David Tepper Makes the Case that Stocks are Cheap

December 17, 2012 9:09 AM EST
In an interview with CNBC this morning, hedge fund manager David Tepper of Appaloosa Management made the case that equities are cheap with the Fed's backstop, although he warned that over the short-term things could be rocky given the fiscal cliff debate.

Tepper said it is clear that the economy is improving and has tailwinds from housing and auto. In addition to a decent economy, the Fed will be buying a trillion dollars worth of assets in each of the next few years, he notes.

In addition to the Fed, Tepper noted that a second, but overlooked, potentially market moving event in Europe was that the ECB voted to lower interest rates, although they haven't moved. Draghi now has the power to lower rates anytime he wants, he notes. This is addition to the ECB's bond buying.

At 12x P/E stocks are cheap, said Tepper. However, Washington is currently holding the market down. Still, he sees limited downside of 2-3% from here and a lot of upside.

On a question if the Fed money printing did anything, Tepper said it certainly has and notes that credit markets are robust.

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