Investors who are tall and currently playing the speculative game in the market should be careful, said David Tepper, founder of Appaloosa Management.
“It was partyon.com in 1999 that screwed up the shorts, and now it’s gangup.inc. It did not end well in 1999 when the dot com bubble popped up. Was there, do it. Old scars,” he said. told CNBC’s Joe Kernen. on Thursday.
The billionaire investor further stressed that investors need to be careful in the midst of a frenzy of trading activities and increased valuations. When things turn around, it can turn sharp.
The influence of retail investors – the clearest in GameStop – has captivated the streets over the past few days, talking to a new class of traders who grew up in the midst of the pandemic.
Individual investors create short pressures by raising names against which hedge funds bet, forcing the funds to cover their losses. It usually pushes shares even higher. Small investors are promoting their activities on the WallStreetBets Reddit board, which has north of three million members.
GameStop and AMC were among the most popular names. The former has risen more than 1,700% this year, while the film series has seen its share rise more than 800% this year.
Earlier in January, Tepper told CNBC’s Jim Cramer that he had a more positive view of the market as the rollout of Covid vaccine continued. With continued support from the Federal Reserve, he said it is difficult to bet against the current market.
“I do not want to say that he is very clumsy. I would say he is very constructive,” Cramer said of his conversation with Tepper. “He saw it coming. He knew how to get out, and now he feels there are bags where you need to be, bags of very reasonable valuations. ‘
Last February, Tepper issued a warning about the impact of the pandemic on supplies, which was apparently predictable.
Tepper told Cramer on Feb. 1, shortly before the stock began to pick up, when the pandemic forced the world to halt, that he had become cautious on the market because of the virus. “You have to be careful, because it could be a game changer. So you just have to be careful,” Tepper said.
CNBC’s Kevin Stankiewicz reported.