Friday, January 21, 2011

Summary of Interview of David Tepper on CNBC today

This morning CNBC had David Tepper, founder of Appaloosa Management, as their guest. If you don't know who David Tepper is, and you follow the stock market, you should. I will give a little summary of his notoriety at the end of this post, but suffice to say, this morning he predicts headwinds ahead for the market and he said that we will not be back to previous employment levels for 15-20 years. He sees the new normal unemployment rate to be in the 6.5% to 7% range, that's even after we get things better.

There were a number of points made this morning and I will summarize what interested me from what he said:

1. There is a bit more downside than there was back in September.
2. Regarding the food bank, Tepper says "I'm obviously an optimist" but things aren't going to get better anytime soon in terms of the need for philanthropy.
3. He's kind of bearish on bonds and gold.

Tepper's Appaloosa Management is a $15 billion hedge fund. Tepper is famous for his positive commentary in 2010 after the US government stepped up the plate with large stimulus programs. Tepper believed that these actions nearly guaranteed the rise of the equities markets in 2010, and he was proven correct.

Tepper accurately predicted that the S&P 500 would close 2010 up 13%. His forecast came true. He predicts a much more difficult 2011, and this, understandably, has many investors worried.

Tepper's hedge fund made a killing during the crash by betting the government wouldn’t let the big banks fail and he was correct.

He said today that companies have become very "efficient" in the past year or two because top line growth has been slow. To me that means squeezing more profits without adding new hires, so that the business keeps making money. But that is not growth and our economy needs growth right now to fully recover. So there is no way we are going to solve these problems with our economy by better efficiency. This is not a good forecast for our country's future.

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