How Carl Icahn Views the Role of Leverage in the Market



Carl Icahn’s interview with CNBC

On February 6, 2018, Carl Icahn, billionaire investor and the chairman of Icahn Enterprises, shared his views on the recent market sell-off on CNBC’s Fast Money Halftime Report.

Icahn opined that the market is a “casino on steroids.” He pointed to the vast number of derivatives products and funds and noted, “The market itself is way over-leveraged” and added that he believed that “one day this thing is just going to implode.”

With respect to the recent market sell-off, he said, “I don’t think this is the explosive time.” Noting that the market would “probably bounce back,” he added, “I don’t think this is the beginning of the end.”

However, according to Icahn, riskier instruments such as derivatives and triple-leveraged exchange-traded funds are taking high leverage from the market. He noted that any small correction could lead to a huge fall in performance due to this leverage.

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Among the major exchange-traded funds, the SPDR S&P 500 ETF (SPY) and the PowerShares QQQ ETF (QQQ) fell 4.2% and 3.9%, respectively, on February 5, 2018. The SPDR S&P 500 ETF tracks the performance of the S&P 500 Index (SPX-INDEX), and the PowerShares QQQ ETF tracks the performance of major US technology stocks. However, these ETFs have shown strong performance numbers in the past two years.

For more on this topic, please read US Equity Market Sell-Off: Dan Loeb Weighs In on 4 Risks.


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