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Carl Icahn: Danger Ahead


dcollon
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I've actually put on  some positions in high yield bonds recently.  Ichan seems to base his argument on a pending series of rate hikes similar to what led to the credit crises.  Hell! We can't even get one rate hike.  Even if the Fed  raises rates by a .25 point, I just don't see them following through with more hikes any time soon.  But, hey, I could be wrong.

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I don't know why he's coming out with this stuff.  This is not how he made his money and he used to emphasize that before responding to some boring repetitive question from whatever financial journalist was asking him for his view on "the market."

 

What if he actually cares about people and being right? He's already made enough money so I don't think he's short the market and going "activist" on it. He could just be a smart thoughtful guy sharing his thoughts Ray Dalio style

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I think what Carl Icahn talked about here is quite similar to the merger-mania that went bust in the 1980s. He has seen it before so he is predicting it will happen again.

All serial acquirers like VRX and PAH had dropped a lot since he started talking about this in May.

I am interested in those serial acquirers but I don't feel like the bottom has reached so soon. After boom-bust, there will be a relatively long stabilization period (1-2 years), so we got plenty of time here.

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You can short HYG or buying puts on it.

 

However, we are already at the lows reached in 2011 on that index or when the World feared that Europe would disintegrate. Are we in such bad shape today?

 

Just food for thoughts. If energy was to rebound then a large portion of high yield bonds would turn out ok and that concern would likely disappear.

 

I was also reading late last night that consumer confidence in China is the highest in a year and that housing in major cities is doing well with prices up. When housing collapsed in the U.S. it was across the board and large cities and/or more desirable areas where the ones that recovered first. No doubt that there is a lot of real estate bad loans in the system in China but, is it as dire as some make it out to be?

 

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I must have been in the minority that was not at all impressed by the video.  Half of it ruined the substance of the argument by including things like carried interest and Donald Trump.  What the heck do those things have to do with the market?

 

When we had the last crisis, the yield curve was inverted and you had no liquidity in junk bonds for various reasons.  It'll probably happen again at some point but he didn't say what would cause it.  Of course no one knows what will cause it, but he didn't give anything that could help identify a catalyst.

 

I could totally understand shorting a junk bond ETF.  There's not enough liquidity in that market during stressful times to give you an accurate market price.  But that's a completely separate issue from saying there's danger because junk bonds are frothy, etc.

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I must have been in the minority that was not at all impressed by the video.  Half of it ruined the substance of the argument by including things like carried interest and Donald Trump.  What the heck do those things have to do with the market?

 

I'm with you! Seems like some sort of media stunt to feed his ego.

 

When this massive downturn in the stock market happens, will Herbalife sell more shakes?

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I can't imagine HYG would have a comparable composition/price level of underlying holdings compared to 2011, so I think that doesn't have a great deal of meaning. Probably better to look at credit spreads and HYG holdings' prices relative to par.

 

You can short HYG or buying puts on it.

 

However, we are already at the lows reached in 2011 on that index or when the World feared that Europe would disintegrate. Are we in such bad shape today?

 

Just food for thoughts. If energy was to rebound then a large portion of high yield bonds would turn out ok and that concern would likely disappear.

 

I was also reading late last night that consumer confidence in China is the highest in a year and that housing in major cities is doing well with prices up. When housing collapsed in the U.S. it was across the board and large cities and/or more desirable areas where the ones that recovered first. No doubt that there is a lot of real estate bad loans in the system in China but, is it as dire as some make it out to be?

 

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I must have been in the minority that was not at all impressed by the video.  Half of it ruined the substance of the argument by including things like carried interest and Donald Trump.  What the heck do those things have to do with the market?

 

When we had the last crisis, the yield curve was inverted and you had no liquidity in junk bonds for various reasons.  It'll probably happen again at some point but he didn't say what would cause it.  Of course no one knows what will cause it, but he didn't give anything that could help identify a catalyst.

 

I could totally understand shorting a junk bond ETF.  There's not enough liquidity in that market during stressful times to give you an accurate market price.  But that's a completely separate issue from saying there's danger because junk bonds are frothy, etc.

 

Agreed. Just seemed like a rambling old man to me.

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