It seems Carl Icahn will not be going activist on the S&P500 after all.
During the Reuters Investment Outlook Summit in New York on Monday, the 78 year old billionaire said that "I am still concerned that one day you'll see a break like you had a few weeks ago but it won't come back."
Of course, that would suggest no more central bank interventions, of the verbal Bullard-kind, or otherwise. In other words, either the Fed losing control or losing all credibility with the market, at which point a stock market downturn would be the least of anyone's worries.
And while most have dismissed the October near correction in the market, Icahn said he is more concerned and is predicting a downturn. "It's really a question of when that is going to happen, in my opinion. It could be three years, it could be three months, it could be three days. But I really do believe there will be a major correction in the next three to five years, at least."
Of course, with an interval of that length, the S&P may well be north of 3000, 4000 or even 5000 by then so the question becomes will the market then be like CYNK, when it climbed to record highs on no volume only to plummet on a sudden spike once the realization that the entire ascent was based on momentum and euphoria fades.
So what is Icahn doing to prepare? "We short S&Ps against a very large portfolio. We have the benefit of not having to worry that much about hedge fund partners," he said, speaking at the Reuters Global Investment Outlook Summit. He also added that he likes "being a minority. I am not saying go short the market, I'm talking in general terms."
He also commented on the quality of corporate earnings, a topic we have covered extensively here in the past: "I look at these earnings and I find them to be somewhat suspect," he said. The earnings that are being reported are based on the ability of companies to borrow at very low interest rates, he said, and everybody is saying "'Everything is great'." However, he said many company executives he speaks to look at the economy and think, "it ain't what it's cracked up to be."
This is not the first time Icahn has called for a major drop:
A year ago in an interview with Reuters, Icahn helped push the market lower with his comments and he took pains this year to be careful on adding a vague timeline, noting that there are many variables he can't handicap.
He acknowledged he could be completely incorrect and the market could climb another 1,000 points. But he also pointed to his decades-long history of reading markets and making investments and said he's been right more often than he's been wrong.
Will he be right this time? Check back in 3 to 5 years. Or three months. Or three days.
