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Tepper Says He’s Still Market Bull as Deficit Shrinks

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May 14 (Bloomberg) -- David Tepper, the billionaire who runs hedge-fund firm Appaloosa Management LP, said he remains optimistic about markets as the U.S. budget deficit eases.

“I am definitely bullish,” Tepper said today in an interview on CNBC. “The budget deficit is shrinking massively. Guys who are short, they better have a shovel to get out of the grave.”

Tepper, whose firm manages $17.9 billion, said the U.S. deficit had shrunk because of tax increases, budget cuts and economic growth. He said the investors shouldn’t worry about the U.S. Federal Reserve reducing its stimulus because otherwise there is a danger of a “hyperdrive market.”

The Standard & Poor’s 500 Index rose 0.9 percent to 1,647.83 at 12:00 p.m. in New York. Equity futures had slumped earlier in the day as JPMorgan Chase & Co. reduced its second-quarter growth forecast for the Chinese economy to 7.8 percent from 8 percent and the full-year estimate to 7.6 percent from 7.8 percent. The S&P 500 has advanced 16 percent this year.

The U.S. is in the early stages of an economic recovery, Tepper said, citing improvements in the auto and housing industries and that there is $400 billion in cash in the economy that could help the stock market increase further. The hedge-fund manager, who in January said in a Bloomberg Television interview that the U.S. “is on the verge of an explosion of greatness,” said the nation is going to have a “great manufacturing renaissance” that may start in 2015 or 2016.

Citigroup, JPMorgan

Tepper told CNBC his firm still owns stock of Citigroup Inc., which is his biggest holding, and other U.S. banks. Tepper has a “small” holding in JPMorgan Chase and favors the New York-based bank splitting Chief Executive Officer Jamie Dimon’s dual role as chairman and CEO, he said.

Tepper also said he cut his stake in Apple Inc. at the start of the year as the maker of the iPhone and iPad devices hasn’t been “evolutionary” or “revolutionary” recently.

The hedge-fund manager said the U.S. housing market is improving though it won’t return to peak levels. He also said he’s not holding commodities and doesn’t like bonds long term.

Tepper said central bankers have eased monetary policies in countries such as Australia, Japan and South Korea and that he has been “bullish” since the start of the year on Japan, where the nation’s corporations have undergone “massive restructuring.” The Middle East is a concern and a war in the region could spur a 5 percent drop in markets, he said.

Tepper’s main fund slumped 27 percent in 2008 before posting a 130 percent gain in 2009, Bloomberg News reported at the time.

To contact the reporter on this story: Saijel Kishan in New York at skishan@bloomberg.net

To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net