今
年投资者大多恢复了元气，而大卫•泰珀(David Tepper)可谓赚得钵满盆盈、领跑吸金狂潮。知情人士透露，今年迄今为止泰珀名下的对冲基金盈利将近70亿美元，而他还即将再让自己入帐逾25亿美元。这将跻身近年来单年收入之前列。
他的制胜秘诀就是押注数十亿美元，赌美国不会重蹈大萧条的覆辙。
Bryan Derballa for The Wall Street Journal
大卫•泰珀
泰珀回忆道，我觉得自己在孤军奋战，有些时候甚至根本没有人开价。
泰珀的搏弈获得了回报。截至12月初，市场复苏帮助他名下公司Appaloosa Management在扣除费用后狂赚钱120%。这些收益令主攻问题公司股票及债券交易的泰珀管理资金规模达到了约120亿美元，使得Appaloosa成为全球最大的对冲基金之一。
泰珀现在又给自己设定了新目标。他买进了将近20亿美元备受打击的商业抵押贷款担保证券。这些证券中有的是由纽约两家从事高级房地产业务的公司Peter Cooper Village & Stuyvesant Town和 666 West 57th Street所发债券进行的担保，过去两年中它们的市值遭到了重挫。泰珀的办公室位于新泽西郊区，可以俯瞰夏特山希尔顿酒店的停车场。
一些专家预计商业地产市场将传来更多坏消息，而且说如果泰珀没有看准，那么有可能令自己近期的收益缩水；而泰珀说自己保持乐观。
一度受到荷包殷实的投资者热捧的对冲基金在2008年损失惨重，重挫了19%。去年，将近1,500只对冲基金关门歇业，占此类基金总数的16%。对冲基金调查公司Hedge Fund Research Inc.提供的数据显示，今年它们又卷土重来，截至11月份盈利19%，创下十年来最佳年度战绩。
今年有少数几只对冲基金大赚特赚，比如关注新兴市场的Everest Capital以及致力于股票交易的Glenview Capital；不过，单以美元衡量，Appaloosa的收益将它们远远甩在了身后。
泰珀成长于匹兹堡一个中产阶级社区，他的父亲曾经是一位每周工作七天的会计师，还有一次因为彩票中奖71.5万美元。泰珀在上世纪80年代末期帮助高盛(Goldman Sachs)从事垃圾债券交易。泰珀总是穿着牛仔裤运动鞋来上班，而且他还会自嘲，对自己的成功轻描淡写。他声称是自己使得“就是这样了”这句俚语在华尔街流传开来，它用来解释当情况有变时需要对投资头寸进行调整。
在一次又一次和提升合伙人的机会擦肩而过之后，泰珀离开了高盛，并在1993年创立了Appaloosa。到2008年，他的年均回报率约为30%，净值估计约为20亿美元。
泰珀现住在新泽西州一栋他在1990年时花120万美元买下两层小楼中。泰珀不久前买下了橄榄球队匹兹堡钢人队(Pittsburgh Steelers)的所有权，然后每个主场比赛他都乘飞机前往观战。泰珀在2004年给自己的母校卡耐基梅隆大学(Carnegie Mellon University)的商学院捐款5,500万美元，并将它改名为泰珀商学院。
这位嗓音沙哑，带着眼镜的交易员很爱笑，不过他手下说老板生气时很快就满面怒容。泰珀在办公桌的显眼位置放着一个前雇员送的礼物──一对铜质睾丸复制品雕像。他在交易日里总会摸摸这座雕像乞求好运，结果总是引得同事们暴笑。
这些年来，他最大的收获来自于大笔买进受到冷遇的投资。1997年亚洲市场崩溃的时候，泰珀在已经包括大量俄罗斯债券的投资组合中又加入了韩国股票。此举使他在两年后市场反弹时赚了10多亿美元。2003年他在垃圾债券上大获成功；2007年他又押注钢铁、煤炭和其他资源企业，2008年大宗商品价格飙升时，他再次大赚一笔。
不过，由于泰珀有时会把一半以上的投资组合都投到单一的交易想法上，他也容易遭受惨烈而突然的损失。
这种做法让他去年亏了逾10亿美元。2008年1月，法国兴业银行(Societe General SA)交易员科维尔(Jerome Kerviel)被查出损失了50亿欧元（合72亿美元），成为世界上最大的交易损失之一。由于担心市场会暴跌，泰珀卖掉了大量持股。然而，价格却并没有下挫，这让Appaloosa损失惨重。去年春季，泰珀转而看好大型公司股并买进了一些，不过却随着股市的下滑而遭了殃。
2006年泰珀重金押注汽车配件供应商德尔福公司(Delphi)。但去年4月，他和一群投资者退出了一桩向这家破产企业注资至多26亿美元的交易，引发了一场激烈的官司大战，到今年夏季才得以解决。Appaloosa在德尔福的投资损失了近2亿美元。
2008年，泰珀最大的基金缩水25%，超过了行业19%的平均降幅。
泰珀18年以上的老客户席利(Alan Shealy)说，和泰珀一起投资就象是飞一样，有几个小时无聊透顶，然后是一阵阵的心惊肉跳。他是典型的机会主义者，投资任何资产类别，不过你必须要有一个钢铁般强壮的胃才行。
进入2009年，泰珀小心谨慎，公司资产中有20多亿美元是现金，占了30%以上。他极度渴望买进。泰珀用母校教授迈尔策(Allan Meltzer)说过的一句话对自己的投资理念进行了诠释──“树总是要长的”。换句话说，增长是经济体的自然状态，因此乐观通常是会有回报的。
今年2月10日，泰珀读到有关财政部开始推出所谓的“金融稳定计划”(Financial Stability Plan)的文章。计划包括政府收购银行优先股、进而向银行注资的承诺。优先股比普通股的回报机会要小，不过风险也要小。
当时，投资者们担心政府最终不得不把大型银行收归国有。美国官员们说，他们并没有这样的意图，不过投资者对此表示怀疑。把大型银行收归国有可能会令普通股股东遭遇灭顶之灾。
来自财政部的消息被泰珀视为政府将支撑银行的证据。他指示手下的交易员开始买进银行股票和债券。
当时很少有投资者和他一样乐观。财政部长盖特纳(Timothy Geithner)推出计划的当天，道琼斯指数跌了逾382点，跌幅近5%。随后的几天中，银行股继续下挫。2月20日，美国银行股价跌至2.53美元。到3月5日，花旗交易价格跌至0.97美元。
泰珀回忆起在公司小小的交易大厅中对合作伙伴之一的卢卡奇(Michael Lukacs)说，这太荒唐了，太疯狂，疯狂，疯狂了！政府怎么会说话不算数？他们不会让这些银行垮台的，人们失去理智了！
泰珀与卢卡奇和Appaloosa的另外一位高管伯林(Jim Bolin)聚到一起开会。泰珀坚持认为，刺激支出和低利率将提振经济。他说，他估计美国政府将花旗等银行收归国有的几率只有20%。
伯林对银行持乐观态度，不过仍认为持有银行债券比高风险的股票要更安全。泰珀说他听了他们的看法，不过他觉得已经到了押大注的时候。Appaloosa的人说伯林往往比泰珀更为保守。
在几周时间里，泰珀的团队购买了各种品种的银行投资，包括债券、优先股和普通股。就在几个月前，政府曾注资数十亿美元维持美国国际集团(AIG)等公司的生存，就像他们现在对银行所做的那样。但是，这并未阻止这些股票的大跌。
3月份时该公司较年初一度损失了10%左右，总计约合6亿美元。泰珀拿起电话做了更多交易，过去他常常把这件事交给下属完成。这一次，他想直接与华尔街经纪人交流，看看情况糟糕到了什么程度。
答案是：非常糟糕。泰珀说，他被告知他是大笔买进的唯一大投资者。
管理20亿美元资产的投资公司Solaris Asset Management的首席投资长格里斯基(Timothy Ghriskey)回忆说，客户们都担心游戏发生了改变，资本主义已不同于以往了。这是发自内心的恐慌。他说他在此期间只买了少量银行类股。
在冬末的一天，泰珀听到了他自己的客户席利的质疑之声。
席利回忆说，自己当时称银行的问题还远远没有结束。不过，管理爱达荷州一家投资公司的席利仍坚持站在泰珀一边。他说，我发现这些头寸的流动性很强，因此如果他是错的，他就会离场。
自2000年以后，泰珀就不太关注他的投资者的神经了。这一年，他曾打赌以科技股为主的纳斯达克指数将会下跌。但很多投资者抱怨说，泰珀偏离了他的债券投资的根本，因此他取消了做空。当纳斯达克市场几个月后暴跌时，泰珀大为恼火。到2009年3月下旬，花旗集团的股价上涨了两倍，泰珀的其它投资，包括垃圾债券也在上涨。他和他的团队买进了更多，在各银行发售股票时花费了10多亿美元。泰珀说，他持有的花旗集团股票的平均成本是0.79美元，美国银行是3.72美元。
到夏末，泰珀仅在花旗集团和美国银行的股票上就获得了约10亿美元利润，自1月份以来，他的总收益超过了45亿美元，涨幅高达70%。
在Appaloosa高管伯林敦促谨慎行事后，泰珀也卖出了一些股票以锁定利润。但该公司仍持有大量美国银行和花旗集团的股票，这两只股票现在的价格分别是15.03美元和3.40美元。
泰珀仍然保持乐观。他说，他预计利率将维持在低位，并认为股票和债券处于合理价位。
这种信念推动了另一个冒险的做法。
在今年的每季度末，泰珀都注意到投资者抛售商业房地产支持的问题债券。他从来没有涉足这些投资，但他和他的10人团队做了一些研究，认为这项投资具有吸引力，其中一些债券交易看来很安全，并能获得15%以上的收益。
泰珀缓慢地投入10多亿美元，取得了高评级的商业抵押支持证券10%至20%的所有权。他将重点放到了纽约Stuyvesant Town和666 West 57th St.等物业的贷款支持债券上。
他赌的是：如果经济好转，他将从这些债券上赚取巨额利息。但如果这些物业赚不回来投资，泰珀认为他还拥有这么多债权，因此对物业的重组将有很大发言权。这意味着，他最终都可以左右逢源。
一些分析师警告说，他的这种做法风险很大。商业房地产的价值继续下跌。债务类产品的所有者并不一定总有很大权力影响商业房地产的重组。而且，由于这些大物业的债务被分割成了许多块，有许多投资者参与，任何控制权之争都将格外复杂。
泰珀说，杞人忧天的想法是错误的：如果你像我们一样认为经济将会不错，那么我们会做的很好。
Gregory Zuckerman
In this comeback year for investors, David Tepper may have scored one of the biggest paydays of all.
Mr. Tepper's hedge-fund firm has racked up about $7 billion of profit so far this year -- with Mr. Tepper on track to earn more than $2.5 billion for himself, according to people familiar with the matter. That is among the largest one-year takes in recent years.
Behind the wins: a bet worth billions of dollars that America would avoid a repeat of the Great Depression.
Through February and March, Mr. Tepper scooped up beaten-down bank shares as many investors were running for the exits. Day after day, Mr. Tepper bought Bank of America Corp. shares, then trading below $3, and Citigroup Inc. preferred shares, when that stock was under $1. One of his investors insisted more carnage loomed. Friends who shared his bullish beliefs were wary of aping his moves amid speculation that the government was about to nationalize the big banks.
'I felt like I was alone,' Mr. Tepper recalls. On some days, he says, 'no one was even bidding.'
The bets paid off. A resurgent market has helped Mr. Tepper's firm, Appaloosa Management, gain about 120% after the firm's fees, through early December. Thanks to those gains, Mr. Tepper, who specializes in the stocks and bonds of troubled companies, manages about $12 billion, a sum that makes Appaloosa one of the largest hedge funds in the world.
Mr. Tepper, whose office overlooks the parking lot of the Short Hills Hilton in suburban New Jersey, now is taking aim at a new target. He's purchased about $2 billion of beaten-down commercial mortgage-backed securities. Among his purchases are bonds backed by chunks of the debt of Peter Cooper Village & Stuyvesant Town and 666 West 57th Street in New York, two high-profile real-estate deals that have fallen in value over the past two years.
Some experts predict more bad news for commercial real estate -- and say that if Mr. Tepper's move doesn't pan out, it could jeopardize a chunk of his recent gains. Mr. Tepper says he remains optimistic.
Hedge funds, once darlings of well-heeled investors, suffered dearly in 2008, dropping 19%. Nearly 1,500 funds, or 16% of the total, shuttered last year. This year, hedge funds are clawing back, with gains of 19% through November, on pace for their best annual gains in a decade, according to Hedge Fund Research Inc.
A handful of funds -- including Everest Capital's emerging-market funds and the stock-focused Glenview Capital -- have racked up fat gains this year. In sheer dollars, though, none appear to have come close to matching Appaloosa's winnings.
Mr. Tepper grew up in a middle-class neighborhood in Pittsburgh, the son of an accountant who worked seven days a week and once won a $715,000 lottery payout. In the late 1980s, he helped run junk-bond trading at Goldman Sachs. Mr. Tepper wears jeans and sneakers to work, and can be self-deprecating, playing down his successes. He claims to have popularized on Wall Street the phrase 'it is what it is' to explain the need to adjust a portfolio if facts on the ground shift.
After he was repeatedly passed over for a partnership, Mr. Tepper left Goldman to start Appaloosa in 1993. By 2008, he had a track record of annual gains averaging about 30% and a net worth estimated at about $2 billion.
Mr. Tepper lives in a two-story home in New Jersey he bought in 1990 for $1.2 million. He recently purchased an ownership stake in the Pittsburgh Steelers football team, and flies to every home game. In 2004 he gave $55 million to Carnegie Mellon University's business school, his alma mater, which renamed itself the Tepper School of Business.
The husky, bespectacled trader laughs easily, but employees say he can quickly turn on them when he's angry. Mr. Tepper keeps a brass replica of a pair of testicles in a prominent spot on his desk, a present from former employees. He rubs the gift for luck during the trading day to get a laugh out of colleagues.
His biggest scores over the years have come from buying large chunks of out-of-favor investments. When Asian markets crumbled in 1997, Mr. Tepper added Korean stocks to a portfolio laden with Russian debt. The moves led to more than $1 billion in profits when markets rebounded two years later. He scored big on junk bonds in 2003, and his 2007 wager on steel, coal and other resource companies paid off in 2008 when commodity prices soared.
But because he sometimes places more than half of his portfolio in a single trade idea, Mr. Tepper also is prone to brutal, abrupt losses.
That approach cost him more than $1 billion last year. In January 2008, Societe General SA trader Jerome Kerviel was revealed to have lost 5 billion ($7.2 billion), one of the world's largest trading loss. Mr. Tepper sold large chunks of his holdings, fearing a market tumble. Prices held up, though, hurting Appaloosa. In the spring of last year, he turned bullish on large-company stocks and did some buying, but suffered as markets declined.
Mr. Tepper made a big wager on Delphi in 2006. But in April of last year he and a group of investors withdrew from a deal to inject as much as $2.6 billion in the bankrupt auto-parts supplier, sparking a nasty legal battle that was resolved this summer. Appaloosa lost almost $200 million on its investment in Delphi.
Mr. Tepper's largest fund dropped 25% for 2008, worse than the industry's 19% average decline.
'Investing with David is like flying, with hours of boredom followed by bouts of sheer terror,' says Alan Shealy, a client of more than 18 years. 'He's the quintessential opportunist, investing in any asset class, but you have to have a cast-iron stomach.'
Mr. Tepper entered 2009 cautiously, with more than 30% of his firm's assets in cash, or more than $2 billion. He itched to do some buying. Mr. Tepper explains his investment philosophy with a line from Allan Meltzer, a professor at his alma mater: 'Trees grow.' In other words, growth is the natural state of economies, so optimism usually is rewarded.
On Feb. 10 of this year, Mr. Tepper read that the Treasury Department was introducing the so-called Financial Stability Plan. It included a commitment by the government to inject capital into banks by buying their preferred stock, or shares that carry less chance of reward but also less risk than common stock.
At the time, investors worried that the government ultimately would have to nationalize big banks. U.S. officials said they had no intention of such a move, which could wipe out common shareholders, but investors were dubious.
The news from the Treasury Department struck Mr. Tepper as proof that the government would stand behind the banks. He directed his traders to begin buying bank stock and debt.
Few investors were feeling as optimistic. The Dow Jones Industrial Average fell more than 382 points on the day Treasury Secretary Timothy Geithner introduced the plan, nearly 5%. Bank shares continued to tumble in the days that followed. Bank of America shares fell as low as $2.53 on Feb. 20. By March 5, Citigroup traded as low as 97 cents.
'This is ridiculous, it's nuts, nuts, nuts!' Mr. Tepper recalls saying to Michael Lukacs, one of his partners, on the firm's small trading floor. 'Why would the government break its word? They're not going to let these banks go under, people aren't being logical!'
Mr. Tepper huddled with Mr. Lukacs and Jim Bolin, another top Appaloosa executive. Mr. Tepper insisted that stimulus spending and low interest rates would boost the economy. He said he estimated there was only a 20% chance that the U.S. would nationalize banks like Citigroup.
Mr. Bolin, who people at the firm say tends to be more conservative than Mr. Tepper, was bullish about banks, but still thought it safer to stick to bank debt than to riskier shares. Mr. Tepper says he listened to the arguments, but said it was time to place a big bet.
Over several weeks, Mr. Tepper's team bought a variety of bank investments, including debt, preferred shares and common shares. Just months earlier, the government had injected billions of dollars to keep companies such as American International Group Inc. going, much like they were now doing with the banks. But that didn't prevent shares of those companies from tumbling.
At one point in March, the firm was down about 10% for the year, or about $600 million. Mr. Tepper got on the phone to make more trades, something he often left to subordinates. This time, he wanted to talk directly to Wall Street brokers to test how bad things really were.
The answer: really bad. Mr. Tepper says he was told that he was the only big investor doing much buying.
'Clients were nervous that the game had changed and capitalism wouldn't be the same. There was real fear,' recalls Timothy Ghriskey, chief investment officer at Solaris Asset Management, a $2 billion investment firm, who says he only bought a small amount of bank shares during this period.
One day in late winter, Mr. Tepper heard from a skeptical client of his own, Mr. Shealy.
'This thing is far from over,' Mr. Shealy recalls saying, referring to the bank problems. Still, Mr. Shealy, who runs an investment firm in Boise, Idaho, stuck with Mr. Tepper. 'I figured the positions were fairly liquid, so if he was wrong, he would get out.'
Mr. Tepper hadn't paid his investors' nerves much heed since 2000. That year, he bet that the tech-heavy Nasdaq index would fall. But so many investors complained that Mr. Tepper was straying from his roots in debt investing that he canceled his bets. When the Nasdaq collapsed months later, Mr. Tepper fumed. By late March of 2009, Citigroup shares had tripled, and Mr. Tepper's other holdings, including junk bonds, were rising. He and his team bought more, spending more than $1 billion, when various banks conducted share sales. Mr. Tepper says his average cost for shares of Citigroup was 79 cents; for Bank of America it was $3.72.
By late summer, Mr. Tepper had recorded about $1 billion of profits in shares of just Citigroup and Bank of America, and his overall gains soared past $4.5 billion, or 70%, since January.
After Mr. Bolin, the Appaloosa executive, urged caution, Mr. Tepper did some selling to lock in gains. But the firm remains a big holder of both Bank of America and Citigroup shares, which now trade at $15.03 and $3.40, respectively.
Mr. Tepper remains upbeat. He says he expects interest rates to stay low, and argues that stocks and bonds are reasonably priced.
This belief is driving another risky bet.
At the end of each quarter this year, Mr. Tepper noticed that investors were dumping holdings of troubled bonds backed by commercial properties. He had never dabbled in these investments, but he and his 10-person team did some research and judged them attractive, with some seemingly safe debt trading at yields above 15%.
Mr. Tepper slowly spent more than $1 billion to gain ownership of between 10% and 20% of highly rated slices of commercial mortgage-backed securities, or CMBS. He focused on debt backed by loans of properties including Stuyvesant Town and 666 West 57th St. in New York.
His bet: If the economy improves, he'll earn hefty interest payments on the bonds. But if the properties can't make their payments, Mr. Tepper believes he owns so much of the debt that he'll have a big say in how the properties get restructured. That means he could ultimately end up ahead.
He's taking a big risk, some analysts warn. The value of commercial real estate continues to fall. Owners of debt classes don't always have much power to influence a commercial real-estate restructuring. And because the debt of these big properties was carved into many pieces, and many investors are involved, any battle for control will be complicated.
Mr. Tepper says the worrywarts have it wrong: 'If you think the economy will be fine, as we do, then we're going to do very well.'
Gregory Zuckerman
Mr. Tepper's hedge-fund firm has racked up about $7 billion of profit so far this year -- with Mr. Tepper on track to earn more than $2.5 billion for himself, according to people familiar with the matter. That is among the largest one-year takes in recent years.
Behind the wins: a bet worth billions of dollars that America would avoid a repeat of the Great Depression.
Through February and March, Mr. Tepper scooped up beaten-down bank shares as many investors were running for the exits. Day after day, Mr. Tepper bought Bank of America Corp. shares, then trading below $3, and Citigroup Inc. preferred shares, when that stock was under $1. One of his investors insisted more carnage loomed. Friends who shared his bullish beliefs were wary of aping his moves amid speculation that the government was about to nationalize the big banks.
'I felt like I was alone,' Mr. Tepper recalls. On some days, he says, 'no one was even bidding.'
The bets paid off. A resurgent market has helped Mr. Tepper's firm, Appaloosa Management, gain about 120% after the firm's fees, through early December. Thanks to those gains, Mr. Tepper, who specializes in the stocks and bonds of troubled companies, manages about $12 billion, a sum that makes Appaloosa one of the largest hedge funds in the world.
Mr. Tepper, whose office overlooks the parking lot of the Short Hills Hilton in suburban New Jersey, now is taking aim at a new target. He's purchased about $2 billion of beaten-down commercial mortgage-backed securities. Among his purchases are bonds backed by chunks of the debt of Peter Cooper Village & Stuyvesant Town and 666 West 57th Street in New York, two high-profile real-estate deals that have fallen in value over the past two years.
Some experts predict more bad news for commercial real estate -- and say that if Mr. Tepper's move doesn't pan out, it could jeopardize a chunk of his recent gains. Mr. Tepper says he remains optimistic.
Hedge funds, once darlings of well-heeled investors, suffered dearly in 2008, dropping 19%. Nearly 1,500 funds, or 16% of the total, shuttered last year. This year, hedge funds are clawing back, with gains of 19% through November, on pace for their best annual gains in a decade, according to Hedge Fund Research Inc.
A handful of funds -- including Everest Capital's emerging-market funds and the stock-focused Glenview Capital -- have racked up fat gains this year. In sheer dollars, though, none appear to have come close to matching Appaloosa's winnings.
Mr. Tepper grew up in a middle-class neighborhood in Pittsburgh, the son of an accountant who worked seven days a week and once won a $715,000 lottery payout. In the late 1980s, he helped run junk-bond trading at Goldman Sachs. Mr. Tepper wears jeans and sneakers to work, and can be self-deprecating, playing down his successes. He claims to have popularized on Wall Street the phrase 'it is what it is' to explain the need to adjust a portfolio if facts on the ground shift.
After he was repeatedly passed over for a partnership, Mr. Tepper left Goldman to start Appaloosa in 1993. By 2008, he had a track record of annual gains averaging about 30% and a net worth estimated at about $2 billion.
Mr. Tepper lives in a two-story home in New Jersey he bought in 1990 for $1.2 million. He recently purchased an ownership stake in the Pittsburgh Steelers football team, and flies to every home game. In 2004 he gave $55 million to Carnegie Mellon University's business school, his alma mater, which renamed itself the Tepper School of Business.
The husky, bespectacled trader laughs easily, but employees say he can quickly turn on them when he's angry. Mr. Tepper keeps a brass replica of a pair of testicles in a prominent spot on his desk, a present from former employees. He rubs the gift for luck during the trading day to get a laugh out of colleagues.
His biggest scores over the years have come from buying large chunks of out-of-favor investments. When Asian markets crumbled in 1997, Mr. Tepper added Korean stocks to a portfolio laden with Russian debt. The moves led to more than $1 billion in profits when markets rebounded two years later. He scored big on junk bonds in 2003, and his 2007 wager on steel, coal and other resource companies paid off in 2008 when commodity prices soared.
But because he sometimes places more than half of his portfolio in a single trade idea, Mr. Tepper also is prone to brutal, abrupt losses.
That approach cost him more than $1 billion last year. In January 2008, Societe General SA trader Jerome Kerviel was revealed to have lost 5 billion ($7.2 billion), one of the world's largest trading loss. Mr. Tepper sold large chunks of his holdings, fearing a market tumble. Prices held up, though, hurting Appaloosa. In the spring of last year, he turned bullish on large-company stocks and did some buying, but suffered as markets declined.
Mr. Tepper made a big wager on Delphi in 2006. But in April of last year he and a group of investors withdrew from a deal to inject as much as $2.6 billion in the bankrupt auto-parts supplier, sparking a nasty legal battle that was resolved this summer. Appaloosa lost almost $200 million on its investment in Delphi.
Mr. Tepper's largest fund dropped 25% for 2008, worse than the industry's 19% average decline.
'Investing with David is like flying, with hours of boredom followed by bouts of sheer terror,' says Alan Shealy, a client of more than 18 years. 'He's the quintessential opportunist, investing in any asset class, but you have to have a cast-iron stomach.'
Mr. Tepper entered 2009 cautiously, with more than 30% of his firm's assets in cash, or more than $2 billion. He itched to do some buying. Mr. Tepper explains his investment philosophy with a line from Allan Meltzer, a professor at his alma mater: 'Trees grow.' In other words, growth is the natural state of economies, so optimism usually is rewarded.
On Feb. 10 of this year, Mr. Tepper read that the Treasury Department was introducing the so-called Financial Stability Plan. It included a commitment by the government to inject capital into banks by buying their preferred stock, or shares that carry less chance of reward but also less risk than common stock.
At the time, investors worried that the government ultimately would have to nationalize big banks. U.S. officials said they had no intention of such a move, which could wipe out common shareholders, but investors were dubious.
The news from the Treasury Department struck Mr. Tepper as proof that the government would stand behind the banks. He directed his traders to begin buying bank stock and debt.
Few investors were feeling as optimistic. The Dow Jones Industrial Average fell more than 382 points on the day Treasury Secretary Timothy Geithner introduced the plan, nearly 5%. Bank shares continued to tumble in the days that followed. Bank of America shares fell as low as $2.53 on Feb. 20. By March 5, Citigroup traded as low as 97 cents.
'This is ridiculous, it's nuts, nuts, nuts!' Mr. Tepper recalls saying to Michael Lukacs, one of his partners, on the firm's small trading floor. 'Why would the government break its word? They're not going to let these banks go under, people aren't being logical!'
Mr. Tepper huddled with Mr. Lukacs and Jim Bolin, another top Appaloosa executive. Mr. Tepper insisted that stimulus spending and low interest rates would boost the economy. He said he estimated there was only a 20% chance that the U.S. would nationalize banks like Citigroup.
Mr. Bolin, who people at the firm say tends to be more conservative than Mr. Tepper, was bullish about banks, but still thought it safer to stick to bank debt than to riskier shares. Mr. Tepper says he listened to the arguments, but said it was time to place a big bet.
Over several weeks, Mr. Tepper's team bought a variety of bank investments, including debt, preferred shares and common shares. Just months earlier, the government had injected billions of dollars to keep companies such as American International Group Inc. going, much like they were now doing with the banks. But that didn't prevent shares of those companies from tumbling.
At one point in March, the firm was down about 10% for the year, or about $600 million. Mr. Tepper got on the phone to make more trades, something he often left to subordinates. This time, he wanted to talk directly to Wall Street brokers to test how bad things really were.
The answer: really bad. Mr. Tepper says he was told that he was the only big investor doing much buying.
'Clients were nervous that the game had changed and capitalism wouldn't be the same. There was real fear,' recalls Timothy Ghriskey, chief investment officer at Solaris Asset Management, a $2 billion investment firm, who says he only bought a small amount of bank shares during this period.
One day in late winter, Mr. Tepper heard from a skeptical client of his own, Mr. Shealy.
'This thing is far from over,' Mr. Shealy recalls saying, referring to the bank problems. Still, Mr. Shealy, who runs an investment firm in Boise, Idaho, stuck with Mr. Tepper. 'I figured the positions were fairly liquid, so if he was wrong, he would get out.'
Mr. Tepper hadn't paid his investors' nerves much heed since 2000. That year, he bet that the tech-heavy Nasdaq index would fall. But so many investors complained that Mr. Tepper was straying from his roots in debt investing that he canceled his bets. When the Nasdaq collapsed months later, Mr. Tepper fumed. By late March of 2009, Citigroup shares had tripled, and Mr. Tepper's other holdings, including junk bonds, were rising. He and his team bought more, spending more than $1 billion, when various banks conducted share sales. Mr. Tepper says his average cost for shares of Citigroup was 79 cents; for Bank of America it was $3.72.
By late summer, Mr. Tepper had recorded about $1 billion of profits in shares of just Citigroup and Bank of America, and his overall gains soared past $4.5 billion, or 70%, since January.
After Mr. Bolin, the Appaloosa executive, urged caution, Mr. Tepper did some selling to lock in gains. But the firm remains a big holder of both Bank of America and Citigroup shares, which now trade at $15.03 and $3.40, respectively.
Mr. Tepper remains upbeat. He says he expects interest rates to stay low, and argues that stocks and bonds are reasonably priced.
This belief is driving another risky bet.
At the end of each quarter this year, Mr. Tepper noticed that investors were dumping holdings of troubled bonds backed by commercial properties. He had never dabbled in these investments, but he and his 10-person team did some research and judged them attractive, with some seemingly safe debt trading at yields above 15%.
Mr. Tepper slowly spent more than $1 billion to gain ownership of between 10% and 20% of highly rated slices of commercial mortgage-backed securities, or CMBS. He focused on debt backed by loans of properties including Stuyvesant Town and 666 West 57th St. in New York.
His bet: If the economy improves, he'll earn hefty interest payments on the bonds. But if the properties can't make their payments, Mr. Tepper believes he owns so much of the debt that he'll have a big say in how the properties get restructured. That means he could ultimately end up ahead.
He's taking a big risk, some analysts warn. The value of commercial real estate continues to fall. Owners of debt classes don't always have much power to influence a commercial real-estate restructuring. And because the debt of these big properties was carved into many pieces, and many investors are involved, any battle for control will be complicated.
Mr. Tepper says the worrywarts have it wrong: 'If you think the economy will be fine, as we do, then we're going to do very well.'
Gregory Zuckerman
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