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Tags: icahn | stock | market | earthquake

CNBC: Icahn Calls Stock Market Nosedive 'Rumblings of an Earthquake'

(Dollar Photo Club)

Tuesday, 06 February 2018 03:09 PM EST

Carl Icahn says he expects stock markets to bounce back after the massive sell-off Friday and Monday, while warning that current market volatility is a harbinger of things to come.

“This is just a little rumbling, a little fault line,” Icahn said on CNBC. “Before the earthquake, you get the rumblings and then maybe you don’t have an earthquake for 20 years, or 10 years, or five years. But these are the rumblings.”

The Dow Jones industrials finished Monday's trading down 1,175.21 points, which amounts to a 4.6 percent loss. At one point late in the day it was down nearly 1,600 points before closing at 24,345.75. The S&P 500 lost 113.19 points (4.10 percent) and the Nasdaq Composite dropped 273.42 points (3.78 percent).

The stock market has been on a bull run for the past nine years, helped by a growing economy, strong corporate earnings and an extremely loose monetary policy by central banks.

U.S. share values have also climbed further since President Donald Trump’s election on the prospect of tax cuts, corporate deregulation and infrastructure spending, and the S&P 500 is still up 23.8 percent since his victory.

However, some investors say the market is over-stretched in the context of rising bond yields as central banks withdraw their easy money policies of recent years.

Meanwhile, billionaire investor Icahn said markets will get some help from a healthy economy, including strong fundamentals for U.S. corporations that include the new tax benefits taking effect this year.

The volatility of recent weeks is cause for concern, Icahn said, adding that he doesn’t remember a two-week period as turbulent as this one. He said the problem is that too much money is flowing into the index funds, where investors don’t know what they’re actually investing in.

“Passive investing is the bubble right now, and that’s a great danger,” he said.

Eventually, that will implode and could lead to a crisis bigger than in 2009, he added.

“When you start using the market as a casino, that’s a huge mistake,” Icahn said.

Icahn also warned that investors have exposure to "way too many derivatives."

"The market is really not a place for the average person to be playing around with derivatives," Icahn said on CNBC. 

“Today, you have these triple-leveraged ETFs (exchange-trade funds) that are crazy.”

Icahn, who has been raising red flags on the stock-market’s meteoric rise, said the S&P 500 and Dow Jones industrials should recover, given the “great fundamentals” in the U.S.

“I think this market will bounce back probably. Eventually, you get through this little panic thing,” Icahn said. “Ironically, even though I am bearish and we have a lot of hedges on, I am not that bearish,” Icahn said.

"The market is a casino on steroids" with these exchange-traded funds and exchange-traded notes, and they are the "fault lines" that will eventually lead to an earthquake on Wall Street, Icahn said.

"The market itself is way over leveraged," and at some point could "implode."

"The market has become a much more dangerous place," he said, adding he believes the current volatility is a precursor to "things to come."

"I don't think this is the explosive time," he said on "Fast Money Halftime Report." "I think this thing will probably bounce back."

© 2024 Thomson/Reuters. All rights reserved.

Billionaire activist investor Carl Icahn warned on Tuesday that investors have exposure to "way too many derivatives" and called the stock market's nosedive just "rumblings of an earthquake."
icahn, stock, market, earthquake
Tuesday, 06 February 2018 03:09 PM
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