Carl Icahn is a brilliant investor with a proven history of delivering excellent returns. In fact, he just rode Netflix from the high fifties all the way to seven-hundred bucks a share in just under three years; an annualized return of around 130%! Icahn took over a major airline when I was literally in diapers so it is with a tremendous amount of respect that I will take the other side of his CNBC appearance from Wednesday.
“I think the public is walking into a trap again as they did in ‘07, and what I’ve said is, ya know as i get older, I think its almost the duty of well respected investors- like myself I hope- to warn people to tell people that you really are making errors”
I think he believes he is doing the right thing and who knows, maybe history will prove him right. But whether or not he’s right isn’t even the point. Icahn should know that when he says things like this, he is absolutely freaking out the people who are at home watching. I personally think well respected investors have a responsibility to stay far away from major market calls that do nothing but stick a wrench in peoples’ investment plans. Let’s say he’s right, is he going to go on TV and tell people when to buy back in? Will he be right?
Now I don’t blame CNBC for putting him on, that piece was gold for them. They are not the business of making you a better investor, but in one of selling advertisements, period. Icahn on the other hand should know better. He even said himself that “now ya know, nobody can pick the market per se.”
“When we did it, it was pretty much of a no brainer (Netflix). It was very hard to compete. It was sort of where Apple is today”
Apple has compounded at 31% over the last decade, becoming the largest company of all-time. At $127 a share, to say that Apple has hundreds of points left in it, and to compare it to Netflix, which is up 1100% over the last three years, is simply ridiculous.
“I personally do (think there will be a dramatic pullback). I like to look for no-brainers, the no-brainer to me is high-yield, 98%.”
No brainers do not exist. If they did, Icahn would not be holding two positions in his portfolio that are down over sixty percent in the last year alone. In fact, Transocean, is down over seventy percent from when Icahn was “loading up” on it.
“We might have avoided the crisis if more people who understood the housing bubble, who understood the mortgage backed securities had spoken out and not just let those things go to the moon.”
“They’re so covenant light (high-yield), it’s even worse than ‘08….In ‘07 I saw the same thing”
I know for a fact that people are persuaded by what they hear on TV. Those in the industry understand that it’s infotainment but others on the outside take this very seriously. I’ve had people in my family ask me if the market was going to correct because somebody (who isn’t a pimple on Icahn’s tucchus) was bearish. So when Icahn speaks, people listen and it’s really unfortunate. When he makes statements like “I saw the same thing in ‘07.” he has undoubtedly caused many people out there to mess with their investment plan. Really a shame.
“The same people who sold those mortgage backed securities, It’s almost the the same thing, it’s almost deja vu, we’re now, they’re in there selling, these companies at huge multiples, and if you look at some of these earnings, the market is going at, S&P seventeen, eighteen times.”
If these bearish forecasts make you concerned, you should take solace in what another pretty good investor had to say about forecasters. Here’s Warren Buffet: “A market forecast tells you nothing about where the market is going but a lot about the person doing the forecast.” Please don’t let this garbage you see on TV and read in the papers junk your plan. Carl Icahn is an amazing investor, but a master market timer he is not.