David Tepper is one of the richest people in the world with around $10 billion net worth. Tepper, being one of the most talented money managers on the Street, leading Appaloosa Management. In a recent interview on Bloomberg TV, Mr. Tepper talked with Stephanie Ruhle and Erik Schatzker. The interview addressed many important issues such as the US stock market, the bond market, and the general macroeconomic environment.
During the interview, Mr. Tepper also discussed about the Eurozone and the European Central Bank’s plans to start Quantitative Easing. He considers that the ECB has not done any QE yet and if they start, it will cause the inflation to start growing.
“[…] if they really get in action you will start creating inflation at some point in time. Until you do that, things will go where they go,” said Mr. Tepper.
Moreover, Mr. Tepper said that the US economy is in a good situation at the moment. However, the bond markets are tricky at the moment, because of the situation in Europe. On the other hand, the stock markets are not at very high multiples. With the interest rates at around 4-4.5%, the S&P 500 P/E ratio of 16.5 is the right multiple. However, the interest rate for 10-year bonds stands at approximately 2.5%, which is not that good.
Mr. Tepper also talked about his investments in Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Federal Home Loan Mortgage Corp (OTCBB:FMCC). Both companies are suffering huge declines in terms of stock prices amid different problems. Just yesterday, a US District Judge dismissed lawsuits filed by Richard Perry‘s Perry Capital and Bruce Berkowitz‘s Fairholme, which accused the US government of acting illegally by sending almost all of Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Federal Home Loan Mortgage Corp (OTCBB:FMCC)’s profits to be paid to the US treasury in form of dividends. Mr. Tepper considers that this case is not over, and will still be appeals on this lawsuits.
Appaloosa has not publicly disclosed how big of a position they own in Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) or Federal Home Loan Mortgage Corp (OTCBB:FMCC), but Mr. Tepper said that their stake is not big enough to be involved actively in this whole thing with lawsuits and Appaloosa’s name does not figure on any of the lawsuits initiated by Fannie and Freddie’s shareholders.
The full interview with many other interesting points can be watched below:
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