Legendary investor Carl Icahn there is great risk of a double-dip recession, a scenario that wouldn’t be pretty for financial markets.
"If you get a double-dip recession, and they start coming down, it's going to be a bit of a bloodbath," he told CNBC.
"The amateur investor is going to get hit badly again, because they're pouring money into these funds. Some of these funds managers I do not think are experienced enough to handle some of the distressed stuff they're buying, and they're going to get burned."
As for financial markets, "I think that you have to be cautious,” Icahn says. The economy “is on a precipice right now, and it could really go either way. I don’t think anyone can say which way it’s going to go.”
The economy shrank 0.7 percent in the second quarter.
Icahn doesn’t see the 60 percent stock rally of the past seven months as proof that the economy is on firmer ground.
“It's a myth to say the market is a good indicator of the economy,” he says. I think individuals are much more of an indicator."
Consumers are afraid to spend with unemployment on the rise, he said. And that’s helping to keep the economy weak.
Mohamed El-Erian, chief executive of money manager Pimco, shares Icahn’s concern about the economy.
He says there’s a “new normal” that will cap annual economic growth at 2 percent in coming years.
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