Billionaire Carl Icahn told CNBC on Tuesday there are too many exotic, leveraged products for investors to trade and one day these securities are going to blow up the market.
"The market is a casino on steroids" with these exchange-traded funds and exchange-traded notes, and they are the "fault lines" that will eventually lead to an earthquake on Wall Street, Icahn said. "The market itself is way over leveraged," and at some point could "implode."
The latest example is an obscure security, which was designed to be a bet on a calm market, that's being blamed for causing an influx of selling in recent days. The VelocityShares Daily Inverse VIX Short-Term exchange-traded note (XIV) blew up overnight as investors were forced to sell when the market went haywire. Credit Suisse on Tuesday said that later this month it will end trading for its XIV, which was supposed to give the opposite return of the Cboe Volatility index (VIX), which is often referred to as the market's fear gauge.