Carl Icahn warns that the stock market has been artificially boosted by prolonged low interest rates.
Some of the values in stocks, "you just have to wonder," the chairman of Icahn Enterprises told
CNBC.
"There are times I look at this market and I wonder about these valuations," said Icahn. Investors are paying "$25-$30 billion for these companies and they don't have any patents, they don't have any technology," he said.
"I don't think you can have [near] zero interest rates for much longer without having these bubbles explode on you," Icahn did say. "You [also] need fiscal stimulus [from Congress]."
Icahn said he's worried about the high debt levels in China and how those might adversely impact the world's second-largest economy. He added that he sees China's "credit problem" posing a "risk" to the global financial landscape: "I don't think the last bullish guy in the world would ignore that."
"If you look at what we call 'our fund' we probably are net short [in investments]. But we [also] own a lot of companies at IEP ... so you really have a built in hedge," Icahn said.
He said his Icahn Enterprises investment firm is net long, when factoring the businesses the investment firm owns, such as refineries and rail cars. "We [also] own Pep Boys."
Icahn, who earlier this year sold his position in Apple, said he still thinks highly of the tech giant.
"We made several billion dollars on [Apple]," Icahn said. "I would get back in [to Apple] if I felt more secure about China," Icahn said. "I don't think anybody can tell you that China is not going to have a problem, even though it might be a very small one."
When asked who would be the best president, Icahn responded he didn't "think there would be any comparison," after answering with Donald Trump as the best presidential choice for 2016. "(Hillary) Clinton says she's there to clean up this mess, but she's been there all these years and hasn't done anything," said Icahn.
"We need a major change or we will see riots in the streets," Icahn predicted.
"It's no secret...there's pure gridlock [in Washington] and they can't get anything done," he said. Trump's "a consensus builder, he knows how to deal with people," said Icahn.
Meanwhile, Goldman Sachs Group Inc. sees lofty valuations as an elevated risk of a big market selloff,
Bloomberg News reported.
"With the S&P 500 close to all-time highs, stretched valuations and a lack of growth, drawdown risk appears elevated," says Goldman Sachs Group Managing Director Christian Mueller-Glissmann, who highlights that selloffs in excess of 20 percent for major bourses occur relatively frequently and recently have been brought about by concerns of a global nature.
With a possible Brexit, the U.S. presidential elections, and a Fed that appears committed to continuing to lift policy rates, this level of event risk is certainly on the table.
"With equities at the upper end of their recent range, we believe equities offer poor asymmetry with little return potential and potential for more frequent and larger drawdowns," writes Mueller-Glissmann. "And while ‘buying the dip’ has worked since 2014 , investors are increasingly concerned about the recovery catalyst in the next drawdown as central bank capacity is increasingly questioned and global growth and inflation remain stubbornly low."
(Newsmax wire services contributed to this report).
© 2023 Newsmax Finance. All rights reserved.