UPDATE 2-Hedge fund mogul Tepper warns: Don't be too long U.S. stocks

Wed May 14, 2014 10:38pm EDT

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(Adds details on conference, other speakers)

By Svea Herbst-Bayliss

LAS VEGAS May 14 (Reuters) - Billionaire hedge fund manager David Tepper sounded a cautious message on Wednesday, telling a ballroom packed with other managers and investors that he was "nervous" about the stock market but that this was not the time to sell.

Billed as the star attraction at the $2.7 trillion industry's biggest annual event, Tepper discussed economic growth, central bank policies as well as his personal commitment to supporting local soup kitchens and food banks in his adopted home state.

But his take on investing in U.S. markets got the most attention when he said: "I'm not saying go short, just don't be too friggin' long."

Coming from the man who earned $3.5 billion to rank as the hedge fund industry's best paid manager in 2013, this was exactly the kind of practical advice the roughly 1,800 attendees, some of whom jetted to Vegas on private planes, came to hear at the annual SkyBridge Alternatives Conference.

Tepper, who runs $20 billion Appaloosa Management, said he doesn't think U.S. economic growth is as strong as it should be and added that central banks are currently being complacent, noting that Europe's central bank "is behind the curve."

Even as the U.S. stock market hit records earlier this week, he worried that it was struggling to move significantly higher now after having surged roughly 30 percent last year.

He wasn't the only one debating what central banks around the world should and might do next from the cavernous ballrooms in the Bellagio hotel.

Hedge fund manager Jamie Dinan, who runs $22 billion York Capital, said he expects interest rates to stay low "longer than people expect."

Both he and Tepper worried more about deflationary pressures than inflationary pressures where the Federal Reserve would be compelled to put on the brakes more quickly.

Like many hedge funds around the world, York has been investing in Europe saying that his fund has been lending to companies by "stepping in where banks aren't going."

An early morning panel pitted economist Nouriel Roubini, nicknamed Dr. Doom for having forecast the economic crisis, against Peter Schiff, chief investment officer of Euro Pacific Capital, who said the Federal Reserve's easy money policy merely reflated asset bubbles.

As the debate grew more heated, former Fed Governor Laurence Meyer, who was moderating the panel, loudly commented on the strange turn, noting that the politicians were getting along while the economists were fighting.

The discord over where markets are going and what policy makers may do next has made for uneven trading conditions this year. The average hedge fund manager is up only 0.9 percent, barely flat this year, after two months of back-to-back losses, something that revived grousing among some investors about the industry's notoriously high fees.

All the same, investors from the Metropolitan Museum of Art, the San Antonio Fire & Police Pension fund, Williams College, and the Sidney E. Frank Foundation among others were still taking meetings with hedge fund managers small and large to gauge what the next big trade might be.

Launched at the height of the financial crisis in 2009 by SkyBridge Capital founder Anthony Scaramucci, the so-called SALT Conference quickly established itself as the industry's most important conference. This year they can rub shoulders with Valerie Jarrett, senior adviser to President Barack Obama, former Treasury Secretary and former Harvard University President Lawrence Summers and Hollywood actor Kevin Spacey.

In past years Scaramucci, who likes to call himself a middle-class kid from Long Island - albeit one with a Harvard Law degree - invited former Presidents who came. This year "we actually got into the White House" by getting Valerie Jarrett to come," he said.

At other moments, some of the wealthy hedge fund managers and executives, often vilified as the "1 percent", underscored their charitable giving.

Kenneth Langone, co-founder of Home Depot and chairman of the trustees of New York University Medical Center, said his dream was to raise enough money, some $600 million more, to allow students at New York University Medical School to attend for free.

For his part, Tepper said he donated enough money in 2008, when his fund was suffering through double-digit losses, to make sure food banks and soup kitchens in New Jersey, where he lives, were always stocked.

Asked whether he believes in good karma, Tepper said: "Are you ... kidding me? Of course I believe in that," noting that in the five-year period since then his fund has performed better than ever. (Reporting by Svea Herbst-Bayliss; Editing by Eric Walsh and Ken Wills)

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