Leon Cooperman told CNBC on Thursday that he believes the trade frenzy traded by Reddit with GameStop shares will end badly. However, the billionaire investor said he did not blame the people who initiated the epic tight squeeze, which sent stocks to dizzying heights in recent days.
“Don’t condemn them. I’m just saying from my experience that this will end in tears,” Cooperman told “Fast Money: Halftime Report,” while the shares of the harassed video game retailer fell about 25%. Earlier in the session, GameStop shares hit an all-time high of $ 483, but came under pressure as numerous retail brokers put limits on operations.
Cooperman said he has no position at GameStop. However, with a quick look at the financial information, he said the company’s falling sales do not support such high stock price levels for anything or even close.
“GameStop isn’t worth $ 500, or $ 400, or $ 300, or $ 200, or $ 100, or $ 50,” said Cooperman, president of the Omega Family Office. He added that “investors” do not own GameStop, only “speculators”.
Cooperman said he believes the current stock market momentum, including the online hype accumulating very short stocks, is the result of many factors, including near-zero interest rates set by the Federal Reserve in response to the pandemic. of coronavirus. He also said Congress ’fiscal response plays an important role.
“Everything is interconnected,” 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 are sitting at home, receiving government checks, basically trading without commissions or interest rates. I’m not saying they’re stupid. Show me a guy with a good record constantly, and I’ll show you a smart guy. “
Just last week, Cooperman had warned of “euphoria” in some parts of the stock market. On the day of Cooperman’s statements, GameStop shares were trading at less than $ 50.
“I’ve been through cycles like this in the past. This is extreme, even more so, but it will also happen,” the hedge fund pioneer said Thursday. For example, he noted that Cisco Systems shares gained valuations during the dot-com boom that far exceeded the company’s sales and have yet to return to the peak of that era, or about two decades later. .
“After all, the stock market reflects the economic progress or lack thereof,” he said, adding that “water seeks its own level.”