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David Tepper Up 35% In 2012 Talks Fed And The Eagles [VIDEO]

David Tepper Up 35% In 2012 Talks Fed And The Eagles [VIDEO]

David Tepper, is the founder of the hedge fund, Appaloosa Management. Tepper’s $16 billion fund is up 35% year to date. He believes that Fed actions have helped the economy and the markets. Tepper believes that the Fed sees a 6 percent unemployment rate is the trigger for inflation. This video lasts 19 minutes and is embedded below along with a computer generated transcript:

isten, if they need to do it, all they have to do is start taking that balance sheet down and start detracting. that sounds easy, david. it’s not easy but it will happen. his hotel, california, who wrote that song? eagles. i’ll give him prince. we’re going to party like it’s 1999? yeah, we can party like it’s 1990. listen, i’m not talking about the economy, i’m talking about — you have so much money. raspberry. red beret. i didn’t say red beret i cedras berry beret. i don’t have monitors. so then, we will get to 6.5% on track in unemployment? this will work? now you’re asking me a different question. do you believe in the new normal? like the pimco idea that we’re going to have subemployment, permanently. the question that the fed is taking a chance. this is a different way to put it. the fed is taking a chance that 6% is where you start triggering inflation, okay? that’s the real trigger here. on unemployment. they’re going to go to 6.5. i think the fed is that they’re not going to trigger until you get to 6%. i think that’s the best i get out of this. i don’t know if that’s right. the question is do you trigger at 7%. you could trigger the real economy and that’s something fisher would be worried about. you have to pull back and you can’t get to 6% and it is possible we have a higher employment rate. and i would love, listen, most important thing is people have jobs, and for people. self-worth and such. there’s the economy. there’s markets. okay. in the big concern is inflation. okay that you’re going to get inflation sooner. on the way to sooner inflation, remember it’s very hard in this economy to have inflation when you have a high employment rate. the question is, right now, nobody’s worried. it hasn’t worked. people worried about inflation who haven’t seen it. you’re not going to see it. i’m not concerned until sometimes in the 7s. i’m a little more concerned than the fed. i don’t know if they’re right or wrong. at some point everybody’s concerned about inflation. the way to inflation, on the way to inflation in the real economy, you’re going to have another sort of — what were your best picture — it’s inflation and asset prices. okay? so you — there’s a market and there’s this. so you’re going to miss out on it if you don’t jump in on it. you have to be cognizant. if you look at the markets right now, okay, and what people are doing and you look at the options market. we can talk about where they should be higher now because you have this binomial situation we’re running. if you look at the option market, what are people more concerned about? if you go 30 points out of the money, the put cal is a lot higher than the call fall. so i don’t have to know anything else except the people are still cautious. otherwise we should have this whole even thing. remember the market can only go down as high as the market is. markets go up four times. so that’s how people are set up, generally. and listen, i’m — nobody likes to lose two or three or four or 5% if it happens at the end of the year because of something that happens in d.c. particularly the end of the year for a lot of hedge fund guys. we’re probably more than anybody else willing to take a loss. we do that. we don’t worry about it. a lot of people get money off the table. because they don’t want to have that year-end loss. how many people had the year you had? we do — when we’re down we’re put in positions. i know. so what was it that you did in the past year that got you 25% or 30%, and is it the same — you have some of the same? you want to know? i do. this is easy. it’s always easy when i come on the show to explain it. this is a market because there’s a lot of street guys that are out of business, right? you know, they’re not out of business but they won’t take the risk because they’re excluded. so here we go. we want to talk about the year. the year at appaloosa. so we go in december, we’re waiting — you have to anticipate what’s going to come next and when things are going to move. so you got the year. in december you’re sitting there, you’re waiting, you say are there going to be ltr or not. if you waited for them to do the ltro in europe, then you invested, in december, and you invested fast, you could take a lot of money. so we made a lot of money. you know, on that first move. then it comes into april. okay. and you look at april and say look the economy looks like it’s going to slowing. a week before the greek election, put calls were at 13. the put side not the call side. they basically said to me, hmm we’re not concerned about greece. we’re not concerned about the economy. why don’t you have these put calls they’re really almost for free. we bought puts so we didn’t have a loss in that drawdown. then we listen again. and we didn’t have to — again, we don’t have to be that smart. okay. we’re not that smart. again, we get into the next time, and draghi is talking about this, that the other, talking about this put and boy he did. he gave away this put. people not listening to it. you ow what we did when we heard about that? we got invested. and that worked too. then we got io this election and said boy doesn’t look like the market is going to be happy about this election, because obama is going to win. whether or not that was right or wrong, and they’re going toish concerned about the fiscal cliff. we took down our position again. now when the market went down again, we said, okay, what are we going to do now? hmm, they’re giving away call puts. call premium now. call premium traded really cheap. let’s buy call premium and that’s what we did. and we got a little longer, into the end of the year. just comparing call premiums and put premiums versus a put versus call premium. call vol, volatility, prices being cheap. versus but — — longer because the market came back down to 1350, 1360. we viewed that as too cheap given what was likely to happen. on worst case always has been and continues to be that they will do something like that senate bill. but that’s where you stand right now on the assumption that d.c. will eventually figure something out. and — listen, that’s just a problem with the market. that’s why you’ll go down. if they want to commit political suicide and not do that plan b, which they all say they’re going to do and you have a lot of different ways they can do it, afterwards, they’ll do that. but if they do that you would just buy more because you think ostensibly — if they do it at that point in time you have your ten years taken care of. okay. and if the economy slows a little bit in the quarter, the money and everything else, people look right through it. these are s&p calls and puts you’re buying? we bought stocks. we — so you’re — we took a position and we bought — s&p calls? amazing — if i give you names you won’t be curious wraen more. you’ll know the times. if you want to talk about past investments way back that we did in the past — you just told us about the last year. because a lot of people are — remember they said you got back in a lot of the banks and then you liented up on the banks. was that what you were doing? remember when the banks got down, all of like bank of america was five bucks, you bought them then you sold remember there was rumors you were selling out of bank america. well, listen, we had — in 2011, we came in 2011, we lost a little bit of money in 2011. we came in to that about as bad as you possibly could come into it. we were very long financials. long some of the other markets, mortgages and junk, and sometimes are through that year we changed our opinion. i basically, you know, called in to mention i changed mine, there was a cautiousness. at that point. and then we took down our whole book in 2011. if we didn’t take down our book in 2011, we would have had a beyond horrible, horrible year. okay? and so we at that point in time, we took down our book to avoid that horrible, horrible year. you know, i show you from my investors, i want to try to do the best job i can and that’s what we did in that year. you know, so that was then. okay. but — so you do a lot of different things but if you do want to get long, just s&ps, is that what you do? if the volatility — what we do with our book, appaloosa has historically — appaloosa historically has a lot of long-term gains. appaloosa historically, like 50%, 60% long-term. okay? so that means we hold things. now, given that the markets are less liquid we probably have 60% of our book, 70% of our book in bonds, stocks, different things like that. we’ll move them up and down based on the individual names. and then we’ll use the — we’ll use stock futures or options, our bond futures, to kind of, you know, get more invested or less invested at different points that we like so we can move the book up and down or sell the book. so when you see low call volatility, you might be buying individual stocks? that would cause you to buy? well, we would buy individual stocks because we like the individual stocks. because something’s happening — then you might add to it, with s&ps, futures — in the whole market if we 240u9 the market was cheap, or — if you have a situation, okay you have the greek election. you don’t know how the greek election is going to turn out. but the vol is cheap. i don’t know what’s going to happen but i know the vol is cheap. it’s either going to be good or bad. i can only lose the premium if it gets bad. if it gets good i’m going to make a lot of money. now i don’t know where the premiums are today but in options i can go, i can be right or wrong and they’ll do it. now i will minimize my losses, because if they really don’t get it right in d.c., the market will go down and i won’t lose. if they get it right, i may not be able to, in this particular situation i may not be able to get invested fast enough is my concern because we’re pretty big. that will get me invested. the worst case is i lose my premium, on the other side. so that’s — that’s the strategy right now. when i have low vols. okay. when i perceive the vol is low for the event. the question is the vol — i think in this particular case they were. if most of your stuff is long-term holdings that you have,id you change anything based on the idea that capital gains taxes are going up one way or the other with this fiscal cliff issue? yeah, we basically have, you know, taken a bunch of our long-term gains this year, to lock in these lower rates for our investors. you know, that’s an easy thing to do in the market. the government lets you take gains. okay it in at 15% versus 23% or 44%. it’s kind of the commonsense to do that with some of your gains. i don’t know if you do with all but you have to do with some of them. if you want to ask me about individual investments you can ask me in 2008, 2009. i know you’re a big lehman guy. so — i’m not going to put you on those. i was just — that’s okay. okay. but, i mean people probably want to know if you think gold is ever going to go, ever going to, i mean it went from 200 to 1700, pretty good move. isn’t it? you’re ready to go again, probably not given what you think about what the fed is not — gold to me is a function of interest rates. if you think the economy is going to start moving, and the stock market starts moving, gold can move up because of so much money out there. on the other hand, if you have interest rates start to move, you’re going to have a problem. so the question is when do our interest rates start to move. the interest rates won’t start to move until you have the stock market goes up a lot. are the real economy that really improves. what’s going to take one or both of those conditions to make things happen. you think u.s. equities are the most attractive in the world right now? listen, the united states of america is a great, great place. it’s a greater place than it was three years ago when we first talked. you know, i’m from pittsburgh, as you know. and you know, that’s probably the center of one of the ranges, the biggest range out there for natural gas. we are, you know, low-cost energy producer in the world. i believe that unemployment will come down over time because of our natural advantages that we have in this country. so yeah, i mean i think the united states is a fantastic place. i think other markets, could you have bigger moves in the european market? could you have a bigger move in the japanese market because the levels they’re trading at? yeah. but this market is a very good market. and i think that once we can get over this hump, if you will, you know, we could have, like i said — you don’t have to get too complicated and look for — like 57s 99. i’m not saying it’s going to happen. i’m saying there’s a possibility. i would just bet, you know. it’s like you want to bet these guys in d.c. to do something, to help this country just get to where it was. get people to work. they can do it. they really can. is it enough, we talked to bob doll earlier who said he thinks businesses will, as long as there’s some clarity, even if it’s bad news in terms of what the tax setup is going to be, give them clarity and they can work with that. clarity is so important. we haven’t had clarity in so long. whether it’s obama care. we know what that is. if you don’t like it, fine. but you have some sort of clarity and there may be some changes but you have relative clarity. just give us some clarity on these tax rates. just get it done. get something done. and it would be great. it was very cheerful to know that they’re talking about moving, you know, so we won’t have another deadline in two months. if you can get something done without that deadline, you know, it’s a really good thing. and not only for the markets, gut for the real economy. and you know, really for, you know, people to start working. if you were the president would you take a deal without that? or would you compromise now if you were the president? what i would do if i were the president, hard job. if i was the president, i would really lead on the medicare stuff. that everybody knows has to get done. you’d push more on that than you would — that’s — i would want both. i mean, it’s on the table now. you saw it. so it’s on the table. they want the president to come out front. it’s very hard for these guys, let’s face what’s hard. it’s hard for republicans to individually say i want to cut this from medicare, i want to raise this age. everybody knowles it needs to be done. there’s one leader. one real leader in this country, and he has to do it. okay. that’s all — i mean, he’s the guy, and you know, i agree with him, though, i would like to see that, you know, not cut out like guys are talking about. but move — let the economy get some real running room. let people — will he rise to the occasion? i personally don’t know the guy. so i — i hope he does that. i hope he — what do you guys have — rise above. that’s for everybody. listen, it’s not a rise above for everybody. you really have — it’s the president to show that hey, this is what he’ll do on this spending side, and that like i said, in lincoln to knock some heads around, and whatever it is, you know, like in the lincoln movie and get it done. and get it done. he can do it. he can get done. if he really wants it, if he really wants to get these democrats up, get that done, and the republicans, they basically are — they put rates on the table. it will happen on that side. listen, raise my rate. i don’t care. get rid of this stupid — some guys are going to be bad at me. but get rid of this stupid carried interest thing. i hope it’s gone. it’s enough already with that. i have a bernanke question for you. that relates to all of this. there have been reports, including some of my own reporting that suggested that he may ultimately step down in 2014. if that happens how does that change your view on all of this? who is taking his plate? is it — that’s the question du jour. could be yellen. some people said geiger could come back. as long as you’re having a democratic at this president who has not been on the other side, as you had some of the republicans on the other side, i would not worry that much about a policy change. i mean if you have dudley or yellen, or somebody of that ilk or anybody that they’re likely to appoint it’s just not going to be that difference in policy. i mean so i’m not worried about bernanke. would it have made a difference if you had a republican, if mitt romney was there and it would have gone different? yeah, could have made a difference. but i don’t think you’re going to get that much different with policy the markets should be concerned at all about it. david, really quickly. we’re out of time. remind you about your friends you were going to call out? yeah, i was supposed to mention a couple of my friends who have crushes on, who is the australian anchor? mandy. i’m not going to mention their names right now, i just scared them and their heart just stopped. but i — i’m just going to give them a huge break on that one. not going to mention james’ name or phil’s name or any of my other friends. not going to mention their names. well done. very kind of you. i’m a nice guy like that. david, thank you very much for coming in. you can call him when you — like if you change everything, don’t, you know, you need to tell us. need to tell you. you guys, — just for your producer, she has called me over the last two years 105 times. i call her man eater. i’m sure now she’s going to be killing me when i walk off this set here. we’re thrilled to have you. thank you. when we come back, we’ll get