Billionaire investor Carl Icahn is backing up his warning of “a day of reckoning” by shorting lots of stock.
Icahn warned on CNBC that “a day of reckoning” was coming for American stock markets unless the federal government stimulates the economy with more spending. “In a recent filing with the SEC, Icahn Enterprises showed that the investor isn’t fooling around, announcing that it had a net short position of 149%,” Fortune
“That means that the value of Icahn’ s short positions — or financial assets that his funds have borrowed rather than bought — is worth 149% more than the value of his long positions. Icahn hopes to make money on these assets declining in value, at which point he would cash out by buying shares in companies at a cheaper price than what he borrowed them for, pocketing the difference in price.”
“To put this short position in context, finance blog Zero Hedge compared Icahn Enterprises’ portfolio to what it had considered to be the most bearish hedge fund, Horseman Global, which has profitably run a short book for four years. Horseman’s net short position is just 98%, far less than Icahn’s 149%.”
No matter who is elected to the White House in November, the next president will probably face a recession, financial experts warned Bloomberg.
The 83-month-old expansion is already the fourth-longest in more than 150 years and starting to show some signs of aging as corporate profits peak and wage pressures build. It also remains vulnerable to a shock because growth has been so feeble, averaging just about 2 percent since the last downturn ended in June 2009.
"If the next president is not going to have a recession, it will be a U.S. record," said Gad Levanon, chief economist for North America at the Conference Board in New York. "The longest expansion we ever had was 10 years," beginning in 1991.
The history of cyclical fluctuations suggests that the "odds are significantly better than 50-50 that we will have a recession within the next three years," according to former Treasury Secretary Lawrence Summers.
Michael Feroli, chief U.S. economist for JPMorgan Chase & Co. in New York, puts the probability of a downturn during that time frame at about two in three.
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