There’s a Bubble Brewing – Icahn

Billionaire investor Carl Icahn spoke with FOX Business Network’s Neil Cavuto and Trish Regan about the economy, saying “I believe that there really is a bubble brewing.” He went on to say that we are in “unchartered territory,” with historically low interest rates, and “a market that’s going up artificially,” which “could be very destructive to our markets and our economy.” When asked about what the Federal Reserve should do, Icahn said, “stop worrying what the markets will do,” and “start raising rates right now.” He went on to say that the “Fed is really pandering to a lot of these guys on Wall Street that they really shouldn’t be pandering to.” Regarding whether he’d take the role of Treasury Secretary, as Donald Trump suggested,” Icahn said, “I guess I would not. I sleep too late.”

On whether he’d take the role of Treasury Secretary if nominated

“As I said in my tweet, I guess I would not. I sleep too late in the morning.”

On Trump nominating him for Secretary of Treasury

“Donald and I have been friends for years, actually I haven’t spoken with him in the last 4-5 months so I was surprised when he put that out about my being the Secretary of Treasury, or that he even was throwing his hat into the ring. But what I have said in my tweet, and what I will repeat, is that he is right on one thing, that I believe, in financial markets I believe that there really is a bubble brewing. Just as in 07, I was very cautious and believed that the housing market would blow up. I will tell you that time too, everybody said that and nobody did anything about it. And interest rates now are at a low that in the history of the Federal Reserve, they’ve never been held down this long and I don’t think anyone will deny that this is unchartered territory – and it could be very destructive to our markets and to our economy…The Fed did a great job in 08, a great job and I really think saved the whole financial community. But many of the very same people that took advantage in 07, are taking advantage if the situation today…And I think Donald is right in speaking out.”

On how the markets will react when the Federal Reserve raises rates

“What I believe is it is very risky what they are doing because nobody knows what’s going to happen. This market is being built on earnings…and the earnings if you really dig into them are really built on these low interest rates. And indecently, the high yield market is the most dangerous…As a result, you see a market that’s going up artificially. Also, a lot of these guys are buying back stock. Now I’d like to see Apple (AAPL) buy back stock, but Apple can afford to buy stock back. But a lot of these companies are buying stock back, if you look at their balance sheet, they have no net worth. So you are building, I believe a bubble like, Volcker said it and Donald said it. And you know, some people don’t agree with a lot of what Donald on a lot of things, some do. The one thing you can say about Donald, which is great, is he says what he believes and he’s not afraid to say it. And you should really talk about what is happening in our economy and I think it could be extremely dangerous.”

On advice for Federal Reserve Chair Janet Yellen

“They aren’t calling for my advice, but I would say definitely start raising these rates. The Fed funds rate leads the market, and you definitely should start raising it…There’s more to looking at data in making investment decisions, and here you are making investment decisions for the whole country. There’s a lot more than looking at data. You know, it become instinctive. I really believe the great investors have great instincts and instincts tell you let’s stop going on this joy ride and let’s start raising rates right now. They should have done it three months ago and stop worrying what the market is going to think of it…stop worrying what the markets will do. The Fed’s role is to keep inflation down and to keep employment high – not to keep the market high…the Fed is really pandering to a lot of these guys on Wall Street that they really shouldn’t be pandering to.”

On how a rate hike will impact his market positions

“I tell you I am talking against my own books, so to speak. I have big hedges on, but certainly not enough against my long positions. But those are things I have to do. I have these big positions, I am on boards. But you know, I am a big boy and a lot of these investors should be big boys. You can’t watch. What is happening now is extremely dangerous and Donald has blanketed it out. I can’t say the way he said it is correct – he said it very bluntly, that we’re in a bubble and I agree with him.”

Video for viewing here.

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