David Tepper, founder of $20 billion hedge-fund firm Appaloosa Management LP, said he’s nervous about markets as the U.S. economy isn’t growing fast enough amid complacency by the Federal Reserve.
“We have this term called coordinated complacency to describe the world’s central banks right now,” Tepper said yesterday at the SkyBridge Alternatives Conference in Las Vegas. “The market is kind of dangerous in a way.”
Tepper, 56, who started his Short Hills, New Jersey-based firm in 1993, said he’s more worried about deflation than inflation and that this is the time to preserve money. The fund manager, who is worth $7.9 billion according to the Bloomberg Billionaires Index, said that while investors can be optimistic on markets, they should hold some cash.
“I think it’s nervous time” he said, adding that markets may “grind higher” in the near term.
Fed Chair Janet Yellen last week said the world’s biggest economy still requires a strong dose of stimulus. U.S. stocks slumped today with the Standard & Poor’s 500 Index sliding 1.2 percent at 11:20 a.m. in New York. Equities had reached all-time highs this week after three rounds of monetary stimulus helped fuel economic growth, sending the S&P 500 Index (SPX) surging as much as 180 percent from its 2009 low.
Tepper said he wasn’t recommending that investors bet against assets. They shouldn’t be too optimistic about rising markets either.
Don’t be too “freakin’ long,” he said.
The money manager has curbed his bullishness since last year after U.S. growth failed to be more robust than it is. Tepper said he would be “comfortable” if the nation posts economic growth of 4 percent in the second half of the year.
“We should be moving faster,” he said.
Tepper said in November that stock markets aren’t inflated and that while he was optimistic about U.S. equities, they may fall 5 percent to 10 percent when the Fed curbs its monthly stimulus program.
Tepper was last year’s top-earning hedge-fund manager as he made $3.5 billion, according to Institutional Investor’s Alpha 2014 Rich List. He joins other money managers, former politicians and celebrities including actor Kevin Spacey and basketball Hall of Famer Earvin “Magic” Johnson among the conference speakers this week at SALT, which is in its sixth year. The event continues today with David Rubenstein of Carlyle Group LP and “The Black Swan” author Nassim Taleb among the scheduled speakers.
He said yesterday that the European Central Bank is “really far behind the curve” and that it should boost its stimulus program in June.
The euro-area grew 0.2 percent last quarter, half as much as economists had forecast, according to Eurostat data released today, adding pressure on the ECB to deliver stimulus measures next month.
Markets may react negatively to inaction by the central bank, Tepper said.
ECB President Mario Draghi said at the institution’s policy meeting in Brussels last week that he’s “comfortable” with the idea of boosting stimulus at the June gathering, and that a strong euro currency “in the context of low inflation is cause for serious concern.”
Should the ECB decide to act, it might deploy multiple tools rather than just cutting interest rates. At 0.7 percent in April, inflation was less than half of the ECB’s goal of just under 2 percent. The rate has been below 1 percent since October.
Tepper, who described global markets as “tough,” said that he has moved his investments around and that his fund is exposed to the markets to the extent that it can either boost or cut holdings easily.