WEBVTT - Omega Advisors Chairman & CEO Leon Cooperman on Markets 0:00:02.520 --> 0:00:07.400 Bloomberg Audio Studios, podcasts, radio news. 0:00:07.760 --> 0:00:11.600 Will joining us now as billionaire investor Leon Cooperman, Chairman 0:00:11.680 --> 0:00:15.440 and chief executive officer of the Omega Family Office. Leon, 0:00:15.560 --> 0:00:18.200 it's such a pleasure. We're super happy to talk to you. 0:00:18.680 --> 0:00:23.079 Has anything altered your review about investing in US equities 0:00:23.120 --> 0:00:24.480 over the last few months. 0:00:25.440 --> 0:00:28.160 No, really, we've come and we've had a very conservative view, 0:00:28.240 --> 0:00:30.560 and we continue to have a very conservative view. I 0:00:30.560 --> 0:00:33.760 don't see the conditions that we suggest the market is 0:00:33.760 --> 0:00:36.480 attractively valued. I look around the world and I see 0:00:36.479 --> 0:00:39.800 the market at high at twenty four times earnings, currently 0:00:39.800 --> 0:00:42.479 around twenty two times earnings, and I look at all 0:00:42.520 --> 0:00:45.400 the issues out there and multiple seams far too high, 0:00:46.320 --> 0:00:48.960 and it's high against current interest rates. I think it 0:00:49.120 --> 0:00:51.960 just rates are going on the tenure in longer Secty're 0:00:51.960 --> 0:00:52.280 going to go. 0:00:52.320 --> 0:00:55.920 Up, not down, right, So to that point, Leon, I 0:00:55.960 --> 0:00:57.720 mean we've seen them go up, and we see that 0:00:58.080 --> 0:01:00.920 that thirty year at five percent. At what point does 0:01:00.920 --> 0:01:04.679 that get super risky? 0:01:05.480 --> 0:01:11.520 Probably now already you know, I have a conservative view 0:01:11.520 --> 0:01:13.160 of the market, So I don't know what you're talking 0:01:13.200 --> 0:01:15.759 about now. I'm not going to change my view. I'm 0:01:15.800 --> 0:01:19.160 negative and I'm looking to become positive, and I think 0:01:19.200 --> 0:01:21.039 the thing that would make me positive to be honest 0:01:21.319 --> 0:01:26.280 when stocksacking better in response to bad news. Now, market 0:01:26.280 --> 0:01:29.080 tops are made on good news, and market bottoms made 0:01:29.080 --> 0:01:31.080 and bad news, and I'm looking for the news to 0:01:31.120 --> 0:01:34.760 get worse. And you know, a lot of things I 0:01:34.800 --> 0:01:37.840 don't like about the market. I don't like the action cold, 0:01:38.160 --> 0:01:41.120 I don't like the absence of leadership and government. You know, 0:01:42.440 --> 0:01:47.520 valuations are too high, and yeah, I think we've bought 0:01:47.520 --> 0:01:48.080 from the future. 0:01:48.440 --> 0:01:51.800 We've well, I am curiously on though. 0:01:51.800 --> 0:01:53.440 I mean when we talk about those points, I mean 0:01:53.560 --> 0:01:57.320 valuations can be corrected, trades and certain assets can be corrected. 0:01:57.360 --> 0:02:00.919 You mentioned the leadership in washing, and that's not something 0:02:00.920 --> 0:02:03.600 that at least not as quickly corrected as you can 0:02:03.680 --> 0:02:07.560 in the markets here. So is this now creating a 0:02:07.600 --> 0:02:11.000 portfolio to stand the test of time or to stand 0:02:11.080 --> 0:02:13.600 the test of something that, in your view could just 0:02:13.680 --> 0:02:15.079 be temporary. 0:02:17.160 --> 0:02:22.640 Well, look, all cycles are temporary, you know. You know, 0:02:23.040 --> 0:02:27.079 economic expansions, so the seats for the next recession. Every recession, 0:02:27.400 --> 0:02:30.440 so the seats the next recovery. So I look at 0:02:30.480 --> 0:02:35.040 everything being cyclical, and I'm HARKing back to when I 0:02:35.120 --> 0:02:37.440 started my career at gold Miss Acts. I got an 0:02:37.520 --> 0:02:41.120 MBA on January thirty first of nineteen sixty seven, had 0:02:41.160 --> 0:02:42.839 no money to bank at, a six month old kid 0:02:42.840 --> 0:02:46.440 to support, and a new wife. Okay, I couldn't take 0:02:46.440 --> 0:02:49.280 a vacation. I started my career at Goldman on February 0:02:49.280 --> 0:02:51.640 first of nineteen sixty seven, and there was one thousand 0:02:52.200 --> 0:02:54.840 nineteen eighty two. With one thousand, I made my moneyment 0:02:54.919 --> 0:02:57.960 picking stocks. I think the very base case I see 0:02:58.639 --> 0:03:02.800 is that environment where the averages don't do anything and 0:03:02.840 --> 0:03:06.960 the actions to individual stocks. And I find that romantic. 0:03:06.960 --> 0:03:09.959 Because the public has been piling into the index, and 0:03:10.240 --> 0:03:14.720 the index is very expensive, and the individual companies outside 0:03:14.760 --> 0:03:17.360 the index are much more attractive than the index. 0:03:17.960 --> 0:03:20.399 This has become much more of a stock picker's market. 0:03:20.440 --> 0:03:22.079 I also thought it was interesting just a few weeks 0:03:22.120 --> 0:03:25.680 ago we heard from Tom Demarca, who of course has 0:03:25.680 --> 0:03:28.840 advised you in the past. He was successively called the 0:03:28.880 --> 0:03:31.920 top of this market, and actually was very prescient in calling, 0:03:32.639 --> 0:03:35.240 at least for what now was the low in April. 0:03:35.600 --> 0:03:38.520 I am curious about this idea though, of trying to 0:03:38.520 --> 0:03:41.320 find those individual stocks that are resilient when I look 0:03:41.360 --> 0:03:44.160 at your portfolio and they will make up funds. Right now, 0:03:44.200 --> 0:03:47.040 your top holding is a mortgage company, and I am 0:03:47.080 --> 0:03:49.880 curious as to how that fits within the landscape of 0:03:49.960 --> 0:03:52.240 some of the concerns that you have right now, and 0:03:52.280 --> 0:03:55.160 why it would not be pulled down by those same concerns. 0:03:55.360 --> 0:03:58.000 Number one, let me just say this, we have an 0:03:58.160 --> 0:04:01.960 enormous profit thanks to management of mister Cooper. We put 0:04:01.960 --> 0:04:05.160 their materially lower prices. We held on to it if 0:04:05.200 --> 0:04:08.360 we like the management a lot. They're excellent capital managers, 0:04:08.520 --> 0:04:10.680 and we think this merge with Rocket Mortgage is terrific. 0:04:11.880 --> 0:04:14.320 Rocket Mortgage has done a very smart deal here with 0:04:14.400 --> 0:04:17.880 mister Cooper, and so at seven point eight times that 0:04:18.000 --> 0:04:20.560 we think they're gonna earn in twenty six and we 0:04:20.600 --> 0:04:23.160 think it's very cheap relative to the market, with very 0:04:23.160 --> 0:04:26.560 good capital management, a lot of free cash flow, and 0:04:26.960 --> 0:04:28.719 we see good growth ahead. 0:04:29.520 --> 0:04:32.279 Leon, Sorry, lower two bucks. 0:04:32.320 --> 0:04:34.480 It's one hundred and thirty one hundred and twenty five 0:04:34.520 --> 0:04:35.200 dollars currently. 0:04:36.360 --> 0:04:40.560 Leon, you talked about the risks to the US market, 0:04:41.040 --> 0:04:45.000 but AI is always a bright spot for US market. 0:04:45.320 --> 0:04:48.600 And you own Google, and you own some energy companies 0:04:48.600 --> 0:04:52.440 that have exposure to AI data centers like Vertive, for example, 0:04:53.240 --> 0:04:55.920 how do you look at that? Is that pure AI 0:04:56.040 --> 0:04:58.200 data center play or is it something else? 0:04:58.279 --> 0:05:04.360 For you guys, I look at with suspicion. In February 0:05:04.400 --> 0:05:07.160 of this year, all the conditions for the top were in. 0:05:07.920 --> 0:05:10.680 Now all the Wall Street strategists were raising up your 0:05:10.760 --> 0:05:13.320 estimates for the year. Now they're busy lowering them for 0:05:13.360 --> 0:05:19.360 the year. And in addition, you saw the crowding into 0:05:19.760 --> 0:05:23.840 technology stocks which now are bunderperformed so far this year. 0:05:24.279 --> 0:05:27.040 And it was a great deal of optimism. Investor optimism 0:05:27.080 --> 0:05:31.920 was at a record higher. The sinemon has turned very dramatically. 0:05:32.000 --> 0:05:34.320 Sentiment is very negative. So the only reason I wouldn't 0:05:34.360 --> 0:05:37.440 be overly negative now is, you know, because I think 0:05:37.520 --> 0:05:38.640 that everybody's negative. 0:05:39.800 --> 0:05:44.960 And where do you think the data center trade though, 0:05:45.160 --> 0:05:46.720 has still overdone it? 0:05:49.680 --> 0:05:52.960 Well, I'm very response to intervinal names. We are in Revertive, 0:05:53.400 --> 0:05:55.800 which we think the world of management have done a 0:05:55.800 --> 0:06:00.600 great job, and we think the stock's attractive. If I 0:06:00.640 --> 0:06:03.520 don't know, I don't know much about it, you know, 0:06:03.560 --> 0:06:05.640 we gotta stick away. Maybe I can talk about the 0:06:05.839 --> 0:06:12.520 newest selections. So we recently aired Atlas Energy Solutions to 0:06:12.520 --> 0:06:16.919 our portfolio. You know, this is a very well run company. 0:06:17.600 --> 0:06:24.279 Of the CEO, the founder is uh bud I think 0:06:24.720 --> 0:06:25.560 give me a second. 0:06:28.240 --> 0:06:32.200 The CEO John right, John Turner, No, no. 0:06:32.040 --> 0:06:35.480 Hey, Atlas Energy. The CEO chairman of the board. I 0:06:35.480 --> 0:06:45.120 guess I'm not sure his title is uh uh ben 0:06:47.200 --> 0:06:49.000 uh uh. 0:06:51.200 --> 0:06:58.279 Well yeah, yeah, well you could you could keep find finally, 0:06:58.440 --> 0:07:00.280 but I mean, maybe just expand a little bit more 0:07:00.320 --> 0:07:02.320 on that, because I mean you seem to be hitting 0:07:02.320 --> 0:07:04.760 on some key areas here, some key themes about bottom 0:07:04.839 --> 0:07:05.440 up stock taking. 0:07:05.480 --> 0:07:09.320 Then clearly a big focus on leadership at these companies 0:07:09.320 --> 0:07:11.280 and the ability to navigate this environment. 0:07:11.480 --> 0:07:12.600 So when you talk about. 0:07:12.680 --> 0:07:15.320 Flow and intelligent use of the free k flow. 0:07:15.720 --> 0:07:20.040 Okay, and that includes Ashland Energy Transfer some of the 0:07:20.040 --> 0:07:20.880 other names like that. 0:07:21.960 --> 0:07:27.360 Yeah, absolutely absolutely, And again you know, we're very attuned 0:07:27.360 --> 0:07:29.840 to what we pay for stock nity trades. We were 0:07:29.840 --> 0:07:33.120 buying his lower six dollars less sales eighteen dollars. We 0:07:33.240 --> 0:07:35.040 pay taxes, so I don't look to turn over the 0:07:35.040 --> 0:07:39.280 portfolio for no reason. So we tend to be a 0:07:39.320 --> 0:07:43.960 holder of things, but not quite as transient as Warren Buffett, 0:07:44.000 --> 0:07:49.120 as good as he is, but the guy who makes 0:07:49.200 --> 0:07:53.320 cuotes the big shuts and as Energy had three energy 0:07:53.320 --> 0:07:57.240 companies before he sold a nice profit. And if you 0:07:57.360 --> 0:08:00.680 check inside Training on Bloomberg, you can see that significant 0:08:00.720 --> 0:08:04.760 purchase of stock by management. And when guys make money 0:08:04.800 --> 0:08:07.320 and they're buying stock for themselves, they're buying stock for 0:08:07.360 --> 0:08:10.360 the company, and you think it's cheap. You know, we 0:08:10.440 --> 0:08:12.120 get motivated. So it's ten and a half times, so 0:08:12.160 --> 0:08:14.760 we think they're going to earn next year. It's high 0:08:14.760 --> 0:08:16.960 to energy. But if you look what's going on around 0:08:17.040 --> 0:08:19.560 the world, energy is not a bad place to be. 0:08:20.680 --> 0:08:23.880 What about outside of the US. Are there opportunities? Do 0:08:23.960 --> 0:08:27.480 you even look outside the US for investment opportunities? 0:08:27.560 --> 0:08:29.800 Look much? Because but I'm not a good person to 0:08:29.800 --> 0:08:32.120 ask that question too, because you know, we're running a 0:08:32.160 --> 0:08:35.960 small family office. We're very big on management contact, and 0:08:36.040 --> 0:08:39.480 so it's discourages to give outside the United States. So 0:08:39.640 --> 0:08:44.080 recent purchases I mentioned, you know, as Energy, I would 0:08:44.120 --> 0:08:48.640 mention ge Healthcare thirteen point three times, earnings growing we 0:08:48.679 --> 0:08:54.200 think twelve percent signing very reasonable multiple thirteen point three times, 0:08:55.040 --> 0:09:04.240 and I like the insurance company Fidelis, you know, twenty 0:09:04.280 --> 0:09:10.439 dollars plus book value, hard market for insurance buying backstock, Well, 0:09:10.559 --> 0:09:12.840 I think they can earn twenty percent in equity. That 0:09:12.960 --> 0:09:15.720 means that have four hours earnings potential. And when we 0:09:15.760 --> 0:09:19.559 get out of a catastrophic environment, you know, a normal 0:09:19.840 --> 0:09:24.840 you know, catastrophe a year current four bucks buying backstock 0:09:24.960 --> 0:09:29.640 excess capital, you know, So if I pig discount to 0:09:29.679 --> 0:09:31.959 other insurance companies because you deal. 0:09:33.320 --> 0:09:37.320 Leon, what's your biggest concern right now? Like I see 0:09:37.320 --> 0:09:39.160 the individual stocks that you're talking about, but in general, 0:09:39.160 --> 0:09:41.280 when you wake up in the morning, what worries you? 0:09:42.720 --> 0:09:45.559 Well, when I gap in the morning, I worry much about. 0:09:45.840 --> 0:09:49.120 I support an organization called Kindness Matters three sixty five. 0:09:49.760 --> 0:09:52.440 What I'm very disturbed about is our fiscal condition and 0:09:52.440 --> 0:09:55.920 an inability to have the two parties work together cooperatively 0:09:56.120 --> 0:09:59.080 to deal with this. And we're heading to financial disaster. 0:09:59.640 --> 0:10:02.680 Even if new budget proposal it's a tax and spend 0:10:02.840 --> 0:10:05.840 kind of thing, it's not dealing with the deficit. Deaf 0:10:06.040 --> 0:10:09.520 is two trillion dollars. It's just too high. Debt outstanding 0:10:09.600 --> 0:10:13.559 is ridiculously high, and nobody's focused on it, and we're 0:10:13.559 --> 0:10:15.520 going to have a financial crisis unless they start space 0:10:15.559 --> 0:10:17.640 now on it. And the bomb market is going to 0:10:17.640 --> 0:10:19.880 get them to focus on it. You know, we have 0:10:20.000 --> 0:10:22.960 a system of leadership in the country. It's leadership add 0:10:23.000 --> 0:10:25.800 of crisis. When not the crisis, therefore is no leadership. 0:10:25.840 --> 0:10:28.960 They argue with each other. It's kindness matters. Takes kids 0:10:28.960 --> 0:10:30.640 off the streets at age three and four and they're 0:10:30.640 --> 0:10:33.839 teach them the importance of kindness. And these people talk to 0:10:33.880 --> 0:10:37.120 each other in such rude fashion. It's very discouraging. 0:10:38.440 --> 0:10:41.720 With regards to the budget and our deficit and the 0:10:41.760 --> 0:10:46.120 fiscal situation. Leon does the market have the ability to 0:10:46.200 --> 0:10:47.359 really push back. 0:10:49.440 --> 0:10:52.560 Well, the bond vigilante sure could push back. You know, 0:10:54.840 --> 0:10:57.400 it got to go back to the market, get get 0:10:57.440 --> 0:11:02.040 capped out by interest rates. Interest rates are not going up. 0:11:02.440 --> 0:11:05.280 If interestrates are not going to go up, then the 0:11:05.400 --> 0:11:07.720 stock marketd be okay. But I think interesstrates are going 0:11:07.760 --> 0:11:08.520 to climb higher. 0:11:09.760 --> 0:11:10.640 How high do you think they go? 0:11:12.920 --> 0:11:15.920 I know a lot higher now prior to two thousand 0:11:15.960 --> 0:11:18.160 and eight, to tenure government bond yielded and align with 0:11:18.240 --> 0:11:21.400 nominal GDP. If you have real growth of a couple 0:11:21.480 --> 0:11:24.520 percent and you have inflation of three or four percent, 0:11:25.000 --> 0:11:28.800 the tenure could be is up to six percent or higher. Wow, 0:11:29.280 --> 0:11:31.920 and you have a capital loss and the coupon is 0:11:31.960 --> 0:11:37.080 sufficiently low that you'd have a loss of principle. So 0:11:37.200 --> 0:11:41.280 I guess yeah. I think their individual stocks are cheap 0:11:41.360 --> 0:11:43.680 road to the bunts, even though the market as a 0:11:43.679 --> 0:11:45.559 whole is expensive. Roads to the buns. 0:11:45.960 --> 0:11:49.480 But that puts us back, potentially leon into territory where 0:11:49.480 --> 0:11:54.400 we're almost talking about double digit percentage yields in order 0:11:54.440 --> 0:11:59.240 to compensate for that deficit, for that debt servicing costs. 0:11:59.240 --> 0:12:02.120 What would that even mean for the economy and more 0:12:02.120 --> 0:12:04.200 importantly for financial markets. 0:12:06.320 --> 0:12:09.120 Well, I think that if they deal with the deficit, 0:12:09.280 --> 0:12:13.800 it's negative for growth, right, you say, it retwards growth 0:12:13.840 --> 0:12:17.840 and consumption. And I think my theme is that we've 0:12:17.920 --> 0:12:20.360 run a very inappropriate fiscal policy. I don't blame the 0:12:20.400 --> 0:12:23.880 President Trump. I actually say he's not doing it the 0:12:23.920 --> 0:12:26.480 right way in my opinion, but he's doing the right things. 0:12:26.840 --> 0:12:32.240 It's very, very difficult to you know, comprehend now. Maybe 0:12:32.720 --> 0:12:34.920 I've had a lot of medical issues the last two months. 0:12:35.160 --> 0:12:37.480 I've had a lot of meetings with doctors and hospitals 0:12:37.520 --> 0:12:40.600 and stuff like that, and you know, I haven't gotten 0:12:40.600 --> 0:12:43.440 the bill. I like that, But the fact of the matter 0:12:43.520 --> 0:12:46.400 is maybe everything should be more means tested. I think 0:12:46.400 --> 0:12:49.280 the wealthy people should be paying more in taxes, not less. 0:12:50.040 --> 0:12:51.439 Well, I'm sorry to hear that. For you, Lean, I 0:12:51.520 --> 0:12:54.400 hope you're doing better now before we let you go. 0:12:55.200 --> 0:12:58.080 What excites you now? And ending on this negative note, 0:12:58.080 --> 0:13:00.280 it's not in a positive note. What gets you going 0:13:00.320 --> 0:13:00.800 in the morning. 0:13:01.120 --> 0:13:03.720 What excites me is buying and mister Cooper and having 0:13:03.760 --> 0:13:06.920 a go from six seven eight to one hundred and 0:13:06.960 --> 0:13:10.960 twenty five. Its excites me not because I'm greedy personally. 0:13:11.240 --> 0:13:13.840 Oh my money is here mark for charity. I've taken 0:13:13.840 --> 0:13:16.800 two giving pledges when we're Warren Buffett to give it 0:13:16.840 --> 0:13:19.400 half my money to non Jewish causes, the other half 0:13:19.440 --> 0:13:23.079 with Mike Levin, my friend who is a Jewish giving pledge. 0:13:23.240 --> 0:13:25.800 So I like making money for two reasons. If I 0:13:25.840 --> 0:13:28.040 lose mind, it means I'm wrong and I have an 0:13:28.080 --> 0:13:31.600 ego like everybody else, And that's number one. Number two 0:13:31.640 --> 0:13:33.520 reasons I like making money is I like to give 0:13:33.520 --> 0:13:36.280 away more money. It's my own envy of people like 0:13:36.480 --> 0:13:39.320 Bill Gates and Bernie Marcus who recently passed away, as 0:13:39.320 --> 0:13:41.240 they had a lot more money to give away. And 0:13:41.280 --> 0:13:44.439 my hero in life is ken Lango, who was very generous. 0:13:45.320 --> 0:13:50.280 Love to good luck, all right, I like making money 0:13:50.320 --> 0:13:51.280 for those two reasons. 0:13:51.960 --> 0:13:54.800 All right, Leon, Well, we really always love talking to 0:13:54.880 --> 0:13:56.840 you and we wish you the best, and of course 0:13:56.880 --> 0:14:00.120 that will be keeping an eye on your charitable endeavors 0:14:00.000 --> 0:14:01.520 as well, and always great to get your thoughts on 0:14:01.559 --> 0:14:03.719 what's going on in the markets, in the economy and 0:14:03.760 --> 0:14:04.120 the books. 0:14:04.240 --> 0:14:06.160 Mike Flundberg, he's another generous guide. 0:14:06.480 --> 0:14:10.440 He certainly is, we know, and I'm sure he'll appreciate 0:14:10.480 --> 0:14:12.600 that thought and we'll pass it along to him. He's 0:14:12.600 --> 0:14:16.480 sitting right behind us, actually I will, Leon. 0:14:16.200 --> 0:14:18.559 Who I was registered independent for many years and when 0:14:18.600 --> 0:14:21.440 he ran for prison as short as his run was, 0:14:21.600 --> 0:14:24.080 I switched to the Democratic Party so I could work 0:14:24.120 --> 0:14:27.200 and support him. But unfortunately he dropped out very quickly. 0:14:27.320 --> 0:14:32.080 Yeah, all right, Leon Cooperman chairman, chief executive officer over 0:14:32.120 --> 0:14:34.480 at the Omega Family office, and of course spent a 0:14:34.480 --> 0:14:36.800 lot of time over at Goldman Sechs asset Management.