Jonathan Tepper, CEO, Mccartney discussed on We Study Billionaires - The Investors Podcast

Automatic TRANSCRIPT

I'm your host pressed impatient as usual McCartney by my co host broder sim. And like we said in the introduction. We're here with Jonathan Tepper, so Jonathan how are you doing? All right. Thanks. Thank you so much for having me on your podcast. Well, we're just thrilled to have you here Jonathan so you're an expert in bear markets. And with all the talk in the current economy about a potential bear market. We're really excited to talk with you today about some of your insights. So my first question that I have for you is about some of the research that you've been recently conducting that stigma I have been reading through in in your research. You talk about various factors that typically indicate the start of a bear market three indicators. Specifically are a peak in mergers and acquisitions share buybacks an IPO talk to us a little bit about this research. One of the things that we've done over time is right. What we call our understanding series, or or you can think of them as white papers. And these are really to try to describe for example, recessions or bear markets or emerging market crises. And so what we try to do is to go away and study what happens in all. These different episodes and try to understand what's happening from a fundamental economic standpoint. What's happening for me technical market standpoint was happening from a corporate standpoint in market cycles, generally stock prices lead CEO's CFO's to behave differently. So in a downturn. When stocks are cheapest, you'd think that CEO's would be very interested in buying back their own shares, and that would be the smart thing to do. And certainly some very smart CEO's do that and buffet his recommended in the past, you know, people like singleton from Teledyne. So there are people who have executed by Baxter awfully. But would generally happens is that when price stock prices go up a lot emanate goes up people use their their stock is currency CEO's become confident by back their stock when stock prices start going down the do the opposite. And so this corporate activity in essentially equity markets tends to be very pro-cyclical and very reflexive. So higher stock prices lead to higher buybacks, even if they're misallocation of capital. What's very interesting is that normally these capital market activities are very high and then rollover near peaks. So you would have seen that instead of eighty nine ninety ninety nine two thousand two thousand seven two thousand eight and what we've seen is a huge surge. And all of these buybacks at remain very strong apparently driven by the tax changes that we saw over a year ago. Very interesting. So we talked about emerge psychosis show by back and whatnot. And there are many different indicators that might have a correlation. But I would really like to talk about the difference between correlation and Casella because it's two different concepts. I think very interesting for investors to get to know, perhaps if you could explain the difference between correlation and Casale and then talk about what has the highest impact or Casale Di to a bam. Ajit if you look at some of those indicators coalition causation or two totally separate things as GDP growth happens. For example, you end up with more. Treats, generally and more street lights right now neighborhoods gross in each grow. But an increasing number of street lights in the city doesn't lead to higher GDP. There are certain things that you could correlate very well and one doesn't cause the other right? It's it's the opposite. In fact, higher growth ten till you the streetlights not the other way around. And so you certainly find this with stock markets. And so, you know, just because you see something moving the same direction doesn't mean it causes that what we try to do is to find leading economic indicators or things that do cause economic growth or markets to turn up or down. We know where there is a lead. Meaning that gives us the investor or policymaker three six twelve or even longer in fifteen months to see what's coming. And so one of the reasons why we had been very cautious and negative was that a lot of the leading indicators that we had concerning global liquidity had turned down..

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