There is a real risk of a double-dip recession and the market is acting in a "schizophrenic" way, which could cause a "bloodbath" for investors, billionaire investor Carl Icahn told CNBC Friday.
"If you get a double-dip recession and they start coming down, it's going to be a bit of a bloodbath," Icahn said.
"The amateur investor is going to get hit badly again because they're pouring money into these funds. Some of these funds managers I do not think are experienced enough to handle some of the distressed stuff they're buying and they're going to get burned," he said.
Icahn said he still sees investment opportunities in advertising, telecom, the Internet and bankruptcies. But making money out of bankruptcies should only be attempted by the experts, he said.
- Dow Will Fall to 6,300 by Year End: Portfolio Manager
- Art Cashin: Falling Dollar Can Crash Markets a la 2008
"We're quite involved in the secular change in the way advertising is going to be done. Obviously the cell-phone business is a growth business," he said.
"You've got secular changes that are hitting the world, especially in the way we buy. So the Internet, I don't have to say - it's obvious, is the great new thing. And advertising on the Internet as apposed to printed media," he added.
Meanwhile, real estate is a perfect example of a good market to short, according to Icahn.
Icahn said he questions why "any individual in their right mind" would buy into Real Estate Investment Trusts (REIT). Investors could never liquidate the underlying value of the buildings on their portfolios, he said.
"I think there's overcapacity in the office market and in shopping centers because you have a secular change in the way retailers are behaving and the way consumers are behaving," he added.
There are still opportunities in the debt markets, but "it's not what it was," he said.
The economy is in a precarious position and the outlook for consumer confidence and unemployment remains bleak, according to Icahn.
"I think that you have to be cautious. It's on a precipice right now and it could really go either way," he said.
Icahn warned against seeing the recent stock rally as a sign that the economy has turned a corner.
"It's a myth to say the market is a good indicator of the economy. I think individuals are much more of an indictor," he said.
"The market is schizophrenic at this point. So you have trillions of dollars literally in consumers hands, they don't want to spend it, they're afraid to spend it," he added.
Yahoo, Microsoft Deal
Icahn, who owns a stake in Yahoo, thinks the Internet search firm is in a "great" secular area. And Carol Bartz, the company’s new president and CEO, is a "real operator" who is "getting things done," he said.
"It cannot compete with a giant like Google and a giant like Microsoft . And you can't let ego get in your way and say: "We're Yahoo and we can compete," Icahn told CNBC.
"I think Google and Microsoft are going to be these two huge dinosaurs. I don't want to call them dinosaurs, but these behemoths that are going to war with each other," he said.
The Internet search deal between Microsoft and Yahoo, which sees Microsoft's Bing search engine power the Yahoo Web site, was a "great deal," according to Icahn.
"I think Wall Street hasn't really appreciated how great that deal is," he said.
- Video: Icahn's Words to Washington