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Tags: Olsen | Icahn | bonds | stocks

Barclays' Olsen: Icahn Is Right on Bond Worries But Not Stocks

By    |   Thursday, 25 June 2015 02:58 PM EDT

Legendary investor Carl Icahn expressed concern Wednesday about overvaluation in financial markets, including stocks and particularly high-yield bonds.

He's on the mark when it comes to junk bonds, but not so much on stocks, says Hans Olsen, head of investment strategy for Barclays Wealth Management.

As for high-yield bonds, "if you look at spreads, absolute yields, they're below average, and meaningfully below average. It's part and parcel of a world in which you have zero interest rates," Olsen told CNBC. "You need a reference point for money in order for markets to work efficiently."

The Barclays U.S. Corporate High Yield index yields 6.34 percent, compared to 1.53 percent for the Barclays U.S. Treasury index.

As for stocks, Icahn told CNBC multiples are huge and earnings are "sort of fudged" by accounting techniques. But Olsen said the forward price-earnings ratio of 17 for the S&P 500 index doesn't indicate stocks are very overvalued.

Meanwhile, star investor Jim Rogers, chairman of Rogers Holdings, shares Icahn's bearishness on stocks. They're headed for a major slide, as the Federal Reserve begins to curtail its massive easing program, Rogers says.

The S&P 500 index stood at 2,115 Thursday morning, 1 percent below its record high.

"This is the first time in recorded history that all the major world central banks are printing staggering amounts of money," Rogers told MarketWatch.

"Now the world has this huge artificial ocean of liquidity. The people getting the money are having a wonderful time. But when it ends, it will be very nasty. The idea that the solution to too much debt is more debt is mind-boggling."

The economy has been in recovery mode since June 2009, and the S&P 500 has tripled since March 2009. But, "we have had economic slowdowns every four to seven years since the beginning of the Republic," Rogers said.

"We’re overdue for another problem. When this artificial sea of liquidity ends, we’re going to pay a terrible price."

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StreetTalk
Legendary investor Carl Icahn expressed concern Wednesday about overvaluation in financial markets, including stocks and particularly high-yield bonds.
Olsen, Icahn, bonds, stocks
326
2015-58-25
Thursday, 25 June 2015 02:58 PM
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