’s not interested in—happiness and joy. She’s right. It doesn’t make sense to be interested in happiness. But I am.