It has been a difficult year – and decade – for billionaire investor Carl Icahn, who despite making $1.3 billion by shorting malls via CMBX 6, a trade we first pitched several years ago as the Big Short 2.0, failed to make waves with any other prominent investments and in fact has been anecdotally net short during the market’s historic surge in the past two years.
Yet despite a spotty recent investing track record, the 84-year-old legendary corporate raider remains
bearish on the fence about the market’s ludicrous ascent, as he made clear in an interview with CNBC’s Scott Wapner in which Icahn warned of the possibility of a significant decline for stocks, and predicted that “wild rallies” in the market always meet a dramatic end.
“In my day I’ve seen a lot of wild rallies with a lot of mispriced stocks, but there is one thing they all have in common. Eventually they hit a wall and go into a major painful correction. Nobody can predict when it will happen, but when that does happen, look out below,” Icahn warned ominously adding that “another thing they have in common is it’s always said, it’s different this time. But it never turns out to be the truth.”
While Icahn refused to go into the specifics of his positions, he said that he was well hedged, although it is certainly that case that he has been well-hedged for the better part of the past decade. After all, who can possibly forget that at in mid-2016, just before stocks erupted higher following Trump’s election, Icahn had a record -150% net short for his Icahn Enterprises LP, one which led to lots of pain in the ensuing years.
Icahn’s cautionary statement came on a very ugly day, with U.S. stocks plunging sharply and on pace for the worst opening to a new year in decades. The three major were indexes were all down more than 3% near midday, with the Dow falling as much as 700 points before recovering some losses. Of course, the rough start to 2021 follows a stellar year for the markets, which saw the S&P 500 rise 16% after having lost a third of its value in March, with tech stocks enjoying dramatic gains even as the Covid-19 pandemic upended the world economy.
The relentless gains prompted some less bullish Wall Street strategists to warn of imminent turbulence: as we reported earlier, Morgan Stanley chief equity strategist Mike Wilson repeated his earnings from late last year, and said in his first note of the year on Monday that the market was “ripe for a drawdown” as the “risk/reward has deteriorated materially.”
We got another indication of Icahn’s challenges earlier on Monday, when Herbalife announced that it was buying back $600 million worth of shares from Icahn and that the activist’s representatives would exit the board. Icahn said in a statement that the time for activism at Herbalife, which he invested in more than eight years ago, had passed but he planned to remain a shareholder at a smaller level.