He's back. A month after Appaloosa's David Tepper explained the end of the bond bull market was here [11] (and 10Y rates are now 5bps lower), the trend-following master-of-the-universe explained to Bloomberg TV's Stephanie Ruhle and Erik Schatzker how the departure of Bill Gross from PIMCO was "nothing... who cares?"; why "the US economy is pretty good", how junk bonds are at "fair value" and stocks are cheap as "multiples are not high." Finally he explains how he "wished he didn't have any investment" in Fannie Mae and Freddie Mac and clarifies in his billionaire-all-knowing-ness how he is sure the United States can contain Ebola.
Headlines:
- *APPALOOSA'S TEPPER COMMENTS ON ECB ACTIONS IMPACTING BONDS
- *TEPPER SAYS DRAGHI HASN'T DONE ANYTHING YET
- *TEPPER SAYS DRAGHI HAS TO STOP THE NONSENSE
- *TEPPER SAYS BILL GROSS EXIT MEANS NOTHING FOR MARKETS
- *TEPPER SAYS BILL GROSS EXIT LONG-TERM NOT RELEVANT
- *TEPPER SAYS U.S. EQUITIES INTERESTING ON MULTIPLES BASIS
- *TEPPER SAYS U.S. ECONOMY PRETTY GOOD, STOCKS NOT HIGH MULTIPLES
- *TEPPER SAYS HIGH YIELD IS AT MID-POINT OF FAIR VALUE
- *TEPPER SAYS HE WISHES HE DIDN'T HAVE FANNIE, FREDDIE INVESTMENT
- *TEPPER SAYS APPEAL FOR FANNIE, FREDDIE POSSIBLE
Full clip:
Excerpted Transcript:
On Bill Gross:
RUHLE: What does this Bill Gross exit mean for the market?
TEPPER: Nothing. Who cares?
On Draghi:
TEPPER: They haven't done any QE yet. So let them start some QE. But the beginning of the end was basically saying that when you create inflation and some inflation in the eurozone, then the bond market is going to start going down. If you don't create inflation in the eurozone of some sort or you don't stop the deflation, then that might not happen. But I do think that if they go in action, if they get in action, 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. And you can look at the curves over there.
TEPPER: Yeah, I think that's probably right to a certain extent. I don't think you want to fight it, but you've got to understand what it's going to mean. So the extent that if he's really in action then you don't want to fight him, but he has to really get in action. You have to start QE. This negative interest rates doesn't necessarily have the effect of creating money. It doesn't necessarily have the effect of creating inflation. So if you want to do that, do that. But right now he's done nothing. So let him start.
On Stock Valuations:
TEPPER: Look, the US economy's pretty good. That's all. But with the stock markets, I think that you really aren't at – at high multiples right now.
TEPPER: Well I don't think it's high because if you – if you believe interest rates are 4 or 4.5 percent, 16.5 seems like about the right multiple. But I don't think we're at the 4.5 percent 10-years. We're at 2.5 percent 10-years or unfortunately 2.43 or something like that right now. And next year at 14
On Bonds:
One big employment print and you will go down to – these yields here will come down in the US, okay?
However, you’re so close to go the other way.
That's what makes this a very tricky market. So if you have – listen, if you have big employment numbers that take you into the 5s, it's going to start worrying the Fed about labor push (ph) inflation at some point. And if you do get inflation in Europe to start – stop going down, inflation to stop going down or deflation looks like it'll start taking over, at the same time you'll have the market's yields turn up here. So it's tricky. And until that happens, you could have pressure on yields down.
So the question is is there enough – are you getting paid enough for the risks in any kind of place in the yields? Because there's a lot of chances to lose money.
On US Equities:
TEPPER: Well I kind of told you. Listen, it's – it's interesting on a multiple basis and – but you have to have certain things happening. You’ve got to have Europe stop – stop the nonsense, so to speak, Draghi stop the nonsense. So that's kind of it.
On Warren Buffett:
TEPPER: Warren Buffett? He's an interesting guy. I'll say that.
On Ebola:
TEPPER: I think the United States, if any country can contain the risk, the United States can contain the risk.
* * *
SCHATZKER: Summing Up: the high-yield market in the mid-point of fair value. The bond bubble if Draghi undertakes QE is going to blow up. Equities okay with next year's earnings.
