Icahn Says Market Rumbling Could Lead to Earthquake
Carl Icahn

Billionaire corporate raider turned activist Carl Icahn said Tuesday that the recent market downturn - including a jaw-dropping 1,175 point plunge on Monday and mixed trading Tuesday -- is a rumbling that will someday lead to a much more significant earthquake that could be worse than then 1929 crash precipitating the Great Depression.

"This is a little rumbling. Eventually, you get through this little panic," Icahn said on CNBC TV. "But one day this thing is just going to implode because you have too much leverage with too many people buying these things and Wall Street sells them these products. It is extremely dangerous. The market has become a more dangerous place."

Icahn discussed two fundamental problems he sees with the market - large-scale investor purchases in over-leveraged Exchange-Trade-Funds and what he sees as a dangerous transfer of capital from actively managed funds to index funds.

"I think the market itself is way over-leveraged and have too much money flowing into index funds and these ETFs," Icahn said. "The problem is that you have too much money flowing to index funds where that money doesn't really know what they own and eventually there will be a time when that earthquake will hit that type of a market."

Icahn added that he believed the Securities and Exchange Commission should install additional regulation on highly leveraged ETFs, backing a statement issued Tuesday by BlackRock that suggested that there should be a hike in SEC rules on inverse and leveraged ETF products.

Blackrock's Larry Fink
Blackrock's Larry Fink

"This is a manifestation of a real problem we have, with index funds, and I agree with Blackrock that there should be regulation on triple-leveraged ETFs," Icahn said. 

However, for now, Icahn said that the fundamentals of U.S. companies are sound, particularly following corporate tax break legislation implemented last month and he continues to find great values in the market today. Also, Icahn said he plans to launch a new activist campaign shortly.

"There are stocks that are cheap and badly managed," Icahn said. "You can burnish that jewel. There are great values around in the market today. You are going to see me in another one in a couple of days."

More from Mergers and Acquisitions

Xerox Received Interest From HPQ Before Fuji Deal: Sources

Xerox Received Interest From HPQ Before Fuji Deal: Sources

Divestitures at Newell Expected in Weeks: Wells Fargo

Divestitures at Newell Expected in Weeks: Wells Fargo

In Biopharma M&A, 'Where There's Real Innovation There's Someone Willing to Pay'

In Biopharma M&A, 'Where There's Real Innovation There's Someone Willing to Pay'

AT&T Expert Calls DOJ's Model 'Theoretically Unsound'

AT&T Expert Calls DOJ's Model 'Theoretically Unsound'

AT&T Battles Department of Justice's Expert Witness Over Merger Assumptions

AT&T Battles Department of Justice's Expert Witness Over Merger Assumptions