Carl Icahn makes a Doom Forecast for stock markets – Is he right?

We are approaching October fast, a month that has a bittersweet aftertaste for many investors. It is also time for the traditional annual fear-mongering by some more flamboyant investors and soothsayers. Daily alerts of impending doom seem to be OK right now. But the latest warning has caught my attention.

This warning comes from no other than Carl Icahn himself (on CNBC), whom I respect as an old-school veteran investor the world has rarely seen. I have always listened to what Icahn has to say. His recent comments and direct confrontation with Black Rock’s CEO Larry Fink about their “high-yield debt funds” were priceless. You should have seen Fink’s agitated face just stopping short of putting his hand on Icahn’s mouth.

Icahn confronted the CEO of the world’s largest asset manager as a person, who has no one to fear in the finance industry – a kind of George Foreman of the finance world. A very shrewd and self-confident investor indeed. But then again, his latest comments of a possible “looming catastrophe” let me wonder if his real intentions and personal agenda.

I have studied Carl Icahn since I started working in the finance industry. What has always impressed me most is his resourcefulness and his ability to adapt to different market circumstances. He did very well with risk arbitrage and options strategies early on in his career. While developing his own circle of competence and his ambitions for the “big money”, he understood the power of catalysts earlier than others. He simply became his own catalyst to unlock value. These were the good old times of greenmailing.

As shrewd as he might be, Icahn has a personality that some might say is less than “gentlemen like”. He is one of the rare, independent investors, who makes use of everything at his disposal, even if it costs him investors, partners or close friends. He does everything to intimidate his opponents before and during a fight, and if necessary go below the belt in order to win – which he usually does. Some readers might not be aware of it, but Carl Icahn was one of the key inspirations for Oliver Stone’s fictitious character Gorden Gekko in the movie Wall Street, brilliantly played by Michael Douglas. Icahn’s handling of TWA in 1985 comes to mind. Let me assure you he didn’t make many friends among pilots and airline unions. “Blue horseshoe loves blue star airlines!” Not anymore!

I am not a friend of fear mongering or Armageddon forecasts. I have never found, and I repeat never, ever found a professional investor, who was able to consistently forecast market downturns. It’s like someone tries to forecast earthquakes based on some seismic data models.  It can’t be done! It’s impossible! But public comments and references alone from influential personalities can move markets. Just imagine Buffett comes out on Bloomberg and warns of an impending market crash. The market would most certainly tank the moment his statement goes over the ticker.

Carl Icahn has reached a similar status and knows of his market-moving influence. But whereas Warren Buffett or Charlie Munger would rather bite off their tongues than make similar comments, Icahn is very open and blunt about it. I don’t know his real agenda and why he is speaking out rather direct warnings. It is certainly not because he is worried about your own skin in the game.

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