Leon Cooperman sees lackluster returns for stocks going forward.
Leon Cooperman is a billionaire legendary Wall Street trader, a hedge fund manager with a personal net worth of $3 US billion (February 2017), and is currently at 660 on Forbes listing.
Leon Cooperman recent business interview in late August was made following an impressive summer stock rally, the S&P was up 13% over the period, many indices experience their best second quarter for decades.
“Leon Cooperman recent business interview in late August was made following an impressive summer stock rally, the S&P was up 13% over the period, many indices experience their best second quarter for decades”
WIN INVESTING
Despite it not being a sell in May go away Summer Leon Cooperman sees lackluster returns for stocks going forward
“I think it is very obvious what is going on is the miracle of free money zero commissions and a lot of people at home getting checks what exceeds what they would get if they went to work” said Leon Cooperman.
Indeed, since the pandemic and great lockdowns struck the world in early March the Fed’s balance sheet has gone from 4 trillion US dollars in January to 7 trillion US dollars in June. The European Central Bank ECB also swung open its liquidity tap with the €750 billion Pandemic Emergency Purchase Program (PEPP). So too did the Bank of England announce £200 billion ($247.55 billion) of additional QE, bringing its bond-buying program to a total of £645 billion, as of June 2020.
“With sports events closed down they are sporting around in the stock market, “said Leon Cooperman. Referring to the Fed’s emergency monetary easing policy Leon Cooperman said, “the Fed chair has given investors a long term put by promising to keep rates to near zero for an extended period”.
“I think it is very obvious what is going on is the miracle of free money zero commissions and a lot of people at home getting checks what exceeds what they would get if they went to work”
LEON COOPERMAN
Leon Cooperman sees lackluster returns for stocks ahead despite acknowledging that the central banks’ liquidity taps flung open has led to the dramatic expansion of valuations
“The president should kiss the chairman on all four cheeks in my opinion,” said Leon Cooperman. Four cheeks laughed the interviewer. “Yes, I won’t go beyond that,” joked Leon Cooperman.
“We also have a president that will say and do anything that will get reelected and he is watching the stock market” added Leon Cooperman.
“So I take a conservative view. Bonds offer return-free risk, the idea of buying a bond whether you get 70 basis points for ten years when you can buy plenty of good companies yielding 2% or more makes no sense” – Leon Cooperman
Leon Cooperman sees lackluster returns for stocks despite being optimistic that a cure will be found for COVID-19 and that the economy will eventually pick up.
“I am focused on who pays for the party when the party is over” said Leon Cooperman.
Massive debt accumulation is why Leon Cooperman sees lackluster returns going forward
“This nation just celebrated its 244-year birthday. It took us 244 years to go from zero national debt to 21 trillion US dollars” he said. “This year what that means is that more of the nation’s income will have to be devoted to debt service, which will retard economic growth” said Leon Cooperman. So, consumption and spending will be reduced to service a 21 trillion US dollar debt mountain.
Leon Cooperman sees lackluster returns because he thinks both fiscal and monetary policy is putting demand forward which should work against future returns
“Price-earnings ratios are a function of confidence, growth rates, and interest rates,” he said. “Confidence has got to be lower based on political uncertainties. Growth rates have got to be lower in the need to service the debt that we are creating” he added.
The Fed’s continuation of monetary easing is evidence of a weak economy and why Leon Cooperman sees lackluster returns, according to the self-made billionaire investor. “The Fed is pursuing zero interest rate policy because things are bad in the economy,” he said. “So I take a conservative view. Bonds offer return-free risk, the idea of buying a bond whether you get 70 basis points for ten years when you can buy plenty of good companies yielding 2% or more makes no sense” added Leon Cooperman.
Stocks could be overvalued, which is also why Leon Cooperman sees lackluster returns going forward “The S&P is roughly 3500 selling at 23 times normal earnings, that multiple is high versus history, not particularly high relative to interest rates. But I would argue that the stock market has been on some form of life support since 2008,” he said. “We never made it out of QE, now we have a zero-interest rate policy,” he added.
Leon Cooperman believes that this should work against price earnings. “Whenever the government is supporting the economy and the market you should take it out of price earning in my opinion” said Leon Cooperman.
“I expect future returns to be unimpressive over a long time” – Leon Cooperman
Leon Cooperman sees lackluster returns and is concerned about long term future implications
“I expect future returns to be unimpressive over a long time” he added.
“We came into 2020 with a fully employed economy yet we were running a trillion-dollar deficit and now we are piling a lot of debt on top of that” he said.
Leon Cooperman sees lackluster returns even in a zero-interest rate environment
“Everyone is cheering about negative interest rates, there have been negative interest rates in Japan and Europe for quite some time and their price earnings ratios are lower than the US,” said Leon Cooperman.
Then Leon Cooperman took a shot at Warren Buffett’s recent investments in Japan. As we noted in a piece entitled, Warren Buffett makes new investments. in five leading Japanese trading companies.
“I have been putting some money in credit where I have been getting high returns” said Leon Cooperman.
“My view is that the market doesn’t go up for the rest of the year and frankly I would not be surprised if the market dropped next year. I am reasonably fully invested with a lot of money in credit,” he said.
“Bull markets are born in pessimism; they grow in skepticism and they mature in optimism and they die in euphoria” quoted Leon Cooperman.
Leon Cooperman sees signs of euphoria creeping into the market. “Look at Tesla up 54% the day that it announces a split, the splits don’t create value” he said.
On political views, Leon Cooperman said, “I am the son of a plumber” and he thinks the American dream, which he achieved needs to be kept alive. “We have to ensure that we stay a capitalist nation” he said. Leon Cooperman thinks the Government has got to get its spending under control and Biden needs to declare what he stands for.
