market folly

David Tepper appeared on Squawk Box this morning on CNBC.  The once elusive Appaloosa Management hedge fund founder has now become somewhat of a sporadically recurring guest, each time popping in update his degree of bullishness.


Reasons For Tepper's Bullishness

He originally came on air in September 2010 and inspired the 'Tepper rally' in markets.  The market is up almost 45% since Tepper's original bullish call and he said "sure, I'm definitely still bullish."  He cited improvements in housing and autos as great reasons to be bullish in the US and also pointed to central banks around the globe that are easing.  We highlighted Tepper's recent media appearance in January when he said to be long equities.

While many in the market are worried about the Federal Reserve tapering, Tepper shows how the deficit should be shrinking in the next six months and notes how there's $400 billion that can either go into the economy or stocks.  "If we don't taper back, we're going to get into this hyperdrive market."

He went on to say, "There better be a true taper or else you might be back into the last half of 1999.  So like guys that are short, they better have a shovel to get themselves out of the grave."

As far as potential risks go, Tepper says you always have to consider potential problems arising in the Middle East that could cause a 5% correction or so, but he doesn't see that coming and he also points that North Korea has settled down a little bit. 

In the end though, Tepper summarizes his thoughts by saying it feels like we're in an early stage economy.


Tepper on the Equity Risk Premium

Tepper highlights how "we're at one of the highs in equity risk premium in history" and that "when the equity risk premium is high, historically you get good returns after that.  A chart he pulled up shows that the highest levels were in 1975, 1982 and now.

He also cited how there's a low 13-handle for the S&P on next year's earnings. 

When asked where specifically he's bullish "I think every place is the place to be in the stock markets of the world.  I think you've taken out the tail risk, the disaster case.  That doesn't mean you won't potentially have riots in Europe."


Appaloosa Long Japan

Appaloosa is long Japan and has been long pretty much since the beginning of this year, Tepper said.  They commented on how Dan Loeb of Third Point has approached Sony (SNE) about restructuring as well.  Tepper noted that, "even though that market's moved a lot, you can still have a lot left in there."


Other Appaloosa Positioning

Tepper said, "It's one of those times where the indexes really are cheap ... My biggest position is Citi (C), you'll see it when my 13F comes out, it's still my biggest position.  We don't own commodities, however if we still see a strong economy, as world growth picks up, commodities will pick up in 2014.  General manufacturing is good, tech is cheap, but you have to be careful because of obsolescence" (so you have to look at individual names there).

He also said they still own Apple (AAPL), though they cut their stake a little bit at the beginning of the year around $500 or so.  They bought just a little bit below $400, and he looks at it as part of his tech basket.  Tepper feels the company either needs to come out with innovative new products, or transition to an evolutionary company where they make cheaper phones, bigger screens, and promote the ecosystem and grow that way.  He says the problem is they haven't done either lately.


Embedded below is the video of David Tepper's interview:

Video 1


Video 2


Tepper was listed as the highest paid hedge fund manager of 2012.