With A Historic -150% Net Short Position, Carl Icahn Is Betting On An Imminent Market Collapse

Tyler Durden's picture

Over the past year, based on his increasingly more dour media appearances, billionaire Carl Icahn had been getting progressively more bearish. At first, he was mostly pessimistic about junk bonds, saying last May that "what's even more dangerous than the actual stock market is the high yield market." As the year progressed his pessimism become more acute and in December he said that the "meltdown in high yield is just beginning." It culminated in February when he said on CNBC that a "day of reckoning is coming."

Some skeptics thought that Icahn was simply trying to scare investors into selling so he could load up on risk assets at cheaper prices, however that line of thought was quickly squashed two weeks ago when Icahn announced to the shock of ever Apple fanboy that several years after his "no brainer" investment in AAPL, Icahn had officially liquidated his entire stake.

As it turns out, Icahn's AAPL liquidation was just the appetizer of how truly bearish the legendary investor has become.

* * *

As readers will recall, when it comes to what we believe is one of the world's most bearish hedge funds, we traditionally highlight the net exposure of Horseman Global, which not only has been profitable for the past four years, it has done so while running a net short book. To the point, as of March 31, Horseman was net short by a record 98%.

 

As it turns out this was nothing compare to Icahn's latest net exposure.

In the just disclosed 10-Q of Icahn's investment vehicle, Icahn Enterprises LP in which the 80 year old holds a 90% stake, we find that as of March 31, Carl Icahn - who subsequently divested his entire long AAPL exposure - has been truly putting money, on the short side, where his mouth was in the past quarter. So much so that what on December 31, 2015 was a modest 25% net short, has since exploded into a gargantuan, and unprecedented for Icahn, 149% net short position.


This is the result of a relatively flat long gross exposure of 164% resulting from a 156% equity and 8% credit long (a combined long exposure which is certainly far lower following the AAPL liquidation), and a soaring short book which has exploded from 150% as of March 31, 2015 to a whopping 313% one year later, on the back of 277% in gross short equity exposure and 36% short credit.

 

Putting this number in context, in the history of IEP, not only has Icahn never been anywhere near this short, but just one year ago when he first started complaining about stocks, he was still 4% net long. Thos days are gone, and starting in Q3 and Q4, Icahn proceeded to wage into net short territory, with roughly -25% exposure, a number that has increased a record six-fold in just the last quarter!

What is just as notable is the dramatic leverage involved on both sides of the flatline, but nothing compares to the near 3x equity leverage on the short side (this is not CDS). As a reminder, Icahn Enterprises used to be run as a hedge fund with outside investors, but Icahn returned outside money in 2011, leaving IEP and Icahn as the two dominant investors.  According to Barron's, the entire fund appears to be about $5.8 billion, with $4 billion coming from Icahn personally. Which means that this is a very substantial bet in dollar terms.

When asked about this unprecedented bearish position, Icahn Enterprises CEO Keith Cozza said during the May 5 earnings call that "Carl has been very vocal in recent weeks in the media about his negative views." He certainly has been, although many though he was merely exagerating. He was not.

"We’re much more concerned about the market going down 20% than we are it going up 20%. And so the significant weighting to the short side reflects that," Cozza added. 

Icahn was not personally present at the conference call, however now that his bet on what is arguably a massive market crash has become public, we are confident he will be on both CNBC and Bloomberg TV in the coming days if not hours, to provide damage control and to avoid a panic as mom and pop investors scramble, and wonder just what does one of the world's most astute investors see that they don't. 

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The Merovingian's picture

Shit, if only Gartman would put out something confirming or denying his concurrence here, millions could be made I tell you!

___________'s picture
___________ (not verified) The Merovingian May 9, 2016 8:13 PM

ackmann and gartman would probably sell all their gold right now and purchase a tulip

Truther's picture

Ackmann and Gartman, nothing but shit shows.

SILVERGEDDON's picture

You mean, Beavis and Butthead. Heh heh heh heh heh.

38BWD22's picture

 

 

Icahn looks very smart now, after having sold his AAPL.  A Junior Wanker Investor like me would never bet against Icahn.

Defend yourselves, diversify.

Divided States of America's picture

I would love if the markets crapped out here but i dont like the fact that a senile jbag may capitalize big on it.

tarsubil's picture

We'll see how big of a player this jbag really is. If he gets squeezed, that is going to leave a mark. He's also been selling the short position. Not sure if that is well appreciated by the powers that be.

Escrava Isaura's picture

 

 

Carl Icahn, and most of his type don’t seem to get it: Market nonsense is almost over. Then, the State will take charge.

 

zeropain's picture

spoken like a true bagholder,  ha ha you must be caught in the bull trap, your fucked.  were going to 666

zeropain's picture

put down the crack pipe and get some downside protection or be a bagholder crackhead, your choice.

DeadFred's picture

Carl's going after a 20% drop, but what's he going to do on day 2?

Fish Gone Bad's picture

The Fed will find his shorts and puuuuuuump them up until they squeeze him like a zit.

gildedtime's picture

Not if Carl's partner The Donald fires her ass!

JamesBond's picture

Market collapses are always followed by violence, internal and external to the country.

Kissy Ass's picture

Can't these filthy jews do something positive for this country before they die?

Building an arts center just to see your filthy name on it is NOT 'something positive'!

AGuy's picture

"Not if Carl's partner The Donald fires her ass!"

The Article right below this one on ZH, states that the Donald plans on Printing money to pay off debt. Perhaps he will fire Yellen and replace with even worse dove.

As I feared, Trump is really a Democrat wrapped in Republican clothing. He's enlisted an Ex-Goldmanite and strong Democrat supported as his chief, and has befriended Chris Christie. Not sure why anyone still sees him as a libertarian.

 

 

Kissy Ass's picture

Libertarian?

Trojan horse full of Filthy's.

my_nym's picture

Supposedly it's racist to notice the natural tribalism ingrained in rabbinic social constructs from birth.

Side note... they're clean, clean!  It's the wretched refuse that's filthy.  Haven't you seen the menstrual blood pictures that some want to sell in order to disperse the Syrian nation amoung the filth/goyim? 

It's all part of keeping themsevles clean, clean and a light unto the goyium... as opposed to the filthy and unclean.  You can't see that we nationalists are the filthy/phobic/nativist/racist ones?  ;-)

zeropain's picture

What about goldmans net shorts. Whats fed going to do with those. What about the jpm quant shorts. What the fed going to do with those. Let spx fall to 1800 to test. Much to the unlike of leveraged longs desparate for yeild to make it seam like its all peaches and cream. Well con man the jig is up. Cut bait and run or go for broke pig man. The investors are waiting for all you pigs to fuck up and cause a crash so the real investors can take over at bargains. That is what trump would do. Sell high, leverage at lows.

The Real Tony's picture

Bear markets rarely ever make a V shaped recovery. This bear market will be a crash followed by a 1966 to 1982 era at best.

johngaltfla's picture

I'll go with 1956. I think we get a massive hit then a "political convention" rally, then when everyone looks at the election choices in September another "America is toast no matter who wins" decline.

MFL8240's picture

No stay long the 30,000 is doable for you and only you!

Librarian's picture

"Carl Icahn, and most of his type don’t seem to get it: Market nonsense is almost over. Then, the State will OFFICIALLY take charge".

FTFY.

It's never enough simply to find out who is the Man Behind the Curtain.  You also have to figure out who has been issuing his orders.  Icahn better pray that his contributions have reached the correct recipients.

Flatchestynerdette's picture

Poor Carl. He endorsed Trump and he's 20% short. I hope he's hedged b/c he's got a huge target on his back for the major short squeeze the fed is going to prove as it romps toward 20k on the Dow. Ride the Train.

Flatchestynerdette's picture

Poor Carl. He endorsed Trump and he's 20% short. I hope he's hedged b/c he's got a huge target on his back for the major short squeeze the fed is going to prove as it romps toward 20k on the Dow. Ride the Train.

Kirk2NCC1701's picture

Icahn getting squeezed, would also discredit Trump, who keeps referring to him.

This Ogre "has layers".

bolo man's picture

Diversification? This is a system failure and no diversification can cure it!

jerry_theking_lawler's picture

Diversifying only takes away the unsystematic risk....that is not what we have here so you could buy 1000000000 different stocks and bonds and when this baby crashes your wealth is gone.

38BWD22's picture

 

 

I have long written that diversification includes gold and CA$H.  Also, guns & ammo for those so inclined.

Kissy Ass's picture

Ohoh and don't forget the bitcoins Bearing! And put something black in there too like oil. Now you have true diversity.

Kirk2NCC1701's picture

You could always buy the world's biggest diamond, whose 1000 karats are for sale soon on London, for an estimated 80-100 million bucks.

Point is, if you don't trust one type of Tertiary (paper) asset, you get other ones, or you rebalance into Primary assets. If, in the offchance, you have to look up "Primary assets", you are a clueless investor and a 'poser' on this site.

New World Chaos's picture

To be short anything without a pair trade is to be effectively long the dollar.  Very risky at this time.  Unless the Fed gives him an unlimited 0% margin "loan" to short gold </sarc>.

Government needs you to pay taxes's picture

The Fed is going to do 2 things fairly consistently: (a) weaken the USD; and (b) inflate equity prices/valuations.

Reality Creator's picture

Icahn is public about his premonitions becuse he wants the fame that goes along with the fortune of being right, about telling the market future. He's 80, he's got a legacy to wrap up, and his biggest bet is going to be this call of a 20% drop. I wonder if he's guided by premonitions of how the presidential electin will effect the domestic and foreign political economy for the worse.

i_call_you_my_base's picture

Seems like if it was about the election he wouldn't have moved this early, but who knows.

JackT's picture

He should have doubled down on that legacy. 20% is still wrong

Fish Gone Bad's picture

If one is going to be wrong, be loud about it.

matermaker's picture

agreed, indeed.    and Trump has already trumpeted that he is in his camp.

Paul Kersey's picture

This could be Icahn's legacy:

"Hedge fund billionaire Carl Icahn tweeted on Friday that he has accepted Donald Trump's offer to be Treasury secretary. "

Ichan's August tweet:

1/3 After last night’s debate I decided to accept offer for Secretary of Treasury.

Kirk2NCC1701's picture

Stockman gets his Reagan-era job back, as Trump's Budget Office Director?

Dibs on that call, bitchez.

TradingIsLifeBrah's picture
TradingIsLifeBrah (not verified) ___________ May 9, 2016 8:33 PM

A wise investor would sell all their gold right now and buy some real estate in San Fran or NYC.  Real Estate never goes down in those markets #Wisdom

___________'s picture
___________ (not verified) TradingIsLifeBrah May 9, 2016 8:45 PM

agree. real estate can be a good investment in times of crisis.

___________'s picture
___________ (not verified) mary mary May 10, 2016 3:44 AM

you have to buy the right thing to the right time at the right place.

even in 2007. especially 2007-2009 was a chance to profit. buy for discount

 

look at california now.

Mr. Bones's picture

When there's blood in the streets...

-some guy who did stuff

ZenMoment's picture

Why would a wise investor sell all their gold right before its price/value is about to skyrocket? And, buy property right before it's price/value is about to plunge? You wait; now is not the time...

bob_bichen's picture
bob_bichen (not verified) ZenMoment May 9, 2016 11:15 PM

turn your crayon around and use the other end.