Leon Cooperman told CNBC on Thursday that he believes the Reddit-fueled trading frenzy with GameStop stock will end badly. However, the billionaire investor said he didn’t blame the people who started the epic short squeeze, which has sent stocks to dizzying heights in recent days.
“I’m not condemning them. I’m just saying from my experience that this will end in tears,” Cooperman said in “Fast Money: Halftime Report,” as the beleaguered video game retailer’s stock fell about 25%. Earlier in the session, GameStop’s stock hit a record high of $ 483, but came under pressure as numerous retail brokers placed limits on the trades.
Cooperman said he has no position in GameStop. However, on a quick look at the financial data, he said the company’s declining sales don’t support such high levels of the current stock price or anything even close.
“GameStop is not worth $ 500, not worth $ 400, not worth $ 300, not worth $ 200, not even worth $ 100, not even worth $ 50,” said Cooperman, president of the Omega Family Office. He added that “investors” don’t own GameStop – just “speculators.”
Cooperman said he believes the current moment in the stock market – including the online hype that is strongly pumping up short-ups – is the result of many factors, including the near-zero interest rates set by the Federal Reserve in response to the coronavirus. pandemic. He also said Congress’s fiscal response is playing a role.
“It’s all interrelated,” said Cooperman, the son of a Bronx plumber who later became one of Wall Street’s most successful investors. “The reason the market does what it does is people sit at home, get their checks from the government, basically trade with no commissions and no interest rates. I’m not saying they’re stupid. Show me a man with a good record , and I’ll show you a smart guy. “
Last week, Cooperman had warned of “euphoria” in parts of the stock market. GameStop stock was trading below $ 50 on the day of Cooperman’s comments.
“I’ve been through cycles like this in the past. This is extreme, more so, but this too will pass,” the hedge fund pioneer said Thursday. For example, he noted that Cisco Systems stock hit valuations during the dot-com boom that far outstripped the company’s sales and have yet to return to the height of that era about two decades later.
“At the end of the day, the stock market reflects economic progress or the lack thereof,” he said, adding that “water seeks its own level.”