Well, Carl Icahn didn’t become a billionaire by being stupid. With an estimated net worth of around $20 billion, he has been active in the investing and corporate buyout world for decades.
Stanley Druckenmiller is no slouch, either. The founder of one of the most successful hedge funds ever, Duquesne Capital, he has an estimated net worth of more than $4 billion.
Besides their billions, the two Wall Streel legends have something else in common. They’re warning – and investing as if – a stock market collapse is right around the corner.
|Carl Icahn: A net short position of 149%.|
You probably recall I wrote about Icahn’s mega-bearish presentation “Danger Ahead” back in the fall. He warned in the video that the junk bond market was at risk of imploding … that companies were loading up on debt to buy their own shares rather than do something productive with the money … and that the stock market was increasingly vulnerable. He followed up on CNBC by saying he went public with his case because he didn’t want investors to lose their shirts again like they did in 2007-09.
Turns out Icahn is really putting his money where his mouth is now. The multi-billion-dollar fund he invests in with his personal wealth – and with money from his publicly traded firm, Icahn Enterprises (IEP) - just finished the first quarter with a “net short” position of 149%. In other words, when you net out all of his short and long positions, you end up with a large, leveraged bet on a stock market plunge. That was a huge swing from a year ago, when the fund was net long to the tune of about 4%. It also appears to be his largest net short position ever.
As for Druckenmiller, he went almost apocalyptic at the closely watched Ira Sohn Investment Conference in New York a few days ago. He railed against a “myopic” Federal Reserve that “has no endgame” … said the massive debt-fueled buyback and M&A bubbles were disasters in the making … and that the “bull market was exhausting itself.” Lastly, he said to “get out of the stock market” and to invest in gold instead.
Now, I haven’t been shy about expressing my worries about the multiple-asset bubbles out there … and I myself shifted to a much more cautious stance last summer. In fact, I recommended conservative investors raise their cash allocations to the highest level in years. I also helped more aggressive investors generate substantial profits from downside ETFs and put options in the market meltdown back in August and September, and again in January and February.
|“I’ve recommended that conservative investors raise their cash allocations to the highest level in years.”|
Since then, markets have rallied back to around unchanged on the year. But the problems I highlighted haven’t gone away. And now, you have some of the most successful, wealthy investors ever warning about a large, impending crisis.
That doesn’t guarantee we will have a stock market meltdown, of course. But it sure as heck is worth thinking about when you decide what moves to make in your own portfolio.
So what do you think? Are Icahn and Druckenmiller on to something? Or do you think Team Yellen/Draghi/Kuroda are the better minds to follow? Are you concerned about the bubble-icious behavior I’ve been discussing? Or do you think it can keep going for a little while longer, or perhaps even years? Hit up the comment section below and let me know.
Until next time,
Los Angeles to San Francisco in 30 minutes by train? That’s what a new crowd-sourced funded effort led by NASA and Boeing veterans is promising. The group announced that it had licensed “passive-magnetic levitation technology” to power its prototype system, which like other hyperloop projects, vows to shuttle humans and goods in a vacuum-tube system at speeds up to 750 mph, USA Today reports.
Hyperloop Transportation Technologies (HTT) announced its plans two days before its rival Hyperloop Technologies Inc. (HTI) was set to showcase the evolution of its own technology in the desert north of Las Vegas. HTI’s web site features photos and videos that show off large tubes designed to house long pods for either people or cargo. Both HTI and HTT are based in Los Angeles.
There’s even another player in this fast-moving industry. SkyTran, based at the NASA Research Park south of San Francisco, recently unveiled a technology demonstration system showing how its two- and four-person vehicles will work. SkyTran has raised $30 million and is operating in partnership with NASA.
The advantages: Hyperloop technology offers the possibility of moving people at great speeds without using fossil fuels. The downside: Making such transportation reliable while mitigating for potential catastrophes unfolding at around the speed of sound, according to the USA Today report.
Are all these efforts worth the money? Should the government get more involved in high-speed transport? Comments below …
Pay for hedge fund managers continues to soar over even the highest-paid CEOs, according to an annual ranking by Institutional Investor’s Alpha magazine. A story in the New York Times pointed out that JPMorgan Chase Chief Executive Jamie Dimon was paid $27 million in 2015. By contrast, hedge fund manager Kenneth C. Griffin made $1.7 billion for the same year. The 25 best-paid hedge fund managers received a combined $12.94 billion in pay and other income last year, the study says. The hedge fund industry has now surged in size to $2.9 trillion from $539 billion in 2001.
It’s still early and still complicated, but an analysis by National Public Radio is giving Hillary Clinton the edge over Donald Trump in the all-important Electoral College vote to become the next president of the U.S. NPR says that the Democrat already has enough votes to win, 270-191, based on states considered either safe, likely and leaning toward either contender. NPR says that Colorado, Florida, Iowa, North Carolina and Ohio are considered tossups right now. It adds, though, that even if Trump were able to get all of those, he would still come up short in the Electoral College.
Do you think it’s over, or will some sure-thing states switch sides leading up to the election? What about the state you’re in? Comments below. …
President Obama will become the first sitting U.S. president to visit the site of the U.S. atomic bomb attack in Hiroshima. Part of a late-May Asia tour, the event fulfills a wish Obama made early in his presidency to visit the site of the nuclear attack against Japan at the end of World War II.
White House officials faced questions on whether Obama’s presence would amount to an apology for using nuclear weapons. But the White House has said the U.S. doesn’t owe Japan a formal apology for using the atomic bomb in August 1945. Officials say the visit will be a reminder of the destruction that nuclear weapons can cause. Officials said the president would give remarks on nuclear nonproliferation during the visit to Hiroshima.
The Money and Markets Team