Leon Cooperman told CNBC on Thursday he believes the Reddit-fueled trading frenzy involving GameStop shares will end poorly. However, the billionaire investor said he wasn’t faulting the people who kicked off the epic short squeeze, which sent the stock to dizzying heights in recent days.
“I’m not damning them. I’m just saying from my experience, this will end in tears,” Cooperman said on “Fast Money: Halftime Report,” as shares of the beleaguered video game retailer tumbled about 25%. Earlier in the session, GameStop’s stock touched an all-time high of $483 but came under pressure as numerous retail brokerages placed limits on trades.
Cooperman said he has no position in GameStop. However, on a quick glance at the financials, he said the company’s declining sales do not support such lofty levels in 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, chairman of the Omega Family Office. He added that “investors” don’t own GameStop — only “speculators” do.
Cooperman said he believes the current moment in the stock market — including the online hype pumping up heavily shorted stocks — is a result of many factors, including the near-zero interest rates instituted by the Federal Reserve in response to the coronavirus pandemic. He also said the fiscal response from Congress is playing a role.
“It’s all interconnected,” said Cooperman, the son of a Bronx plumber who later became one of Wall Street’s most successful investors. “The reason the market is doing what it’s doing is, people are sitting at home, getting their checks from the government, basically trading for no commissions and no interest rates. I’m not saying they’re stupid. Show me a guy with a good record consistently, and I’ll show you a smart guy.”
Just last week, Cooperman had warned about “euphoria” in parts of the stock market. GameStop shares were trading under $50 on the day of Cooperman’s remarks.
“I’ve been through cycles like this in the past. This is extreme, more so, but this too shall pass,” the hedge-fund pioneer said Thursday. For example, he noted that shares of Cisco Systems reached valuations during the dot-com boom that far outpaced the company’s sales and have yet to return to the peak of that era even roughly two decades later.
“At the end of the day, the stock market reflects economic progress or the lack thereof,” he said, while adding that “water seeks its own level.”
Later in his extended interview with CNBC, Cooperman emphasized his concern with the current conditions in financial markets. With such accommodative monetary policy from the Fed, Cooperman said, investors across asset classes feel compelled to take on more risk in search of better returns. That is pushing more money into the equity markets and propelling the market higher, he contended.
“Everybody is moving out on the risk curve, and one of these days — not today, not tomorrow — but one of these days people are going to come in on the risk curve, and I think we’ll have lots of issues to deal with,” Cooperman said.
Simply put, Cooperman said interest rates cannot stay pinned near zero and taxes will probably go higher in order for the U.S. to tackle the national debt. Despite viewing higher taxes as likely, Cooperman criticized rhetoric from Democrats, including President Joe Biden, who say wealthy Americans must pay their “fair share.”
“I hate that expression with a passion,” said Cooperman, who has said he voted for Biden in the November election despite disagreeing with him over certain economic issues, such as taxes. Cooperman has said he did not vote for former President Donald Trump because Trump does not share the same “values.”
Cooperman on Thursday blasted the phrase for being too vague, asking what does “fair share mean?”
“I’m willing to work six months a year for the government and six months for myself, which means a marginal tax rate of 50%,” said Cooperman, who previously ripped Democratic Sen. Elizabeth Warren over her proposed wealth tax.
“This fair share is a bullshit concept. It’s just a way of attacking wealthy people, and I think it’s inappropriate,” Cooperman said Thursday. “We’ve all got to work together and pull together.”