What Cooperman Is Watching Next Year
Leon Cooperman, Chairman & CEO of Omega Advisors, reveals what he is watching in 2013, including China and the European economy, housing and gas prices.
Vanguard’s move into PE may change the landscape forever
Private equity has been growing in popularity in recent years as more and more big-name funds and institutional investors dive in. Now even indexing giant Vanguard is out to take a piece of the PE pie. During a panel at the Morningstar Investment Conference this year, Fran Kinniry of Vanguard, John Rekenthaler of Morningstar and Read More
let’s get final thoughts from our guest host this hour, lee cooperman, chairman of lee advisors and chairman and ceo of saks management. r 2013, you have talked about you think overall, the market is likely to go up than down. you asked when what i’m watching in china, european economy. a good plus for the economy is home prizes are starting to strengthen a bit and home sales picking up. the banking system is extremely liquid. gasoline prizes six or eight months ago w$3.80 a gallon and the last i saw was $3.30 a gallon. that’s a plus and watch inflation and overall retail sales. to get the market down, you need a recessionary environment. it does not look recessionary at the moment. if we can’t get the right leadership out of washington, we go over the cliff, no fix, we could wind up with a recession. that’s the one thing that could screw this up? i don’t think it’s logical. it would be a bad signal to the world we can’t govern ourselves. in a coupleths the debt ceiling comes into play and if you can’t resolve the cliff problems, the debt problems linger. why put the economy through the winger and scare them and then fix it. you would also like to see serious changes take place. if this just gets kicked down the road- as i said befor think — i think roughly 70% of tax revenues to the government are coming from wealthy people. let’s sit down, republicans and democrats and have an telligent cosation, what should the maximum marginal tax rate be. mr. buffet, i have enormous respect for warn. he said if you make over a million or 35 or 40%, i can live with that. take that marginal tax rate and determine your dwreeld to the government and let’s size the government to that revenue yield. we’re just kidding ourselves. it’s just not a revenue problem we have a cost problem. a straight analysis like that is not likely to come out of washington, right? ultimately, it has to. you have to live within your means. the market is not forcing that right now, around the world, everyone is in a race to the bottom. we have to ultimately get there. the question, will we get there with a crisis or without a crisis. i want to get there without a crisis, i’m not a good crisis investor, i tend to be more long oriented. nice to have you here. coming up, power
Cooperman Delivers Alpha at Omega
“In my bones, I just feel over the next three or four years you are going to have significant negative return in bonds,” said Leon Cooperman, Chairman & CEO of Omega Advisors, revealing his modestly positive view on equities.
nike capital agreed in principle to be acquired by getgo on the cash portion of the bid. knight capital agreed. the cash portion a prior bid increased. 3.75 a share and knight ceo, tom yois, would have been the chairman, instead be executive chairman. our guest in the first hour, one of wall street’s most successful value investors continues to deliver for his clients. his fund is up 30% this year. joining us now, lee cooperman, chairman of omega advisories, delivering alpha advisory board and speaker, something we put on every year. i can hearll this stuff, i guess it was greatly exaggerated, the demise of ing and investing in general, and can only get 5 or 6% if you’re lucky and here you come in this past year with 30%. the year is not over. 7 1/2 trading days left and we’re watching it closely. you’ve basically done this by staying positive for most of the year. positive most of the year and continuing mildly positive now, less positive than we have been. why on earth were you positive at the beginning of this year when everybody else was talking about europe, china, the election, the slowdown. so many reasons to be negative. historically, bear markets precede recessions. you get the market down a lot and it’s highly probable. we don’t think recession is probable in 2012 and 2013. if you don’t have recession, the market is such i don’t think you go down a lot. the economy is creeping2% growth rate and one thing that worries me, not out of the view, is the federal reserve has an environment there is no consensus to common stock. i may have a zero but bottom line, what do i do with money? keep it in cash, zero. the fed has told us it will be zero a couple more years. put it in u.s. government bonds, 1.8%. that’s ridiculous. adjusted for taxes and inflation, you get a negative return. rates don’t belong where they are. we made a great deal of me on the last couple of years at high yield. it was 25% in ’08 and 23.6% and credit markets are unusually tight because no particular bargain in high yield anymore. you’re left with common stocks. you can find many common stocks yielding more than bonds and growing businesses and discount net asset value. by default, common stocks win. that’s the way we’ve been playing it. the right view. we had other ancillary strategies. done well in credit, done well in stock picking. by having the correct view of the market, we had above average exposures to equities, which has worked. what causes a recession typically? a lot of people were saying — i think going into 2013, there is probably 1 in 4, 1 in 5 chance. what causes it? i would say accelerating inflation and the fed tightening. the fed tightening. you see the fed tightening and told us we have to get to 6 1/2%. that may be a while. not any time soon. yeah. ultimately the markets will turn on us. if anything bothers me is the realit$20 trillion deficits and interest rates at zero are not sustainable prescription. we wake up and the markets will turn on us. we face that risk. we don’t know whether it’s 2014, 2016 event but somewhere out there. we hope we get the leadership in this country to deal with it before it becomes a crisis. deal with it how? what do you want to see? it’s a combination. i don’t disagree with raising taxes on high income people. i’m one of them and don’t disagree with taxes. d we have to deal with entitlements and health care costs and general expenditures. we have to have the political will to do what’s got to be done. thus far we haven’t. i look in a nutshell. let’s say we’re at 15% and spending 25%, there are people that would like to raise 25% and keep funding the government as it is now, maybe increase the government. most people, in a poll, would say, no, i like small government. when you actually pin them down, what do you not want that you’re getting right now, they want everything they’re getting right now. there are people that make the case the american people want 25% government spending. this was a defining election in the history of the country. it didn’t go the way we were hoping it would go. we all both want the country to do well and hope the president does an exceptionally good job and if he does well the country will do well and we’ll do well and we have to get down to business and deal with these issues. if we don’t, ultimately, we will have a problem. one of my favorite stories, a distinguished goldman sachs partner, i was with the firm 25 years, in the early ’70s, the former secretary of the treasury left and joined goldman sachs, he was very good buddies with pete peterson, vcivic-minded citizens and took out a one page ad in the new york times alerting people to the deficit. that was in the 1980s and it’s much worse than back then, we have the worst deficit ever in the country. until we start feeling pain we will kick the can down the road and hopefully it will change and hopefully won’t change until it’s too late to do something about it. what will be the signs you’re watching that will tell you the markets are starting to turn. right now, you’re fully invested. pretty much fully invested. we’re very bottom up. i have to say, i’m trying to find a word to describe my view, i’m like a buffalo. could see it go up 10% next year, down 10%. more likely up and down because of the economy and because of the fed. we’re in a condition we haven’t seen in many years, half the stocks are yielding more than fixed income. you have to go back to 1998 to see that condition. it’s great conservasm on the part of the investor because of the beating they took in 2008. you’re still seeing liquidation. i saw a huge piece in the journal over everything that hit the individual investor over the past five years, people are saying the love for equities and the equity dreams, it’s over. i don’t think so. that was a positive article for the prospects of the future. you have to doubt that. i feel comfortable with the statement. zero short term interest rates and 1.8% 10 year u.s. government bond rates have an implication for perspective terms for the bond market and telling you they’re less than historical but i think superior than earning in interest income. in my bones, i feel over the next three or four years, you will have significant negative returns in bonds and make no sense. what would be the signs? dollar exchange rate hit and dollar weakening, not happening presently and zero rate inflation is another sign basically. what got us and hit us hard in 2008 was the overleverage in the system and banking system. consumers weleverages, hing too high. the interest rate staying this low has helped everyone sort of at least de-leverage to some extent but have we transferred all that private sector leverage. to the public sector? we transferred it to the fed. it’s still there. does it eventually mean our purchasing power the dollar has to go down. ultimately, there will be more inflation. everybody else is better. consumers are de-leverages, housing market de-leveraged. all these things that allow it to do well. corporate balance sheets de-leveraged. can you get the government to start this deal with its issues. i’m not one of these people that says it’s not solvable. it’s solvable. we have to give up a little bit suffering, some old time virtues. basically, it’s solvable. simpson-bowles was start, the president’s own commission. i think he has to move in that direction and hopefully we will before we have the crisis that forces it. we have evolved into a system of leadership out of crisis. we don’t have a crisis right now. we don’t have the leadership. in 2008, they didn’t get along like they don’t get along now but they did what they had to do because they had a crisis. financial asset prizes don’t discount a crisis. i’m not looking for the crisis to precipitate leadership. i want any leadership before the crisis. right now, my principle bullish nish is around 75 or 80 cents from companies. it motivates me. i like everybody else has to decide what to do with clients’ money and my own money. you have to have cash because there’s tail risks out there. i go to work everyday because i want to go to work and don’t have to go to work and don’t ever want to be in the position