Investors who are long and play the speculative game now unfolding in the market should be careful, said David Tepper, founder of Appaloosa Management.
“Partyon.com was in 1999 that cheated on shorts, and now it’s gangup.inc. It didn’t end well in 1999, when the dot com balloon appeared. I was there, I did that. Old scars,” he said. for Joe Kernen of CNBC. on Thursday.
The billionaire investor continued to stress that investors need to be cautious amid a frenzy of trading activity and increased valuations. When things turn around, they can suddenly turn around.
The influence of retail investors – the most obvious in GameStop – has captivated the street in recent days and speaks to a new class of traders who have grown up in the midst of the pandemic.
Individual investors create short pressures by gathering in the name that hedge funds bet, forcing funds to rush to cover their losses. This usually pushes the actions even higher. Retail investors are promoting their work on the WallStreetBets Reddit board, which has 3 million members north.
GameStop and AMC were some of the most popular names. The former has grown by more than 1,700% this year, while the film chain giant has seen its stock grow by more than 800% this year.
In early January, Tepper told CNBC’s Jim Cramer that he had a more positive view of the market as the launch of the Covid vaccine continued. In addition, with continued support from the Federal Reserve, he said it is difficult to bet against the current market.
“I don’t mean to say it’s extremely ugly. I’d say it’s very constructive,” Cramer said of his conversation with Tepper. “He saw that coming. He knew he was coming out, and now he feels there are pockets you should be in, pockets with very reasonable ratings.”
In February last year, Tepper issued a warning about the impact of the pandemic on stocks, which proved to be predictable.
On February 1, shortly before stocks began to dwindle as the pandemic forced the world to freeze, Tepper told Cramer that he had become cautious in the market because of the virus. “You have to be careful, because he can be a game changer. So you just have to be careful,” Tepper said at the time.
– CNBC’s Kevin Stankiewicz contributed to the reporting.