Carl Icahn spoke with both Bloomberg TV and with CNBC yesterday at the Robin Hood Investor Conference. Readers can find our coverage from Bloomberg here. We have just recieved the full transcript of the Bloomberg talk, and we posted the clips from Bloomberg and CNBC. Everything can be found below.
Carl Icahn, speaking with CNBC’s “Fast Money,” the activist investor revealed his thoughts on high-yield bonds, and the stock market. Icahn, who heads Icahn Enterprises LP (NASDAQ:IEP), admitted he is worried about a major event—especially given the Federal Reserve’s policy.
Carl Icahn: ‘Quite concerned that something is going to happen’ with stock market
STEPHANIE RUHLE, BLOOMBERG TV: I am with the one and only Carl Icahn. Carl, let’s start with interest rates. In this low interest rate environment, how do you see this – what implications does it mean for the economy?
CARL ICAHN, CHAIRMAN, ICAHN ENTERPRISES: Well the Fed is really in my opinion holding the market up. We’re long and we keep a big hedge on. They’re like this. We make money. But it is concerning that the Fed turned this market around here because it sort of let it be known that the Fed funds rate isn’t going to be raised in March. So you have to be concerned. I am concerned about the high yield market. I think that’s in a major bubble.
But I wouldn’t say to short it tomorrow, even though we have a short position on it to some extent. But what we do is a very arcane kind of derivative where we do the CDS. We buy the CDS on it. I’m going to explain it on my Twitter account one of these days. I’m going to try to write something on it. It’s really interesting what we do on that. But it would take you more than a half an hour to get into what we do with these derivatives. It’s really – it’s really saying the credit spread is way too narrow. We did this in ’07. I did it in ’07 because I was worried. It was like this in ’07. And sometimes you hit big, and in ’07 and ’08 – see that’s what happens. In ’08 on a couple of hundred million investment, believe it or not, we made $1.4 billion because the spread widens, and when it widens you make a lot of money.
RUHLE: But does it worry you to be in the credit derivatives market in high yield at a time when there’s a liquidity crunch? Can’t everybody get – find the exit door?
CARL ICAHN: No. That’s why we’re on the other side of it. In other words, if they can’t find the door we come out pretty good. We’re out of the fire, so to speak. I really think it’s – it’s a bubble, but I’m not going to tell you to get nervous today. I – I think with the Fed doing what they’re doing, nobody can pick what the market’s going to do tomorrow, next week, maybe even next month or maybe even six months. There are too many variables for the human brain to do it. It’s wasted occupation. A lot of people write these erudite papers on it, but it’s very hard to – you can pick it on a long-term basis and be right. All you can find, a no-brainer. This is what I look for a risk/reward —
RUHLE: You look for a no-brainer?
CARL ICAHN: Risk/reward’s major in your favor. I think there’s a no-brainer long term, the high yield market is in a bubble. But when it’s going to burst – and it – and it costs you money – to do what I’m saying costs you money while you’re waiting. So it’s not for a lot of people.
RUHLE: So you mentioned 2007/2008. You have been in the markets for decades. When you look back in history, if you assume that history repeats itself in terms of finance, is there a period in history? Is it ’08, is it 1982, is it 1972 that you could say I’ve sen this market before and here’s when it happened?
CARL ICAHN: ’08 was the only time, Stephanie, where I was really worried that the whole thing could bust open. That was the only time in my whole history that I was nervous. And I think the Fed did a great job in saving it. Bernanke did a great job in saving it. Now though I worry the Fed has given the patient too much medicine and doesn’t know how to stop the medicine. And – and so every time they start saying we’re pulling back, you’re going to get less medicine, something happens to the patient.
And the day is going to come when they can’t keep doing it. They can’t – you keep the rate at zero, but you can’t – you can’t do that forever because you’re going to start having consequences that you can’t even think about.
RUHLE: Like what?
CARL ICAHN: I could – I could tell you 10 of them, and I’m sure the Fed has thought of this. For instance, sooner or later you’re just going to have rampant inflation and you can’t – and you can’t deal with it, or it’s just going to stop working. The medicine stops working. You can’t – you can’t give the patient more medicine. You’re at zero rate. The Fed funds rate is zero. So it really could happen that you just – it doesn’t work. The economy is looking okay now. It’s looking all right, but you got to think about it. I’m not sure that even though you have unemployment at – coming down a little bit, look at the pay scale to the individual. Look at the wealth difference. You have a lot of problems even today.
Being that said, I’m not saying that this market should be shorted. I’m not saying – we have a big hedge on, but we’re long. That’s what we do.
RUHLE: What if you had outside money? What if you had to offer monthly, weekly, daily liquidity? Could you survive in a market like this or do you think we’re going to see guys go down and we’ll see real consolidation?
CARL ICAHN: I’ll tell you, if you have to offer that I don’t believe you can be an activist. I think it’s very different being an activist. Being an activist, you have to have staying power and patience. And we – look, we’re very proud of our record. If you – if you bought our stock in 2000, you’re up annualized 22 percent a year. We really did great. And for the last five years it even did better. But we have our ups and downs during these periods. When we do what we do, there’s going to be depths. And – but to be an activist, you need tremendous staying power.
So that’s one of the reasons I stopped the fund because after – after the ’08 fray (ph), we were getting three-year money. Nobody wanted to give you three years. And we did all right for people in the fund, but it just didn’t work for us. And then we had so much capital over (ph) ourselves anyway. We have a —
RUHLE: You’ve got so much capital. Would you ever consider taking outside money at this point?
CARL ICAHN: No. Not – not – not in a fund. We might in certain instances. We’ve talked about it where we want a lot of money to go after a big company. Then we would maybe. People have approached about this where we put in $3 billion or $4 billion and then we get another guy to put in $4 billion or something to that effect or two guys for $4 billion a piece and we put in $5 billion in a big one. But it’s really not there at this time. We – the market’s gone too high for that right now for us.
RUHLE: You mentioned the Fed back in 2008. I know you had dinner with Ben Bernanke last week. Do you feel like he saved the world?
CARL ICAHN: Bernanke did a great job. I think now – he’s out of there and —
RUHLE: Is Janet Yellen doing a great job?
CARL ICAHN: I think – I think – this is not my expertise, so I’m just saying it as somebody who has a good feel for it I think. That right now – and I think they might even agree. And I said it before that there’s going to be unintended consequences of what’s happening. And – and if that happens, you have a real problem.
RUHLE: All right. I’m going to play word association with you. I’m going to give you a name and you’re going to tell me – Tim Cook?
CARL ICAHN: I think he’s a great CEO. One of the best I’ve ever met, and I’ve met a lot of them. I think —
RUHLE: Why is he a great CEO? Because he listens to you?
CARL ICAHN: Tim Cook – I don’t think Tim listens to anybody. He listens to himself. Look, I had dinner with him. I met him once or twice. I’ve watched him. And he is what Silicon Valley should have, not Marc Andreessen and Michael Dell. They’re on one end of the continuum. They are really banal guys. They are pernicious to the system. Cook is on the other side of that. You take Marc Andreessen. We —
RUHLE: Are you saying nanny nanny poo poo to Marc Andreessen right now? I got you?
CARL ICAHN: No, no. I’m not saying that because I think Donahoe should have done it three years ago. Hey, he went in, he – how does a guy get away with it? He said – as he leaves, I think he told The New York Post, I’m very pleased with what I’ve accomplished at Ebay, and sure he’s pleased. You’d be pleased too if you could steal $5 billion. He stole – he took away $5 billion from the shareholder and he got away with it. You might be pleased too, right, if you could get $5 billion and get away with it, right?
RUHLE: All right. So Andreessen’s out. You got your wish. You got the board seats. Now what do you think of Ebay?
CARL ICAHN: Now what do I think of who?
CARL ICAHN: See, Ebay is very interesting because I actually – I know it sounds strange. I sort of like Donahoe. I think Donahoe really wants to do a good job. He wants to enhance value, but he’s made a lot of errors. And I think he might even admit it. Look, he made an error keeping Andreessen, but that’s not a major error. An error that was just made now which I think is more telling than most people do is he’s out of the Apple ecosystem and Apple Pay. And if you look at Apple, Apple’s a behemoth. Apple is going to make Apple Pay work. You know what I’m talking about.
RUHLE: Apple Pay is going to make Apple work?
CARL ICAHN: You know Apple Pay?
RUHLE: Yes, of course.
CARL ICAHN: You’ll go in with the thing (ph). Apple – no. Apple Pay has a very good future to it, but – but you – if you really understand it, so they use Visa, they use MasterCard and a few others. They don’t use PayPal. I think – I think Donahoe was crazy to go and take bad ads about them. I think right now they should be involved with Apple Pay. That’s one error that I think he made, but he’s made other ones. So I’m very nervous that you’re going into a very, very tough situation with eBay.
It’s – it’s like Motorola. It’s analogous to Motorola. And few will deny that we were very instrumental in saving Motorola from going bankrupt. What we did was we got on the board and we got them to split it or help to get them to split it. We were influential. And I think if you ask some of the board members, they’ll say that. And then we went in and got – and – and – and then once they split it, we brought in the right guy. We got – we got – we got Greg Brown, who was the then CEO. It was difficult. I had to five martinis with him to convince him to become co-CEO for eight months because that’s the only way he could Sanjay Ri (ph) in.
We went through – I had I’d say 40 dinners in my apartment with the Motorola people. Greg Brown didn’t get along with Sanjay Ri. Two cats in a bag. We had to have them —
RUHLE: Two cats in a bag.
CARL ICAHN: Yeah. And we had them in my apartment to get them along until we split it. And then we were really instrumental in getting that thing sold to Google, which was a master – a great deal. I’m not saying it was bad for Google, but it was great for Motorola because I don’t think Motorola could have made it because nobody could compete with the Android Samsung and with Apple. And that’s what has come out of it.
I think Ebay is in that situation. They got a jewel in PayPal. It’s a jewel. It controls the online merchants. Not controls them. They get along and they have a great thing going with the two of them. But that can’t last forever, and now somebody would love to buy them I would believe. And this is is what they should be exploring. Okay, they waited too long to do the spinoff. Great thing to do and they should keep moving on that, but they should also explore a sale – a sale.
And a lot of people will be naysayers. They’re always saying you’re wrong, you’re wrong. And – but over the years, look at our record and look what we’ve brought to the shareholders. That’s what I’ll say.
RUHLE: Is this Silicon Valley euphoria, the money coming from the sky pouring into the Valley, making you feel – if you think high yield is a bubble, how about that whole tech world?
CARL ICAHN: You know something? It’s almost – it’s almost despicable what goes on. That – that you have in Silicon Valley these guys are like the old alchemists. They take this crap and they say they’re making gold out of it. There are great companies that have been made, but these guys then, they’re like the emperor’s new clothes. They try to get this reputation. I’m talking about guys like Dell and Andreessen because I know them a little bit for this little, shall I say, altercation. They have – like I said on TV before, they screwed more people than Casanova. That’s what they do, okay? And – and I’m not going to go back on saying what I believe.
RUHLE: Then when you hear this disruptive innovators, does it just make you stick to your stomach?
CARL ICAHN: You know what? These guys – hey, you know what? I’m going to do a study – I’m going to do a study, Stephanie. It’ll be interesting. I thought of it today. I’m going to do a study of all the money I’ve made for shareholders, of the companies I went into from the day I went in and how much capital they made to the day I went out, okay? And we made billions.
But you know what might be interesting? If you take Dell and Andreessen together and find out how much they – they cost