This page has been archived and commenting is disabled.
Carl Icahn Warns "Meltdown In High Yield Is Just Beginning"
Amid the biggest weekly collapse in high-yield bonds since March 2009, Carl Icahn gently reminds investors that he saw this coming... and that it's only just getting started!
As we warned here, and confirmed here, something has blown-up in high-yield...
With the biggest discount to NAV since 2011...
The carnage is across the entire credit complex... with yields on 'triple hooks' back to 2009 levels...
As fund outflows explode..
And here's why equity investors simply can't ignore it anymore...
If all of that wasn't bad enough... the week is apocalyptic...
Icahn says, it's only just getting started...
If you haven’t seen ‘Danger Ahead’ watch it on https://t.co/4rVAcLBsH9. Unfortunately I believe the meltdown in High Yield is just beginning
— Carl Icahn (@Carl_C_Icahn) December 11, 2015
He followed up with a brief appearance on CNBC:
As we detailed previously, to be sure, no one ever accused Carl Icahn of being shy and earlier this year he had a very candid sitdown with Larry Fink at whom Icahn leveled quite a bit of sharp (if good natured) criticism related to BlackRock’s role in creating the conditions that could end up conspiring to cause a meltdown in illiquid corporate credit markets. Still, talking one’s book speaking one’s mind is one thing, while making a video that might as well be called “The Sky Is Falling” is another and amusingly that is precisely what Carl Icahn has done.
Over the course of 15 minutes, Icahn lays out his concerns about many of the issues we’ve been warning about for years and while none of what he says will come as a surprise (especially to those who frequent these pages), the video, called “Danger Ahead”, is probably worth your time as it does a fairly good job of summarizing how the various risk factors work to reinforce one another on the way to setting the stage for a meltdown. Here’s a list of Icahn’s concerns:
- Low rates and asset bubbles: Fed policy in the wake of the dot com collapse helped fuel the housing bubble and given what we know about how monetary policy is affecting the financial cycle (i.e. creating larger and larger booms and busts) we might fairly say that the Fed has become the bubble blower extraordinaire. See the price tag attached to Picasso’s Women of Algiers (Version O) for proof of this.
- Herding behavior: The quest for yield is pushing investors into risk in a frantic hunt for yield in an environment where risk free assets yield at best an inflation adjusted zero and at worst have a negative carrying cost.
- Financial engineering: Icahn is supposedly concerned about the myopia displayed by corporate management teams who are of course issuing massive amounts of debt to fund EPS-inflating buybacks as well as M&A. We have of course been warning about debt fueled buybacks all year and make no mistake, there’s something a bit ironic about Carl Icahn criticizing companies for short-term thinking and buybacks as he hasn’t exactly been quiet about his opinion with regard to Apple’s buyback program (he does add that healthy companies with lots of cash should repurchases shares).
- Fake earnings: Companies are being deceptive about their bottom lines.
- Ineffective leadership: Congress has demonstrated a remarkable inability to do what it was elected to do (i.e. legislate). To fix this we need someone in The White House who can help break intractable legislative stalemates.
- Corporate taxes are too high: Inversions are costing the US jobs.
Ultimately what Icahn has done is put the pieces together for anyone who might have been struggling to understand how it all fits together and how the multiple dynamics at play serve to feed off one another to pyramid risk on top of risk. Put differently: one more very "serious" person is now shouting about any and all of the things Zero Hedge readers have been keenly aware of for years.
Full video below.
* * *
Finally, here is Bill Gross also chiming in:
Gross: HY Fund closes exit doors. Who will get in if you can't get out? Risk off.
— Janus Capital (@JanusCapital) December 11, 2015
»
- 97 reads
- Printer-friendly version
- Send to friend
- advertisements -
great video.
USD to rally hard as a result.
Oh PPT where art thou
My favorite client question: Would you like me to lose your money all at once or slowly over time?
Mine. "Oh you need higher yield ? And how long do you need to remain solvent?
There's a run on the bank fund
What we really want to know, Mr. Icahn, is are you short or long on Stendra? (VVUS)
Shit quality MBS were the first to blow up in Q4 of 07, Q1 of 08.
Quick, everyone buy HY so this cock sucker Ichan's shorts blow up.
Oldest trick in the book. Sell short in volume. Go on CNBS with your video about how the sky is falling. Rubes pile into the trade. Cover and reap the dishonst gains. Before there were videos and TV, they did this shit on stone tablets.
Honestly speaking, I think the charts look great. Then again, I'm 'that guy' on the other side of the trade again.
Yeah, the number of companies that have pivoted from growth at any price to "solvent" is staggering. Had a credit guy tell me marks are likely top ticking for end of year NAV's and like December 2007 there is no way free trading credit is properly calculating 2+ years of negative earnings & cash coverage. The next shoe to drop will likely come out of the mutual HY funds & event credit guys who have yet to really unwind the rate hike -> volatility selling trade.
Auslander on war: War is coming. It is a fact, an inescapable facthttp://thesaker.is/auslander-on-war-war-is-coming-it-is-a-fact-an-inesca...
So... shit is finally starting to smell like shit?
Who knew?
Its all fun & games until you run out of other peoples money.
Ya well.... WHO DIDN'T see this coming? If you are surprised by this "after the fact" news, then you obviously aren't reading enough of the hedge and might want to dedicate more time to being more informed and a little less opinionated.
Hey! I resemble that remark!
I just hope they can keep this bitch alive until I can sell out my Dow20k hat inventory.
Nice pic. The real One :)
Is that Mr Lundy from Mrs Doubtfire?
" If you Want Some Come get Some "
Carl
Carl knows damned well whats going to happen to his portfolio if this keeps up.......
KAAABOOOM.
And Gold just sits there " who me "
I just made friends with a pretty little maple leaf.
hypocrite
Wonder how he's doing with his big stake in FCX?
Getting his ass handed to him.
Just have to remain above ground for a lot longer
He says he cares about this country, but doesn't mind squeezing the people who work for him - the people who are his fellow countrymen. He's part of what's killing the middle class.
Watch out, he wants you to buy the dip. Believe me, this is just a bloodletting. It ain't the dip yet.
To fix this we need someone in The White House who can help break intractable legislative stalemates.
e.g Trump and me
Do you honestly believe the president has any say so in world events? The president is the front man, not the decision maker. The White House is a mirage in the banksters' dessert.
professional doomers, it was just beginning for the past 15 years.
Fuckin Cramer goes "Armageddon!" and everybody laughs, and then 2008. That's my only quibble. Sometimes they're right.
Well, that was merely justification for TARP.
And you might note, Armageddon has yet to arrive on that street.
Tell us about it Carl. Tell us about LINE, CHK, LNG, RIG, etc. etc. etc.
You saw this coming. Why are you among the largest holders of all these dogs???
Carl Icahn is a demonic psychopath. I feel sorry for the people that feel the need to listen to him. He is a rotting corpse emitting a foul smell, move on.
so you're saying everything he points out is wrong?
or you just want to make it personal disregarding the content and everything that everyone is saying for ages?
I'm saying if you have not insulated yourself and your family's well being from criminals like him, you are fucked. Whether he is right or wrong, he is duplicitous piece of shit, so who fucking cares what he says.
that's fair.
to me it seems a good compilation that may help inform others by forwarding. I had not seen such a clear and short version yet.
he is duplicitous piece of shit, so who fucking cares what he says.
YOU DO. You read the article and commented.
So stop your duplicity.
if you have not insulated yourself and your family's well being from criminals like him, you are fucked.
Do you have US Dollars?
Do you own a home or Real Property anywhere in the World?
You are NOT INSULATED. You delude yourself.
You are just as fucked as the rest. Oh I am in that same boat. Most people are.
The real problem is that there are many more of them than you and your family. You can only hold out on your bullets for a little while and if they have any inkling that you have anything then you will be overrun.
You may have hundereds of gunz and tens of thousands of rounds.
But personally I can only fire one, accurately, at any given time.
Unless you are in the middle of flyover without a sould for miles, or,if you are in a small collective offamilies, then you will probably succumb to what is happening after the collapse.
Yeah. You are also fucked. So sorry to SLAP reality your face.
Tom you've had 14 years since a fascist coup, 7 years to remove your liablility to the system since near collapse, you have been given this time to do just that. If Carl Icahn's warning (whatever it was because i really didn't listen to it) causes you concern, I have to ask what the hell have you been doing for all this time?
Like I have been saying.
Now ... If it closes now below 79.52 friday ...look...look.. out below even more....
If it closes the year below the 78.60, we should see 62 handle next year in HYG
In Oct. I bought long term 2017 PUTs. They almost doubled right now..
Chernobyled.
We Chernobyled some folks.
Yep, Icahn saw this coming. He buys 100 million shares of FCX (Freeport-McMoran) at over $20+ during 3rd quarter (SEC report) and it's now worth less than $7 (at the moment). How does he explain that to his investors? Losing 2/3 of your investment in 60 days takes real market knowledge.
He always talks book. He's loaded up with puts.
Maybe that's why they are called "junk".
Doesn't "High Yield" mean "High Risk"? That is the school of capitalism I was taught.
what is this 'risk' of which you speak? never heard of such a thing.
DAMMIT CARL!
WTF is this crap? Ten grand for this fucking ratty old rifle? You have to be kidding me. I guess I must be a mutli-millionaire for fucks sake. I will give $500 cash and that is it.
http://www.gunbroker.com/Auction/ViewItem.aspx?Item=530069181
In the box with all the pieces, might be worth it. I paid 4 for an no 4 t sniper with all the goodies in the box.
If it were full auto, maybe.
Pop on a Bumpski stock or a SureFire for a AK flat back reciever, you can have some fun.
what happened with the pop in HY around 12:30pm est?
everything bounces. Its only because short buyers and seller are trading. Otherwise it would just go to $20 in a day with no one shorting.
Someone is going to get the pinnacle from that Blackrock up their ass.............
If this is IT for Credit Cycle, meltdown could be worse than 2008.
1) HY ETF products advertise liquidity but it only exists as long as large proportions of investors do not need it. HY ETFs didn;t exist until 2007. Now they will get tested.
2) Because of regulatory changes designed to make US Banks “safer”, banks hold much, much less Corporate Bond inventory. There is no buyer of last resort!
3) Because companies have spent all the money borrowed on Share Buybacks instead of Capex, there is less to sell in the event of default. So reduced Recovery Rate means bargain basement prices fall.
4) In 2009, based on previous history, you might step up and buy a HY bond on the basis of US growth recovering to 4%. After 7 years of Fed efforts to jump-start the economy who still believes that?
The $TRAN chart on Stockcharts looks like it is poised to punch through the Aug low.
After that, it is a LONG ways down. Eyeballing the chart, looks like it might be the RHS of an Eiffel tower pattern - only the tower points up this time. In 2009, the Eiffel tower pattern was upside down :-).
the greatest anti-socially-responsible hijacking kike`flyer in zionist 'we-want-it-all', history...[!]
Smoke and a pancake.
smoke and a pancake?
Bong and a blintz?
Pipe and a crepe?
S&P getting uncomfortably close to 2000.
Anybody out there more learned than me think 2k will act as resistance and bounce off these levels or will I have to go shopping for a new set of glasses soon?
More volatility until after the fed meeting and options expiry -- would you want to be holding a position thru that??? Then santa claus rally.
Any fireworks will have to wait for next year.
Imagine if investors start selling what they can sell (IG) instead of what they want to sell (HY). And imagine if HYG gets locked up so the selling shifts to LQD...and then LQD gets locked up too.
That would be Funny. And Ironic.
Funronic.
indeed, an inverse-unpossible
+100
Yeah, that's what starts the blood-letting in earnest.
Nah, you guys must be complete newbies.
When ever there is fear, investment grade and treasuries are bid. Very much needed for collateral, which will be in short supply.
Sorry idiots. You'll need another dooms day scenario.
Irunny and sad-ire?
Math Strikes Back.....
Long long ago in a galaxy far away, basic economic principles were completely dismissed as irrelevant.
Evil forces proudly proclaimed that "deficits don't matter" and the land fell under the grey clouds of lies and more lies.
Math sat silently taking it all in and one day it perked it's head up and exclaimed, "Fuck You!"
Woe be it to those who thought math would remain silent forever.
Great comment!
A lot of modern political disinfo seems to rest upon refuting science- For instance the alledged suspension of physics on 9/11, the suspension of history (a la Francis Fukuyama), and now the suspension of mathematics re our western economies.
Maybe I will try a little experiment to see if I can suspend biology too. I shall not eat nor drink for six months- buoyed by the fact that such an approach might be considered 'modern' and 'positive'. When I prove all the Cassandras wrong, my Krugmanesque corpse will be laughing all the way back from the grave.
But- we must all remember that things are different now.
No sarc, just the wind in the trees.
Yep, I tell people we are living in a mini dark ages. Science is being actively discredited by politics and monied interests.
I won't be surprised if witch burning makes a comeback, starting in the muslim psychopath center of the world. Here's looking at you saudi arabia and your faggot princes of darkness.
10 today will get ya a doulble bottom at 5:
http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=hyt&insttype=Stock&freq=2&show=
Is this IT?!?
I love how Carl throws out there Larry Fink's name and Blackrock. Carl says, larry meet bus.
Talk about a meltdown? Get a load of this BS
Dumped directv last week, gone streaming...
FUCK ESPN and disney and the chozenites
Somehow, when the Netflix movie cornucopia costs you $7.99 a month, realizing you’re paying 40 bucks for tedious Major League Baseball games and sleep-inducing PGA golf tournaments seems like a lot-lot-lot of money.
http://www.thedailybeast.com/articles/2015/12/06/the-sports-bubble-is-ab...
The jooz have robbed again.
or with slingtv pay $25 & get it all...
shut up and buy more aapl!
Man, I'd hate to be on the other end of any deal negotiated with the shrewd Icahn. On the plus side, it'd mean I'm a player. On the minus side, It'd mean I'm about to have my ass handed to me.
The hapless, yield-starved institutional muppets holding 8% junque bonds on unprofitable frackers will need to take a serious markdown to market as average junque rates soar past 17% and oil plummets to the low 30s.
Meanwhile, eight years after bankstermania, Proposed FASB Accounting Standard on Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement is scheduled to be issued on leap day 2016.
It's all Bernie Madoffs fault
This guy is selling his own book. BEWARE.
The Collapse is coming but remember he is one of gamers and cronies in the system.
Watching MSM financial channels into the close. I was going to take a drink everytime they say "we're off the lows of the day" but I realized I don't want to pass out before dinner.
Carlos slim plEh ball khan Warn nuclear thieves pakistan urenco.
Just think, if the DOW loses 10,000 more points ZeroHedge can finally say "I TOLD YOU SO".
J.P. Morgan analysts wrote that the three best leading indicators for recession have been credit spreads, the shape of the yield curve and profit margins.
Here are some signs of a coming recession.
1. Investors in high-yield bonds are expecting to see their first negative return since the start of the credit crisis in 2008.
http://www.marketwatch.com/story/deteriorating-junk-bonds-flash-warning-signs-for-stocks-2015-12-07?dist=afterbell
2. Factory orders continue to drop
http://www.zerohedge.com/news/2015-10-02/us-factory-orders-flash-recession-warning-drop-yoy-10th-month-row
3. Default risk spikes
http://www.zerohedge.com/news/2015-10-02/us-financials-default-risk-spikes-2-year-high
4. M&A set record
http://michaelekelley.com/2015/05/29/mergers-and-acquisitions-set-record/
5. Iron ore prices tumble
http://www.marketwatch.com/story/iron-ore-prices-keep-crashing-adding-to-global-growth-fears-2015-11-30
6. Baltic dry shipping index tumbles
http://www.marketwatch.com/story/shipping-index-falls-to-all-time-low-stoking-fears-about-global-growth-2015-11-19
Here is how to prepare.
http://michaelekelley.com/2014/10/16/8-things-to-do-when-recession-happens/
Here is how to get your mind off this stuff.
http://michaelekelley.com/category/humor/
Good luck!