Carl Icahn’s Gloomy Warning, ‘Danger Ahead’, Donald Trump Endorsement [Video]
Carl Icahn, the 79-year-old billionaire and 22nd richest person in the United States, according to Forbes, announced the release of a gloomy new video, Danger Ahead, addressing what he sees as an “asset bubble” that has been building with the implementation of the U.S. Federal Reserve’s quantitative easing program and coming problems for the stock market and economy if steps aren’t taken to address it.
Donald Trump announced his presidential campaign on June 16 and over the following days stated that he would want to appoint Carl Icahn as secretary of the U.S. Treasury. At the time, few took the Trump candidacy seriously and comedians, such as Jon Stewart, had a field day.
“I am flattered but do not get up early enough in the morning to accept this opportunity,” Carl Icahn said in a statement reported by CNBC.
By early August, Trump has surprised almost all observers by leading Republican presidential polls and Icahn quickly changed his tune, as reported by USA Today.
1/3 After last night’s debate I decided to accept @realDonaldTrump offer for Secretary of Treasury.
— Carl Icahn (@Carl_C_Icahn) August 7, 2015
2/3 Seriously, the methods of electing our corporate and political leaders have become completely dysfunctional.
— Carl Icahn (@Carl_C_Icahn) August 7, 2015
3/3 In both areas, we are in dire need of a breath of fresh air.
— Carl Icahn (@Carl_C_Icahn) August 7, 2015
Even before June, when Icahn declined Trump’s offer, he had been warning that interest rates had been held “artificially” low for far too long by the U.S. Federal Reserve through its quantitative easing program. The term “quantitative easing” was first used by the Bank of Japan, but its use became widespread by the United States, Great Britain and the European Union to describe policies put in place after the 2008 subprime mortgage collapse, as reported by Bloomberg.
Previously, intervention in open markets by central banks was typically limited to affecting overnight lending rates. With quantitative easing, central banks moved out along the yield curve with massive bond and paper purchases, among other measures, seen as infusing liquidity and propping-up economies that may have otherwise become stagnant. Carl Icahn believes that this has gone for too long and that it has created an “addiction.”
At certain times along the way, such as the fall of 2014, interest rates in high-quality short-term paper turned negative, as reported by Bloomberg. This represents a seemingly absurd situation where investors actually paid borrowers for the privilege of being able to park money. The idea behind negative rates is that central banks wanted to discourage investors from investing in the safest products available and encourage them to move out along the yield curve or into other asset classes, such as equities.
Icahn feels that quantitative easing has run amok, feeding this so-called addiction and that once central banks begin raising interest rates again there will be an “equity value adjustment,” which is a polite way of saying that stock markets will fall.
Icahn’s new video, set to be released at midnight tonight on his website, is purported to deal with these issues and propose how, if Donald Trump were elected and he were appointed Treasury secretary, he would attempt to manage them.
Carl Icahn is known as being an activist investor. While he has been successful at buying and selling investments based on their own merits, he is also well known for taking large positions in the stock of companies and then rallying other investors and lobbying management teams to make changes. Icahn’s lobbying won him a seat on the board of The Manitowoc Company (NYSE: MTW) and he has been attempting to win a seat on the board of Gannett Co., Inc. (NYSE: GCI), as reported by Forbes.
Icahn is also reported to have made successful investments in companies like Apple Inc. (NASDAQ: AAPL) and Netflix, Inc. (NASDAQ: NFLX).
In the trailer for the Danger Ahead video Carl Icahn states that as a person who grew up in Queens, New York, he has a love for “this country” and feels strongly about the “dysfunction” transpiring in U.S. politics and the “board rooms” of the United States.
[Photo by Michael Nagle / Getty Images — Screenshots Courtesy Carl Icahn Website]
