Investing for Survival
12
things I learned from David Tepper: #2
2. “Markets adapt. People
adapt.”
People have a tendency to
extrapolate from the present in trying to predict the future. Many pundits make
their living extrapolating X or Y to the sky or to the ground depending on the
most recent trend. David Tepper makes the point with an example: “In 1898, the first
international urban-planning conference convened in New York. 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.” The
nature of capitalism is that often the remedy for high prices is high prices
and low prices is low prices. Incentives are created and people respond in a
capitalist economy by adapting based on price signals. David Tepper likes to
make bets against people who don’t believe markets will adapt. He stuffs
perma-bears and perma-bulls in his game bag.
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