David Tepper, the pioneer in distressed credit investments, sat down with CNBC today for an exclusive interview. Following up on his previous thesis that stock market is a safe and profitable investment, Tepper reiterates that the stocks are still a better option than bonds in terms of what is cheaper. Fed continues to buy bonds which has overpriced these assets. On the other hand, an unfavorable outcome of the fiscal cliff negotiations could plummet the stock market by 3 percent on average which is not much. Tepper does not see a huge downside to investing in stocks, he believes that republicans will not commit ‘suicide’ and will eventually come around.
Talking about Fed’s monetary easing plan, Tepper said that perhaps Fed has done enough. Economy has rebounded and can take itself from here with tailwinds from growth in housing and autos sector. The Fed is determined to bring the unemployment numbers down and is projected to add a trillion every year to its sheet while continuing with its fiscal easing plan.
He also talked about why ECB does not choose to lower interest rates to the maximum and why euro has not been weakened like everybody else is doing with their currency. The reasons are either technical or political. Going into negative interest rates has an entirely different set of implications. ECB has agreed to lower interest rates and Draghi could put that into motion anytime. So investors have been given a free put on the stock market which many have not realized or haven’t acted on yet. Moreover ECB also plans to pursue a bond buying program which is again a lucrative opportunity for investors.
Appaloosa assets under management exceed $16 billion and is up 35 percent on a gross basis and 25 percent, net of fees, year to date.