David Tepper, founder of Appaloosa Management, needs little introduction. After leaving Goldman Sachs to start his $19 billion hedge fund in 1993, he’s had one of the best track records on Wall Street. Some have called him the greatest trader of his generation, but you readers can fight about that in the comments.
Linette Lopez: The yield curve is still flat, many think that European banks are still under capitalised, and you said on a recent CNBC interview that you don’t think the stock market can go much higher (which generally means there’s only one way it can go). In this market, where do you think is the most dangerous place to keep your money?
David Tepper: I think German and UK bonds are most susceptible to a significant decline. On UK bonds, with weakness in currency, future inflation indicators have picked up to the 3% area with close to 1% 10 year. And Europe seems to be picking up with zero bund yields and inflation that will pick up to 1.5% in first quarter. So both UK bonds and German bunds are a sell.
Lopez: Say the Fed does raise rates in December, then what? What do policymakers need to do to support the Fed during this transition? Are you in the ‘there must be fiscal stimulus’ camp?
Tepper: I think some infrastructure spending would be good for economy and would help the Fed towards policy normalization.
Lopez: What’s the biggest thing on your clients’ minds right now that they keep asking you about?
Tepper: That I will give them back their money.
Lopez: Around this time last year you said the Chinese yuan was over-valued. Now it’s hit a 6-year low against the dollar. Do you think it still has farther to fall?
Tepper: It has a little further to fall. They seem to be accepting a bit more weakness in the currency. And there is still a need to take money out of country and outflows seasonally pick up this time of year.
Lopez: You called one of the US presidential candidates “demented, narcissistic and a scum bag” on national TV. You left which one up to the public’s imagination, but as a new Florida resident, are you afraid comments like that will get you banned from Mar a Lago?
Tepper: My mother told me if you have nothing nice to say about someone don’t say anything — that [comment] was my version of that.