David Tepper, Appaloosa Management founder & CIO, explains why he is definitely “bullish” on the stock market. “The numbers are truly amazing,” he added. David Tepper was on CNBC this morning discussing his views on stocks and his lukewarm videos on Apple.
David Tepper CNBC interview videos and transcript below
i’m definitely bullish. look, ever see the movie cousin vinnie? i did. years ago. when i was a yute. so there’s this moment at the end of the move where where he is making the case, summing it up. he sums up so many different things that the prosecution says, case dismissed. because the evidence is so overwhelming. kind of like that right now. it’s so overwhelming. autos are better, housing is better. continuing to improve. the fed, well, before we get to the fed, australia just eased, japan, korea. these united states of america, we just are just amazed at the way these numbers work. as we go out further. so really on the tv, on your show and others, there’s been talk about tapering. right. tapering back to fed. so the market is worried about tapering. the numbers are quite amazing. just truly amazing. the fed is going to purchase $85 billion of treasuries and mortgages a month. it is over a trillion. so over 500 in six months. what’s happened and what’s really mazing is that if you look at the incomes the next six months because of tax increases, budget cuts, growth in the economy and fannie mae and freddie mac pwaeug back, the deficit is shrinking. this is something we can hopefully at least work on now. and i have the numbers. the next six mos def sit will be well under 100. probably closer to 85. which means — this is an important thing. for those people who say we have been financing the deficit, we really have — the fed will never say that. this is a pretty big issue. we have over $500 billion we’re going to buy over the next six months. now we only have a deficit less than 100 the next six months. the net issuance versus refunding is a little over 100. that means we have 400 billion, 400 billion that has to be made up. so basically think about this. that’s being taken out of the market, out of the bond market. 400 billion is now in your hands, my hands and other folks’s hands. and there’s a few choices. it either has to go in the economy, which, you know, it probably will go somewhat in the economy. it has to go to the short end of the curve trade better. we have this cess. or it has to make stocks trade higher. w, the problem is you might be worried some of that might go into the economy and, you know, it might stimulate with a little bit of surge. basically, afterwards, we also have to cut back because the deficits in the future will be less than this trillion dollars. so if we don’t taper back we will get into this hyper drive market. it’s backwards. the fed has to taper back. because if you look at the numbers, it’s so tremendous, these numbers are so tremendous that you can have the market in
nespresso. what else? this is in addition to your exclusive story. david tepper was ranked number one hedge fund earner. we don’t need to worry about, you know, that you made $2.2 billion. which is nice. you had a great return. all right. on september 24th, 2010 you basically said either the economy is going to improve and stocks are going to go up, or the fed is going to make sure the economy improves and stocks are going to go up. we’re up almost 50% from when you said that. i would just as an opening question i would say from here either the economy has improved and is going to continue to improve, or the fed is going to continue what it’s doing to make sure it improves. i don’t see why this is different or why you should be less bullish. are you still bullish? sure. yeah. i’m definitely bullish. look, ever see the movie cousin vinnie? i did. years ago. when i was a yute. so there’s this moment at the end of the move where where he is making the case, summing it up. he sums up so many different things that the prosecution says, case dismissed. because the evidence is so overwhelming. kind of like that right now. it’s so overwhelming. autos are better, housing is better. continuing to improve. the fed, well, before we get to the fed, australia just eased, japan, korea. these united states of america, we just are just amazed at the way these numbers work. as we go out further. so really on the tv, on your show and others, there’s been talk about tapering. right. tapering back to fed. so the market is worried about tapering. the numbers are quite amazing. just truly amazing. the fed is going to purchase $85 billion of treasuries and mortgages a month. it is over a trillion. so over 500 in six months. what’s happened and what’s really mazing is that if you look at the incomes the next six months because of tax increases, budget cuts, growth in the economy and fannie mae and freddie mac pwaeug back, the deficit is shrinking. this is something we can hopefully at least work on now. and i have the numbers. the next six mos def sit will be well under 100. probably closer to 85. which means — this is an important thing. for those people who say we have been financing the deficit, we really have — the fed will never say that. this is a pretty big issue. we have over $500 billion we’re going to buy over the next six months. now we only have a deficit less than 100 the next six months. the net issuance versus refunding is a little over 100. that means we have 400 billion, 400 billion that has to be made up. so basically think about this. that’s being taken out of the market, out of the bond market. 400 billion is now in your hands, my hands and other folks’s hands. and there’s a few choices. it either has to go in the economy, which, you know, it probably will go somewhat in the economy. it has to go to the short end of the curve trade better. we have this cess. or it has to make stocks trade higher. w, the problem is you might be worried some of that might go into the economy and, you know, it might stimulate with a little bit of surge. basically, afterwards, we also have to cut back because the deficits in the future will be less than this trillion dollars. so if we don’t taper back we will get into this hyper drive market. it’s backwards. the fed has to taper back. because if you look at the numbers, it’s so tremendous, these numbers are so tremendous that you can have the market in sort of a hyper mode. potentially. i don’t know where the money goes. do you happen who else doesn’t know where the money goes. all along we hoped that the fed could pass the baton to the real economy. that’s the way sit supposed to work. the fed is supposed to get out when the economy gets better. in a way you like to have a smooth market not two up too fast. so this worrying about tape thorring, there is no worrying about tapering. the second steve liesman comes on the air, what happens? if there is a true taper, there better be a true taper. guys that are short better have a shovel to get themselves out. if you don’t have that back to have a smooth market move. these numbers we’re talking about are tremendous. i’m not disagreeing. i want to know what the period will look like. you really have to — first off, do you have cut back purchases to get to some normal ality. never did we run close to these numbers. in 2011 or earlier did we run into these numbers where we have this net takeout. i think the fed doesn’t know the effects. what they do know is that they have to move the program down. it’s almost seasonal. they should taper it down. if you don’t taper it down, you could go crazy. i don’t know that. they don’t know that. it’s just a possibility. you have to expect some of it. the question will be if the market does the numbers they should be fine. they know how the flow of money is. they should be fine. the market should expect some. the question is you’re not getting anything until june 19th. that’s a fed meeting. so you have this excess of money in the system. so i don’t have any fair — and then you go beyond that. you look at the budget numbers. we have six wall street firms budget numbers and stuff. next year the average is about 600. and the next two years after that, 600 million deficit. and the next year is 500. you can’t run a trillion and have big gaps for the whole year. the first half of the year, you know, october to march, you basically have most of your spend something most of your tax receipts. and second half of the year, april to october or april to september 30th. if you’re the fed, what should you be doing? taper off in the first half of the year and be bigger in the second half of the year. so you have this balance of flows. i’m trying to figure out with what andrew sorkin does with 4 billion. you spend some, invest some. with evaluations, i think they are only so valuable to talk about. things can get overvalued and go much further. it is still a fact that it has moved 45% since you made the case the first time around. so it’s not as cheap as it was. i have this other chart. this is a blog by the fed. you can’t probably see this thing. if you hold it there, i think it is like the best. he has nerves of steel. the high points are 75, 82 and now. cheapness of the market. equity risk. it is basically saying that when the premium is high, historically you get better returns after that. one of the all time highest equity risk premiums in history. you can almost feel it with the nonexcitement of the entire world in equity prices and the stock market. look, here’s the joke. to me it’s a joke. i don’t know how fast the economy is going to grow. it feels like it’s getting better. if ecb is talking about it after the election, you will probably see more movement by the government. can i tell you real quickly. look at a chart at what’s going on this morning. it’s already beginning and the market hasn’t even opened. this is just as you have been talking what’s happened here in front of us. too bad. i like people that got winded. guys that are bearish by nature and they got wind that you were coming in today. they are classic, though. but that’s not with what you’re saying. how can you two-year extension in spain and france for austerity. where is it coming from? next year you’re still low 13 for estimated earnings. say you are 3% treasure list. at some point they can go up in yield. are you most bullish on the united states? is this the place to be in the world? i think every place is the place to be in the stott market. it doesn’t mean you won’t potentially have some rise in europe because it is very high. but you have the ecb and the powers being a little more pro growth. you do have it turns a little bits, which is good. we’re along japan. and i know you’ll ask me about that. when did you get along japan? from pretty much the beginning of the year. it’s pretty good for us. whatp do you make of dan loeb’s stand? we began with my — i had a weight room in my office. i had a building in short hills. so i have known him a long time. dan say really goodin vestor and really smart. one of the reasons he’s really smart because he knows how stupid he is. he knows his pit falls and he knows what he can and can’t do and he appreciates that. he takes a very soft approach. sony kind of opened the door for him. there’s massive restructuring of a lot of japanese companies. whether sony, some of the real estate companies over there. i mean, we — so many companies restructure and increase the value. besides that, if you look at earnings estimates, you know, at 105, goldman sachs and others, goldman is probably at the high end. so you’re taking very low multiples. you really can’t have — even though that market has moved a lot, you still can have a lot in there.
they took it away. back to our news maker of the morning. david tepper, $17.9 apaloosa management. i have to plug cnbc. i put a cnbc app on my phone. it sucks the life out of my phone. and you and those lips i’m not going to make a comment. i’m just not going to say anything. bloomberg knew he would be bullish today. they did? no, no, no. do you have the morning wakeup app? it’s just for the market stuff. i think it’s 99 cents. it is really good. it gives you the index, treasuries. do you save up for that? 99 cents. i saved up a long time. we are going to get to horse manure in a second. david eihorn said jelly doughnut is yummy. two are indulgent. three may induce tummy ache. you can have too much of a good thing and overdoses are destructive. so buy gold at 1900, which is what he did. what do you make of that? he’s skinny, so i don’t know if he’s ever had a jelly doughnut. me and joe, we know jelly doughnuts. i’m svelte. you look at his mouth. you don’t look at me. look at this. questions? no questions. no comments. you look beautiful. you’re gorgeous. hit me. hr forbids us from touching. i’m small. you’re a high sitter, though. big personality, small? stature. he was commenting on david eihorn. yeah, yeah, yeah. daviguy. he really is. he’s a smart guy. listen, first off, the people who say the fed policy doesn’t work, it would have happened anyway. great. might have happened. might not have happened. the private sector seems to be in pretty good shape. as soon as the question is over, it’s going to be really interesting second half of the year. people picking up economic forecasts. really interesting stuff. so i actually think, you know, it’s all worth it. the question is how are they going to get out? i’m thinking if you do get that pick up and if you get the surge in there they don’t hold back from what we talked about earlier, you know, i think there will be a natural way to do it. because the numbers are not as big as you think. and the gap, how they can take it down. you’re going to take it down with growth naturally. at some point the feds will want the interest rates to go up. i think there’s going to be a more natural path for this taking off jelly doughnuts. you can follow the rally a little bit. if you look at other patterns. let’s look at this economy for what it is. you were in a depression state when we went through the lehman collapse. you’re kind of an early were stage economy. probably have yours to run in the early stage. we don’t have inflation. you have room there. unemployment is high. you have room there. we have a little bit of room to run. we just had the early sector of the economy is moving. you had big rallies is housing. banks recovered. probably more in the u.s. people look for this, which will come. people say there’s no renaissance. people don’t do numbers right. of the sectors that you just mentioned, which do you see the most opportunity and where would you put your money? listen, we think, you know, it’s one of those times where the indexes are really cheap. they really are low. next year the s&p, we kind of have it in the low 13s in next year’s numbers. 3%, 4%, run 20 times. crazy stuff. so, yeah. my biggest position is citibank. you’ll see it when it comes out. it’s s citibank. we have a certain amount of the u.s. banks which are good sectors. we don’t own commodities because we think the economy will be strong. the way it usually works is later on we’ll have as more growth picks up, the economy will will pick up in 2013. i think general manufacturing, tech is cheap. individual sort of gain. awe lewded — the desk wants you to know, i think you alluded that rates could nor higher than they are now. i don’t know when you think that will happen for the 10-year or mortgage rates, but will it happen in the next year? for mortgages, without the fed, the market has a net shrinkage of mortgage paper. okay. so there’s a little bit of shortage. there’s no new issuance of nonagency paper. nonagency, fannie and freddie paper. the mortgage rates are getting better and better and better. i think that it’s really a question of when the — how good the economy gets and how fast the economy gets better. i hate to use this word because it will come back to haunt me in life. for all these bears out there, we may be, a little bit of golden. we just may be there. probably the fed doesn’t want to. it’s just a smoothing mechanism to go up at a slower rate. to go back to a fairly low level anyway. you have no inflation. you’re going to go up but the question is when are you going to go up? it is cash here. to be quite frankly it could be short anything. i don’t like bonds long term. but good luck. i like the trade. just like the japanese trade. it’s finally going back up a little bit. everybody is excited. oh, my god, they are falling. japanese markets are going to hell. 80 basis points. stop. stupidity is running wild. you started talking a little bit about manufacturing. were you leading, too, that our input is just a huge story? is that what these manure? no. that’s a different story? tell the story. i told a story years ago, horse manure story. it was a story about the 1890s there was a big rob in the world about horse manure. horses were moving everything, popping in the cities. london times said in 50 years the horse manure would be nine feet high on every street. they had a conference in 1898, urban conference in new york city was supposed to last two weeks. disbanded after three days because they couldn’t figure out the answer to this horse manure problem. the answer was, cars came along. these guys looking at this economy, they don’t want to say the economy is better. they didn’t get how much the budget cuts happened. that’s why we have this $400 billion thing in six months. this is tapering, there’s no hammering. no hammering. there should be no hammering. you should invite it. the market is going up. the question is how fast. market forces provide incentives if the government doesn’t mess things up. there are incentives to innovate. that’s why there is still fish in the ocean and we’re still making nickel and cadmium. people love to read if we don’t change our ways the earth will be ruined. it had to be global warming this time. we slowed down global warming a little bit although there’s still a problem potentially depending how you believe it. the natural gas in the u.s. is still carbon. but it slows down. you know, it takes it away. but, look, we were just talking about the u.s. the u.s. is going to have this great manufacturing renaissance. everything will be manufactured in the u.s. when we have — when the world has a need to it. 3% world growth you won’t see it. when the world picks up. people who say i haven’t seen the renaissance of the united states, give it a little time. that’s just the way the numbers work. apple, you seem to be doubling down on apple. i don’t know. it looked like you were from some of the filings. i don’t know if that’s right or wrong. where are you on apple now. we still own apple. we cut our stakes in the beginning of the year i guess around 500 sort of area. and then, you know, so we’re — you know, it’s — it’s still — we still have a position in apple. bought a little bit below 400. just a little bit. it’s okay right here. it’s okay. to me it’s another thing in the tech basket so to speak. more or less perform with the market on, you know, i, along with everyone else is waiting to hear what they have to say as far as do they have something revolutionary in the horizon? revolutionary. or evolutionary. evolutionary, if they don’t have something great and fantastic, make a bigger screen for goodness sake. by the way, while you have this great, you know, sort of itunes, i forget what they call it. eco system. make a cheaper phone. that equals — it can have a very high multiple. if you don’t have it that way, go that way. if you don’t have the steve jobs around to do the revolutionary sort of thing, do the evolutionary thing. now, if they don’t do either, we’ve got a problem. it’s like, houston, we’ve got a problem. so september, if they don’t have either, i hope i can move fast. if they do something, that’s — how are you thinking about? we took it down. right. you know, it’s another position. it’s not close to like city corp. is more than twice the position of apple, for instance. so we give you — and isn’t it just evolutionary changes in their products for why the stock has come down? it hasn’t been revolutionary. they vice president done the evolution either. # samsung comes out with a big screen. i’m still waiting. hello, apple. i’m still waiting. they haven’t done either. do something. one or the — and the problem is i think, listen, i don’t know the company that well. i’m not the analyst in my shop. but it seems to my you have to do one way or the other. it doesn’t stop you from doing it. they have to figure out. if you don’t have the next greatest thing you can still be a very, very successful company. you have the best eco system. if you whether or not at the numbers in 14 — 15 and 16, it looks like we will be 3% deficit. right. with nominal growth, the debt to gdp will be coming down. he said 3 trillion if we keep the sequester. do you want to keep it or not? keep the sequester. make the small changes like this. the stupid things they’re doing. it’s not — listen, and i — some people are suffering. it’s horrible. like everything else. but the thing is, when you look at the numbers you have a chance in the next couple years, the debt to gdp will come down. there’s a problem with saying that. you have to do something. hopefully obama will do something with the entitles now while the democrats are in there. we have no problem in the next two, three, four, five years. there is no problem. the debt to gdp will come down. it is down in 7, 8, 10 years when it really starts picking up again. joe and i start collecting retirement or whatever. that’s like half of new jersey yourself. we do a lot of stuff in new jersey. what about — should we just borrow a bunch of money and fix every bring in the country and build some new roads. listen, we should — things that need to get done, get done. people will say they have this, at in china. that’s fantastic. that’s not what we should do. when we need things we do things. should we do more infrastructure? yeah. if we can fix the entitlements, which may be the renaissance which may come in 2015, 2016, supply and demand is a little better, you will pick up tax revenues. i was a bull on the united states of america in 2009 when there were so few bulls. i might have been the only bull in march 2009. you know what, i’m still a bull in this country. this is a great country. the chinese said — i was with another really hedge fund guy. actually does more commodities sort of stuff. he was over in china. and he said the chinese were complaining. he said the united states are so lucky. they just have this energy thing. he said — he’s actually, what is he? scandavian. he said that’s because god blesses america, you atheists. what would change your mind? what would make you less bullish? there’s always things that can happen to make markets go down. middle east is a little bit of concern. you can get a 5% drop because of the war, how it’s set up. i don’t see that happening but it could happen. north korea settled down a little bit. i guess if — sars. sars. like a hybrid swine flu. did you see that? they have a swine flu/bird flu. i worry about zombie apocalypse. coming from pittsburgh, that’s where they did the night of the living dead. listen, there may be some people in the summertime in europe because of the high unemployment. hopefully after the german elections they make moot. but if they don’t, if the economies don’t pick up, it’s going to be tougher to hold together. it makes us look so good. they are seeming to recognize that. more and more they are recognizing that. the germans are giving it to some of that thought. you touched on u.s. housing but i don’t think i got the full on david tepper version. i think the only thing holding it back is — from what we hear, to get the people back in the labor force. because we basically had. listen, people move on in life. and you have this huge house. housing will pick up. it’s not going to back to where it was. it’s not good for the economy. but hopefully, you know, you do. you have housing picking up. you read about the price increases and the demands there. like i said, i do believe we’re in the early stage. it feelsike early stage recovers. bears can’t stand that. they can’t stand it. it’s cousin vinnie. everybody who show shoo go look at cousin vinnie. you have to watch it. at the end. joe peschi. what’s his namarate kid. what’s his name? ralph macchio. i have one more for you. you own jpmorgan? we have a small position in jpmorgan. are you willing to break it up — not break it up but split. as a general rule, not talking about jpmorgan, kphot commenting on jpmorgan, we generally recommend splitting up. now, if you have a strong lead, that may suffice. i don’t know the situation. it’s not wne of our major positions. definitely want one guy i was thinking about this too. it definitely wouldn’t be the the end of the rld. what is it? reed and who else at citigroup? two guys together -counsels. you need somebody in charge. you need one guy in charge. no lead director. what you need is to have strong oversight. depending what the chairman’s role is or theead director, you know, how it’s defined, listen, part of the problem of — still a problem in corporate america, we talk about japan. the board of appaloa. it’s a dictatorship. you still have a problem in the united states of directors who forget what they’re doing. who don’t know — forget they’re working for shareholders at the end of the day. they get too comfortable. and you need that strong lead director for a lot of different reasons than a bank. a lot of ways you can get in a trouble with a bank, as you well know. ask the real tough questions. you could have had a strong lead director. it would have been not a bad thing. splitting that role. if you have something strong enough. it’s a question, right? right. would you guy — i just saw tesla go up another five bucks. have you seen those? i don’t know the financials. i don’t know whether to. right. what do you drive? what do i drive? fisker half price. if it doesn’t blow up in the parking lot, catch on fire, something like that. you know what, you have grown into this spot here. i have grown into this spot? yeah. you were wonderful today. my good friend, good friend i golf with is on at noon, steve weiss. i golf with him. i said, steve, i’m going on. he said you’re going on, i’m coming on at noon. i love you, steve, anyway. those guys are shameless. and you guys aren’t? you are the most shameless of them all on squawk box. thank you. thank you. you and vinnie go out and see it. cousin vinnie. that’s a plug. you don’t have to be a yute. 1894. horse crisis.