Those trades were classic Tepper, according to a former analyst, in that they were complicated in execution but simple in theory. “He takes a macro perspective on something, for instance this European sovereign crisis, which is that ‘it’s not going to be that bad,’ ” explains Kolatch. “And then he takes that and applies it to a micro idea, a particular stock, as opposed to saying I’m going to do this with the currency or do this with the interest rate, which is kind of what the macro guys do. He’ll buy these particular three stocks that will reflect this macro idea.”
This could be another reason why Tepper is so invested in being a regular guy. It pays to think like one. Of course the government will keep its promise, a regular guy would think. Of course California will bail out Pacific Gas & Electric Company, because it’s not going to let the state not have power. Of course Russia won’t default on its debt, since it can just print rubles the same way America prints dollars—eh, well, you can never really predict what those crazy Russians will do.
“She’s saying you’re a master of the obvious,” cracks Eric Cole, a newish trader recently from Morgan Stanley, when I float this theory.
Tepper doesn’t so much deny this as make it sound smarter. “I think when it comes to decisions, I try not to be emotional. To drown out the noise and look at the important facts.” Keeping your head about you when others are losing theirs is a lot easier said than done, especially in the midst of a panic like the one in 2009, when the data and rumors were at a fever pitch and people were worrying about whether they had enough canned goods to survive an economic siege. Even others who did the same trade as Tepper were afraid of going in as deeply. “That’s why he’s got a house in the Hamptons and I don’t,” says Kolatch.
Asked where this preternatural confidence comes from, Tepper merely shrugs. “I was never afraid to go back to Pittsburgh and work in the steel mills,” he says.
Of course, he’s also cocky enough to believe he’ll never have to. “David has succeeded over time because he believes he’s the exception,” says Marc Lasry, the billionaire founder of Avenue Capital, a hedge fund that has invested in the same companies as Appaloosa. “If that’s how you’ve succeeded for twenty years, it’s hard to believe it’s going to end. I can guarantee you that David thinks he’s usually right. That he’ll be like, ‘Over time, I will always do a better job than others.’ It’s the only way he and others like him can succeed.”
“I used to get really upset when I had a down year,” Tepper says. “Now that I’ve been doing it this long, I have a much easier time. What matters, ultimately, is the track record I have over time.”
There’s simply not enough upside in self-doubt. “We’re not afraid to lose money,” says Tepper. “Hence the plaque. I should say, we’re not afraid to make money.”
They’re not afraid to fight for it, either. Tepper likes to point out that Appaloosa is not a “vulture” fund exclusively and that the majority of investments are in equities, but that’s like a professional assassin pointing out that he doesn’t spend all his time killing people. The thing he is best at is finding a deal, and the best deals are found in sick and ailing companies. And this can be a dirty business. Two years ago, Tepper headed up a consortium that agreed to help auto manufacturer Delphi exit from Chapter 11 protection—only to pull out at the last minute after the credit markets seized up, stymieing the company’s ability to get financing. A bitter battle ensued. Delphi filed a lawsuit against Appaloosa, alleging, among other things, that Tepper “pushed, with the grace and diplomacy of a battering ram, to play a central role in the reorganization” of the company, only to turn tail and “manufacture an excuse” once they lost interest.
“I’m no longer mad,” says former Delphi CEO Steve Miller, who is now the chairman of AIG. Tepper has “certainly got a touch of arrogance, but he’s really entitled to it. He’s the kind of guy who moves ahead while you are trying to figure out what to do with your pawn. His ability to do math, really complicated balance-sheet math in his head, was awesome. But he’s impatient with us lesser mortals.”
By all accounts, Tepper’s personal volatility is as up and down as his returns. “He’s an asshole, to say the least,” says someone who worked with him. “I had stuff thrown at me. He can be a nice guy off the desk, in the kitchen or walking to the car. It’s almost like Jekyll and Hyde, you didn’t know any given day who was going to walk through the door.” This is not merely someone with a grudge. When Tepper coached elementary-school kids in softball, Phil Glassman says, he could be heard screaming all the way down the block.
Tepper admits he can be difficult. “I used to be worse,” he says over the phone. “When I was at Goldman, I’d say things to people like, ‘Do you know what a schmuck is? Go look in the mirror.’ Now I’m kinder and gentler. Aren’t I kinder and gentler?” he asks his employees.
In the background there’s silence.
“Aren’t I kinder and gentler?”
Over the summer, even Tepper’s outsize confidence was shaken. By August, Appaloosa had reduced its stakes in financial companies and picked up safer blue-chip pharmaceutical stocks.
Thanks to weak economic figures, discouraging jobs reports, and the sense that policy-makers were unlikely to provide any more stimulus, Tepper was close to becoming one of the doomsayers he had made fun of just a couple of months before. He was quoted prominently in a Wall Street Journal article, hemming about deflation. “It just feels very uncertain right now,” he said over the phone in August. “I’m a natural optimist, but the numbers are just horrid. The whole economy is stuck in mud. Thick. Dark. Mud.”
Sure, he was still having fun: There was golf, and poker, and his nephew’s bachelor party, among other things. But his main pleasure, trading gargantuan sums of money, was unavailable to him. “This company looks cheap, that company looks cheap, but the overall economy could completely screw it up,” he said grumpily. “The key is to wait. Sometimes the hardest thing to do is to do nothing.”
Basically, Tepper was bored. Betting on the markets is “like gambling,” he said. “It fills that same rush.” And once you get the rush of making $4 billion, it’s hard to fill that void with anything else.
“What would I do?” he said, back at the Hilton, when I asked why, with more money than he could ever need, he didn’t just quit while he was ahead. “When do you stop trying to be the best?”
Fortunately for Tepper, he didn’t have to wait too long. By early September, his spirits were up considerably. The government had indicated it was not completely averse to another stimulus. Things were bad, but they were moving. “I’m feeling more optimistic,” he said in September. “The mud is loosening up.” Soon, he’ll be ready to dive into it again.