Activist investor Carl Icahn took to Twitter and CNBC Wednesday to issue a stark warning to investors: “I think the public is walking into a trap again as they did in 2007,” Icahn told CNBC.
Specifically, the 79-year-old investor warned of a bubble in high-yield debt. The prominent investor joins a chorus of voices pointing at frothiness in the so-called junk-bond market, including DoubleLine Capital founder Jeff Gundlach.
In two tweets published on Wednesday, Icahn cautioned against listening to so-called permabulls, saying the 2008 crisis might have been avoided if more investors had warned about the risk of a bubble in 2007, as he is attempting to do now.
On Monday, Los Angeles-based bond fund manager Jerry Cudzil, head of U.S. credit trading at TCW Group, told Bloomberg that he is also building up a big cash stockpile to brace for a bond-market selloff.
This isn’t the first time Icahn has sounded alarm bells. In early May, Icahn warned that “when [high-yield bond funds] start coming down, there is going to be a great run to the exits.”
The selloff may have already started. S&P Capital IQ reported that investors withdrew $2.9 billion from high-yield funds for the week ended June 17 — the biggest redemption in six weeks — on top of another $2.6 billion that pulled out the week before.
