Carl Icahn: Markets Could Suffer Huge Drop
According to the billionaire investor, when it comes to equities, "a lot of the earnings are a mirage."
You don’t have to like him but you have to respect his results and that’s why markets fell Monday when Carl Icahn spoke at the Reuters Global Investment Outlook Summit.
"I am very cautious on equities today. This market could easily have a big drop," Icahn said.
What was a flat market was soon down about 0.4 percent after Icahn expressed concern. Equally alarming was that his comments weren’t built on the now overused, “the market has ran up too fast” reason.
"Very simplistically put, a lot of the earnings are a mirage. They are not coming because the companies are well run but because of low interest rates."
He went on to say that much of the stock price appreciation is a result of share buybacks instead of actual earnings growth.
As Icahn has made himself more available to the media, he has used it to push his current positions. Icahn watchers remember his numerous open letters to Dell (NASDAQ:DELL) along with his ceremonial first tweet being devoted to the company and numerous media appearances where Dell was the topic of conversation.
Currently, it’s Apple (NASDAQ:AAPL). He’s using his high profile to push the company to repurchase more shares and his appearance at this conference is no different.
“Apple is not a bank and it should not be run like a bank because investors did not invest in a bank," he said. "Apple has all this money, they should be using it."
He continues to say that he doesn’t plan to take on a truly activist role with the company—something that would be difficult given Apple’s size and Icahn’s relatively small position, but he will continue to push the company to put more of its cash to work.
Although not known as a Wall Street nice guy, even those who don’t like him personally can’t argue with his success. According to Icahn, if you purchased shares of companies where his people took board seats and held the shares as long as he did, you would have pocketed an annualized return of more than 28 percent.
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