Billionaire investor Carl Icahn talked to Bloomberg to dangers in the bond market, falling oil and activist investing. While he is bullish on Apple, a company in which he holds shares, and believes the stock is doubling, he urged caution on many other kinds of investments, especially bonds.
Bloomberg asked him what is the main mistake investors make. “That they invest, ” he said, and added, “I’m being facetious, but not completely. Investing can be very dangerous and that especially holds true when the market has increased for a number of years, as is the case today.”
The prospect for bonds is particularly grim, according to Icahn, and he sees a high-yield bubble. The bonds are at too low an interest rate, which means risky companies can borrow money too easily. Some say cash flow can compensate or low rates, but this cash flow is “ephemeral, ” Icahn pointed out.
While he thinks oil will eventually be a “great opportunity” as demand increases and supply dwindles, it probably has further to go before it bottoms. He counseled patience, saying his three year short on the Eurobond is only now yielding results.
Another place he recommended patience was in activist investing. He characterized his own strategy as an activist investor as patient rather than aggressive. As an activist investor, he has often been critical of management, and thinks that too many companies are run by ineffective CEOs who are paid too much. He says shareholders are not benefiting from a democracy. “It’s called a democracy, but it’s a misnomer. It’s more like a totalitarian state, a dictatorship or at the very least, a monarchy. That’s what you really have.”