Reserve Drawdown Creating Volatility - David Tepper

(Updated - September 10, 2015 8:45 AM EDT)

On CNBC, David Tepper attempts to explain the current market situation, focusing mainly on the exit of reserves from foreign countries like China.

Tepper said that during the run-up China and other countries invested reserves in longer-assets and on top of that the U.S., Japan and ECB had QEs working in the same direction. He noted $10-$11 trillion in reserves plus the world QEs.

Tepper says now reserves are seeing a drawdown, which makes waves in the market.

The hedge fund manager said there is not only reserves coming out of China, but reserves coming out of other counties like Saudi Arabia and others. He said "it's cumulative."

Overall, he said we will have higher volatility. Tepper said current volatility (VIX) may be too low in the low 20s.

He said PEs on companies with emerging market exposure may be too high. He asks should Procter & Gamble (NYSE: PG), Mondelez Int'l (NASDAQ: MDLZ), and General Electric (NYSE: GE), with emerging market exposure, trade with 20 multiples? Meanwhile, he said the U.S. is a great place to invest.

Tepper sees a "challenging" current market environment, although he still targets 18 PE on the S&P.

On stocks, he said S&P 500 estimates for 2016 look aggressive given the emerging market slowdown. That said, he doesn't see stocks as too overpriced. He said "flat stocks is not a bad place to be." He is not comfortable short stocks, but may look at shorting if the market heads higher from here.

Tepper said he is "not as bullish as I could be on stocks." Says longer-term you will still make money in stocks. Says 10-20% corrections happen all the time. He said if the stock market crashed he would be a buyer of stocks.

Says there's a time to make money and a time not to lose money. Says now is the time "not to lose money."

Tepper doesn't see a 25bp rate hike from the Fed impacting U.S. growth.

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