- Billionaire investor Leon Cooperman told Bloomberg that the Fed has created a “speculative bubble.”
- Cooperman said markets are not focused on the debt in the US that’s growing at a pace far exceeding the general economy.
- The investor said that he sees the continued “artificial support” for the economy as negative.
Wall Street legend Leon Cooperman told Bloomberg on Monday that the Fed has created a “real speculative bubble.”
The hedge fund manager said he’s “uncomfortable” at the moment because the market is not focused on the amount of debt being created in the nation. Cooperman emphasised that the US has piled up $US21 trillion of debt in its 244 years, and said it will probably end 2020 with $US27 trillion in debt.
“That is a growth rate in debt far in excess of what the economy is growing at and I think that’s going to be a problem down the road,” he said. Cooperman also said that the US has had artificial support for the economy since 2008, and he sees this as a negative.
The Federal Reserve cut its benchmark interest rate to near zero in March to soften the economic fallout of the pandemic. Cooperman said low interest rates are indicative of a problematic economy, and that zero interest rates are creating a “very speculative tone to the market.”
“What I’ve not fully appreciated is what a zero-interest rate environment does for stocks. I was focused on the fact that we’ve had zero interest rates in Japan and Europe and their stocks are five or six multiple points below the United States market,” Cooperman said.
The investor also mentioned that he is not buying bank stocks soon even though he believes they’re cheap at the moment. “I’m concerned about financial conditions generally so I’m not adding to my banks,” Cooperman said.
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