David Tepper, founder and hedge fund manager of Appaloosa Management LP, believed that the Federal Reserve would not taper the stimulus or $85 billion bond-buying program for a long time, amid the distractions in the economy caused by the government shutdown.
David Tepper on economic slowdown
During an interview with CNBC’s Squawk Box, David Tepper said, “They’re not tapering for a long time now, they have no choice. The government is still shut, things are going to obviously slow down and now it looks like they may have a relatively short-term deal, which is not going to create the confidence they would quite like.”
The hedge fund manager noted that at present the economic data does not support tapering the quantitative easing. He indicated that the employment rate is not great.
David Tepper said the markets will go up given his projection that the Federal Reserve will continue its current bond-buying activity. He said, “So that’s definitely sort of going to be a push-up to markets. Generally speaking, markets will go up, [because] my basic belief has been when you have large [quantitative easing], markets go up.”
David Tepper on tapering
David Tepper added, “I don’t think you’re going to get ‘1999’ because I was talking about not tapering in a world where you didn’t have politicians who have nearly lost their minds.” During a previous interview with Squawk Box, the hedge fund manager opined that the markets would go back to a situation during the last half of 1999. “There better be a true [Fed] taper or else you might be back into the last half of 1999. Guys that are short, they better have a shovel to get themselves out of the grave.”
With regards to the issue of the government’s debt, David Tepper said, “As far as the debt is concerned, they should just pass something in Congress that says the debt will be paid always. Do that and that will make things much more stable.”
David Tepper and debt ceiling
In addition, David Tepper believed that Senate Majority Leader Harry Reid and Minority Leader Mitch McConnell developed a short-term deal to end the government shutdown and to raise the debt ceiling before the deadline on Thursday, October 17.
“It looks like they may have a relatively short-term deal, which is not going to create the kind of confidence you might quite like. If you get a bigger, broader budget deal, that would be great and markets could fly,” said Tepper.
David Tepper also called the default deniers “freakin stupid.” The hedge fund manager said, “These guys they were great debaters in college. I’m so glad they were great debaters…they’re so smart. They’re so smart. But they’re so friggin’ stupid…so friggin’ stupid…”
In terms of stock valuation, David Tepper commented that equities will move towards the normal valuation at 18 to 20 times multiple in the future. According to him, it is difficult to invest with the current environment.