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Business/Finance See other Business/Finance Articles Title: An ‘Icahn-ic’ Warning: Danger Ahead An ‘Icahn-ic’ Warning: Danger Ahead Posted on September 29, 2015 by Brad Hoppmann When billionaire activist investor Carl Icahn speaks, the investing world listens. At midnight Tuesday, when most of us were snug and comfortable in bed, the high-profile corporate raider released a nearly 15-minute video on his website:“Danger Ahead: A message from Carl Icahn.” As the public woke up to word of Icahn’s video warning, it made a lot of waves among the investing media. The headline-grabbing Icahn has come into renewed national prominence of late thanks to his friendship with, and the frequent praise he gets from, GOP presidential frontrunner Donald Trump. Like Trump, Icahn doesn’t hesitate to take advantage of an interested media that seemingly hangs on his every word. In fact, over the past couple of days, Icahn has given numerous interviews to outlets like CNBC, Fox Business and Reuters. In these appearances, he’s added more color to the his “Danger Ahead” video message. So, what exactly is Icahn warning the investing public about? For starters, Icahn is no fan of the Federal Reserve. A central theme of his video, as well as his recent interviews, is a warning over the unintended consequences of ultra-low interest rates on the economy and financial markets. Here’s the verbiage straight from the video: If low interest rates were just that simple of a panacea, we would never have recessions and we would never have these crises, these panics. The Fed saved us in 2008, but then again you could argue the Fed got us into it in ’02 and ’03. Icahn’s solution to the unintended consequences of ultra-low interest rates is for the Fed to raise rates. This, he says, would help ameliorate the growing bubbles in many asset classes, including real estate and even in the art market. They don’t understand the treacherous path they are going down. That’s what Icahn said in a separate interview with Reuters, in which he also declared his support for Donald Trump as a candidate to be the next U.S. president. In that Reuters interview, Icahn said: God knows where this is going. It’s very dangerous and could be disastrous. According to Icahn, the current situation with the Fed, financial markets and the economy in general required the “Danger Ahead” warning at this time. In fact, the lack of warning about the dangers of the subprime mortgage market in 2007 is one big reason why Icahn said he felt compelled to raise red flags about the state of the financial markets. In addition to the Fed, Icahn also offered up several sharp critiques of other dangers out there, including: •Yield risk. A need for yield by income investors is creating a very risky environment that’s funneled money into assets that carry much more risk than traditional income holdings. •Financial folly. Icahn criticized corporate management teams that issue huge amounts of debt to fund EPS-inflating buybacks, as well as ill-conceived mergers and acquisitions. •Honesty gap in earnings. Icahn believes that many companies are being deceptive about their bottom lines, and that they are using some subtle financial tricks to hide the real condition of their balance sheets. •Political discontent. Icahn railed against the political class, especially Congress, which he says has demonstrated incompetence in doing what they were elected to do. •Corporate taxes. Icahn says they are far too high, and that so-called “inversions” (where U.S. companies take over a foreign firm primarily for the tax benefits) are costing American jobs. Icahn went on to sound like Donald Trump in his criticism of hedge fund managers who benefit from the “carried interest” loophole. This law allows earnings to be taxed as capital gains rather than ordinary wage income, and that is a situation Icahn thinks is unfair. Icahn endorses his friend Trump for president, so it comes as no surprise to me that Trump’s tax plan (released Monday) would eliminate the carried interest loophole. As someone who tries to provide insight into many different aspects of the economy, financial markets, social issues, etc, I admit that I found Icahn’s “Danger Ahead” video intriguing. The billionaire does know what he’s talking about, and even though I don’t agree with everything he said in his nearly 15-minute presentation, I do applaud someone of his prominence coming out and saying what he thinks needs to be done to fix a broken system. If you are at all interested in some provocative thoughts on these subjects, I recommend watching the Icahn video yourself. I think it is well worth the 15 minutes. Poster Comment: Click on link to view video. Post Comment Private Reply Ignore Thread Top • Page Up • Full Thread • Page Down • Bottom/Latest Begin Trace Mode for Comment # 1.
#1. To: BTP Holdings (#0)
If the perils are making believers out of these two plutocrats, is it a hopeful sign? If a critical mass of the highest rollers were thinking similarly or at least seeing the writing on the wall, couldn't they basically order the Fed to raise rates -- if that is in fact a solution? The fat cats are the real rulers of the country. Politicians depend on them to get reelected, appointees have to be beholden to them too by some route.
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