There is much ridiculous with Tepper's comments and to be fair I do not know in what context everything was said. On the surface it sounds absurd. Besides having a misunderstanding of what QE really is, he is basically admitting the entire system is a ponzi. All ponzi's initially implode. Last time the market was here heading up (back late last year) the chatter was about how this was going to be a V shaped recovery. WHEN WAS THE LAST TIME YOU HEARD THAT FROM A BULL? No longer is the argument that the economy is in great shape and going to be a great V shape recovery. Now the argument has shifted to the Fed will save us and won't let the market go down. How well did that work in 2008? In fact it is the same exact argument that emerged after the initial argument in 2007 failed. The initial argument in 2007 was that it was going to be a very shallow recession. After that argument failed than it became the Fed was ahead of the curve and going to save everything. After that it was the Treasury and John Paulson was going to save everything (remember the Paulson bazooka?) After that is was we are all going to die.
So now the prospects of a V shaped recovery are off the table but if you listen to Tepper there is no risk. The market will only go up. Ponzi 101 until the entire thing collapses.
A friend of mine sent me something else by Tepper which I actually really liked. However, the premise is completely wrong in the context of how he uses it.
“In 1898, the first international urban-planning conference convened in New York,” he said. “It was abandoned after three days because none of the delegates could see any solution to the growing crisis caused by urban horses and their output. In the Times of London, one reporter estimated that in 50 years, every street in London would be buried under nine feet of manure.”
He paused, allowing people in the crowd to snicker to themselves, then went on to recommend a handful of investments most would consider highly risky, among them debt in AIG and equity in financial companies like Bank of America and even some banks in teetering Europe. “I know, everyone hates the financials,” he said. “But the PIIGS”—Portugal, Ireland, Italy, Greece, and Spain, considered to be the most troubled European economies—“every single one has a deficit-reduction plan! The ECB—the Bundesbank—bought back government bonds!” He paused for dramatic effect. “Holy Christ. It’s like the chastity belt is off, and the girl is starting to play.”
The crowd tittered nervously. “On the way to work this morning, I got a headache because I was listening to one guy talking about how there’s gonna be hyperinflation. And then after him there was some guy telling me there’s going to be a depression and deflation. Neither—neither—is most likely going to happen,” he said. “The point is, markets adapt, people adapt. Don’t listen to all the crap out there.” - David Tepper
Like I said - I really like what he said above. It embraces capitalism. The market will solve the problems. HOWEVER, the market right now is not allowed to work. Furthermore, unlike other "problems" debt is inherently different. It is the millstone that holds you down. It cannot disappear unless it is paid off or defaulted on. Once you have to much debt the market is handicapped until that is resolved. If the problem was to much housing, I wouldn't worry about it. The market would fix it. If the problem was China wasn't consuming enough, wouldn't worry about it, the market would fix it. If the problem is to much debt, the market would fix it, it would be really painful, but if it isn't allowed to fix it, it can be catastrophic. Tepper is comparing not apples to oranges, but apples to asparagus.
He may be right though in one respect. It may be alot more ponzish than anyone would care to admit. In a ponzi it doesn't go down gradually. You wake up one morning and you lost 100% from the day before. It is possible that the government can keep everything together until over a very short time period - they can't.