Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Will joining us now as billionaire investor Leon Cooperman, Chairman
Speaker 2: and chief executive officer of the Omega Family Office. Leon,
Speaker 2: it's such a pleasure. We're super happy to talk to you.
Speaker 2: Has anything altered your review about investing in US equities
Speaker 2: over the last few months.
Speaker 3: No, really, we've come and we've had a very conservative view,
Speaker 3: and we continue to have a very conservative view. I
Speaker 3: don't see the conditions that we suggest the market is
Speaker 3: attractively valued. I look around the world and I see
Speaker 3: the market at high at twenty four times earnings, currently
Speaker 3: around twenty two times earnings, and I look at all
Speaker 3: the issues out there and multiple seams far too high,
Speaker 3: and it's high against current interest rates. I think it
Speaker 3: just rates are going on the tenure in longer Secty're
Speaker 3: going to go.
Speaker 2: Up, not down, right, So to that point, Leon, I
Speaker 2: mean we've seen them go up, and we see that
Speaker 2: that thirty year at five percent. At what point does
Speaker 2: that get super risky?
Speaker 3: Probably now already you know, I have a conservative view
Speaker 3: of the market, So I don't know what you're talking
Speaker 3: about now. I'm not going to change my view. I'm
Speaker 3: negative and I'm looking to become positive, and I think
Speaker 3: the thing that would make me positive to be honest
Speaker 3: when stocksacking better in response to bad news. Now, market
Speaker 3: tops are made on good news, and market bottoms made
Speaker 3: and bad news, and I'm looking for the news to
Speaker 3: get worse. And you know, a lot of things I
Speaker 3: don't like about the market. I don't like the action cold,
Speaker 3: I don't like the absence of leadership and government. You know,
Speaker 3: valuations are too high, and yeah, I think we've bought
Speaker 3: from the future.
Speaker 4: We've well, I am curiously on though.
Speaker 1: I mean when we talk about those points, I mean
Speaker 1: valuations can be corrected, trades and certain assets can be corrected.
Speaker 1: You mentioned the leadership in washing, and that's not something
Speaker 1: that at least not as quickly corrected as you can
Speaker 1: in the markets here. So is this now creating a
Speaker 1: portfolio to stand the test of time or to stand
Speaker 1: the test of something that, in your view could just
Speaker 1: be temporary.
Speaker 3: Well, look, all cycles are temporary, you know. You know,
Speaker 3: economic expansions, so the seats for the next recession. Every recession,
Speaker 3: so the seats the next recovery. So I look at
Speaker 3: everything being cyclical, and I'm HARKing back to when I
Speaker 3: started my career at gold Miss Acts. I got an
Speaker 3: MBA on January thirty first of nineteen sixty seven, had
Speaker 3: no money to bank at, a six month old kid
Speaker 3: to support, and a new wife. Okay, I couldn't take
Speaker 3: a vacation. I started my career at Goldman on February
Speaker 3: first of nineteen sixty seven, and there was one thousand
Speaker 3: nineteen eighty two. With one thousand, I made my moneyment
Speaker 3: picking stocks. I think the very base case I see
Speaker 3: is that environment where the averages don't do anything and
Speaker 3: the actions to individual stocks. And I find that romantic.
Speaker 3: Because the public has been piling into the index, and
Speaker 3: the index is very expensive, and the individual companies outside
Speaker 3: the index are much more attractive than the index.
Speaker 1: This has become much more of a stock picker's market.
Speaker 1: I also thought it was interesting just a few weeks
Speaker 1: ago we heard from Tom Demarca, who of course has
Speaker 1: advised you in the past. He was successively called the
Speaker 1: top of this market, and actually was very prescient in calling,
Speaker 1: at least for what now was the low in April.
Speaker 1: I am curious about this idea though, of trying to
Speaker 1: find those individual stocks that are resilient when I look
Speaker 1: at your portfolio and they will make up funds. Right now,
Speaker 1: your top holding is a mortgage company, and I am
Speaker 1: curious as to how that fits within the landscape of
Speaker 1: some of the concerns that you have right now, and
Speaker 1: why it would not be pulled down by those same concerns.
Speaker 3: Number one, let me just say this, we have an
Speaker 3: enormous profit thanks to management of mister Cooper. We put
Speaker 3: their materially lower prices. We held on to it if
Speaker 3: we like the management a lot. They're excellent capital managers,
Speaker 3: and we think this merge with Rocket Mortgage is terrific.
Speaker 3: Rocket Mortgage has done a very smart deal here with
Speaker 3: mister Cooper, and so at seven point eight times that
Speaker 3: we think they're gonna earn in twenty six and we
Speaker 3: think it's very cheap relative to the market, with very
Speaker 3: good capital management, a lot of free cash flow, and
Speaker 3: we see good growth ahead.
Speaker 2: Leon, Sorry, lower two bucks.
Speaker 3: It's one hundred and thirty one hundred and twenty five
Speaker 3: dollars currently.
Speaker 2: Leon, you talked about the risks to the US market,
Speaker 2: but AI is always a bright spot for US market.
Speaker 2: And you own Google, and you own some energy companies
Speaker 2: that have exposure to AI data centers like Vertive, for example,
Speaker 2: how do you look at that? Is that pure AI
Speaker 2: data center play or is it something else?
Speaker 3: For you guys, I look at with suspicion. In February
Speaker 3: of this year, all the conditions for the top were in.
Speaker 3: Now all the Wall Street strategists were raising up your
Speaker 3: estimates for the year. Now they're busy lowering them for
Speaker 3: the year. And in addition, you saw the crowding into
Speaker 3: technology stocks which now are bunderperformed so far this year.
Speaker 3: And it was a great deal of optimism. Investor optimism
Speaker 3: was at a record higher. The sinemon has turned very dramatically.
Speaker 3: Sentiment is very negative. So the only reason I wouldn't
Speaker 3: be overly negative now is, you know, because I think
Speaker 3: that everybody's negative.
Speaker 2: And where do you think the data center trade though,
Speaker 2: has still overdone it?
Speaker 3: Well, I'm very response to intervinal names. We are in Revertive,
Speaker 3: which we think the world of management have done a
Speaker 3: great job, and we think the stock's attractive. If I
Speaker 3: don't know, I don't know much about it, you know,
Speaker 3: we gotta stick away. Maybe I can talk about the
Speaker 3: newest selections. So we recently aired Atlas Energy Solutions to
Speaker 3: our portfolio. You know, this is a very well run company.
Speaker 3: Of the CEO, the founder is uh bud I think
Speaker 3: give me a second.
Speaker 2: The CEO John right, John Turner, No, no.
Speaker 3: Hey, Atlas Energy. The CEO chairman of the board. I
Speaker 3: guess I'm not sure his title is uh uh ben
Speaker 3: uh uh.
Speaker 4: Well yeah, yeah, well you could you could keep find finally,
Speaker 4: but I mean, maybe just expand a little bit more
Speaker 4: on that, because I mean you seem to be hitting
Speaker 4: on some key areas here, some key themes about bottom
Speaker 4: up stock taking.
Speaker 1: Then clearly a big focus on leadership at these companies
Speaker 1: and the ability to navigate this environment.
Speaker 4: So when you talk about.
Speaker 3: Flow and intelligent use of the free k flow.
Speaker 1: Okay, and that includes Ashland Energy Transfer some of the
Speaker 1: other names like that.
Speaker 3: Yeah, absolutely absolutely, And again you know, we're very attuned
Speaker 3: to what we pay for stock nity trades. We were
Speaker 3: buying his lower six dollars less sales eighteen dollars. We
Speaker 3: pay taxes, so I don't look to turn over the
Speaker 3: portfolio for no reason. So we tend to be a
Speaker 3: holder of things, but not quite as transient as Warren Buffett,
Speaker 3: as good as he is, but the guy who makes
Speaker 3: cuotes the big shuts and as Energy had three energy
Speaker 3: companies before he sold a nice profit. And if you
Speaker 3: check inside Training on Bloomberg, you can see that significant
Speaker 3: purchase of stock by management. And when guys make money
Speaker 3: and they're buying stock for themselves, they're buying stock for
Speaker 3: the company, and you think it's cheap. You know, we
Speaker 3: get motivated. So it's ten and a half times, so
Speaker 3: we think they're going to earn next year. It's high
Speaker 3: to energy. But if you look what's going on around
Speaker 3: the world, energy is not a bad place to be.
Speaker 1: What about outside of the US. Are there opportunities? Do
Speaker 1: you even look outside the US for investment opportunities?
Speaker 3: Look much? Because but I'm not a good person to
Speaker 3: ask that question too, because you know, we're running a
Speaker 3: small family office. We're very big on management contact, and
Speaker 3: so it's discourages to give outside the United States. So
Speaker 3: recent purchases I mentioned, you know, as Energy, I would
Speaker 3: mention ge Healthcare thirteen point three times, earnings growing we
Speaker 3: think twelve percent signing very reasonable multiple thirteen point three times,
Speaker 3: and I like the insurance company Fidelis, you know, twenty
Speaker 3: dollars plus book value, hard market for insurance buying backstock, Well,
Speaker 3: I think they can earn twenty percent in equity. That
Speaker 3: means that have four hours earnings potential. And when we
Speaker 3: get out of a catastrophic environment, you know, a normal
Speaker 3: you know, catastrophe a year current four bucks buying backstock
Speaker 3: excess capital, you know, So if I pig discount to
Speaker 3: other insurance companies because you deal.
Speaker 2: Leon, what's your biggest concern right now? Like I see
Speaker 2: the individual stocks that you're talking about, but in general,
Speaker 2: when you wake up in the morning, what worries you?
Speaker 3: Well, when I gap in the morning, I worry much about.
Speaker 3: I support an organization called Kindness Matters three sixty five.
Speaker 3: What I'm very disturbed about is our fiscal condition and
Speaker 3: an inability to have the two parties work together cooperatively
Speaker 3: to deal with this. And we're heading to financial disaster.
Speaker 3: Even if new budget proposal it's a tax and spend
Speaker 3: kind of thing, it's not dealing with the deficit. Deaf
Speaker 3: is two trillion dollars. It's just too high. Debt outstanding
Speaker 3: is ridiculously high, and nobody's focused on it, and we're
Speaker 3: going to have a financial crisis unless they start space
Speaker 3: now on it. And the bomb market is going to
Speaker 3: get them to focus on it. You know, we have
Speaker 3: a system of leadership in the country. It's leadership add
Speaker 3: of crisis. When not the crisis, therefore is no leadership.
Speaker 3: They argue with each other. It's kindness matters. Takes kids
Speaker 3: off the streets at age three and four and they're
Speaker 3: teach them the importance of kindness. And these people talk to
Speaker 3: each other in such rude fashion. It's very discouraging.
Speaker 1: With regards to the budget and our deficit and the
Speaker 1: fiscal situation. Leon does the market have the ability to
Speaker 1: really push back.
Speaker 3: Well, the bond vigilante sure could push back. You know,
Speaker 3: it got to go back to the market, get get
Speaker 3: capped out by interest rates. Interest rates are not going up.
Speaker 3: If interestrates are not going to go up, then the
Speaker 3: stock marketd be okay. But I think interesstrates are going
Speaker 3: to climb higher.
Speaker 2: How high do you think they go?
Speaker 3: I know a lot higher now prior to two thousand
Speaker 3: and eight, to tenure government bond yielded and align with
Speaker 3: nominal GDP. If you have real growth of a couple
Speaker 3: percent and you have inflation of three or four percent,
Speaker 3: the tenure could be is up to six percent or higher. Wow,
Speaker 3: and you have a capital loss and the coupon is
Speaker 3: sufficiently low that you'd have a loss of principle. So
Speaker 3: I guess yeah. I think their individual stocks are cheap
Speaker 3: road to the bunts, even though the market as a
Speaker 3: whole is expensive. Roads to the buns.
Speaker 1: But that puts us back, potentially leon into territory where
Speaker 1: we're almost talking about double digit percentage yields in order
Speaker 1: to compensate for that deficit, for that debt servicing costs.
Speaker 1: What would that even mean for the economy and more
Speaker 1: importantly for financial markets.
Speaker 3: Well, I think that if they deal with the deficit,
Speaker 3: it's negative for growth, right, you say, it retwards growth
Speaker 3: and consumption. And I think my theme is that we've
Speaker 3: run a very inappropriate fiscal policy. I don't blame the
Speaker 3: President Trump. I actually say he's not doing it the
Speaker 3: right way in my opinion, but he's doing the right things.
Speaker 3: It's very, very difficult to you know, comprehend now. Maybe
Speaker 3: I've had a lot of medical issues the last two months.
Speaker 3: I've had a lot of meetings with doctors and hospitals
Speaker 3: and stuff like that, and you know, I haven't gotten
Speaker 3: the bill. I like that, But the fact of the matter
Speaker 3: is maybe everything should be more means tested. I think
Speaker 3: the wealthy people should be paying more in taxes, not less.
Speaker 2: Well, I'm sorry to hear that. For you, Lean, I
Speaker 2: hope you're doing better now before we let you go.
Speaker 2: What excites you now? And ending on this negative note,
Speaker 2: it's not in a positive note. What gets you going
Speaker 2: in the morning.
Speaker 3: What excites me is buying and mister Cooper and having
Speaker 3: a go from six seven eight to one hundred and
Speaker 3: twenty five. Its excites me not because I'm greedy personally.
Speaker 3: Oh my money is here mark for charity. I've taken
Speaker 3: two giving pledges when we're Warren Buffett to give it
Speaker 3: half my money to non Jewish causes, the other half
Speaker 3: with Mike Levin, my friend who is a Jewish giving pledge.
Speaker 3: So I like making money for two reasons. If I
Speaker 3: lose mind, it means I'm wrong and I have an
Speaker 3: ego like everybody else, And that's number one. Number two
Speaker 3: reasons I like making money is I like to give
Speaker 3: away more money. It's my own envy of people like
Speaker 3: Bill Gates and Bernie Marcus who recently passed away, as
Speaker 3: they had a lot more money to give away. And
Speaker 3: my hero in life is ken Lango, who was very generous.
Speaker 3: Love to good luck, all right, I like making money
Speaker 3: for those two reasons.
Speaker 1: All right, Leon, Well, we really always love talking to
Speaker 1: you and we wish you the best, and of course
Speaker 1: that will be keeping an eye on your charitable endeavors
Speaker 1: as well, and always great to get your thoughts on
Speaker 1: what's going on in the markets, in the economy and
Speaker 1: the books.
Speaker 3: Mike Flundberg, he's another generous guide.
Speaker 1: He certainly is, we know, and I'm sure he'll appreciate
Speaker 1: that thought and we'll pass it along to him. He's
Speaker 1: sitting right behind us, actually I will, Leon.
Speaker 3: Who I was registered independent for many years and when
Speaker 3: he ran for prison as short as his run was,
Speaker 3: I switched to the Democratic Party so I could work
Speaker 3: and support him. But unfortunately he dropped out very quickly.
Speaker 1: Yeah, all right, Leon Cooperman chairman, chief executive officer over
Speaker 1: at the Omega Family office, and of course spent a
Speaker 1: lot of time over at Goldman Sechs asset Management.