Carl Icahn: It’s Too Hard To Predict Short Term Market Moves

0
Carl Icahn: It’s Too Hard To Predict Short Term Market Moves

Following is the unofficial transcript from a CNBC exclusive interview with Icahn Enterprises Chairman Carl Icahn on CNBC’s “Fast Money Halftime Report” (M-F, 12PM-1PM ET) today, Monday, October 18th in honor of the 10th anniversary of the program. Following is a link to video on CNBC.com:

Get Our Icahn eBook!

Get our entire 10-part series on Carl Icahn and other famous investors in PDF for free! Save it to your desktop, read it on your tablet or print it! Sign up below. NO SPAM EVER

Q3 2021 hedge fund letters, conferences and more

The Man Behind TCI: One Of The World’s Top-Performing Hedge Funds

TCI David Marcus Investment ResearchThe Children's Investment Fund Management LLP is a London-based hedge fund firm better known by its acronym TCI. Founded by Sir Chris Hohn in 2003, the fund has a global mandate and supports the Children's Investment Fund Foundation (CIFF). Q3 2021 hedge fund letters, conferences and more The CIFF was established in 2002 by Hohn Read More

Carl Icahn: It’s Too Hard To Predict Short Term Market Moves

SCOTT WAPNER: Let’s welcome in our first headliner of the week, Carl Icahn. He is the Chairman of Icahn Enterprises. Carl, it's good to have you here. I think you were with us on one of our very first shows. It is good to have you back to help mark our 10th year. Welcome.

CARL ICAHN: Thanks for having me and I, I think I was in a number of your shows over those 10 years and I'm glad you've been so successful.

WAPNER: No I appreciate it very much and it is good to have you. I do want you're still in the news, as always, and I do want to talk about your latest activist play in just a moment. I want to start though where I left off with my investment committee and that is talking about the market because when you were with us last on television, which was a year ago in October of 2020, you were pretty bearish and I spoke to you again on the phone in January of this year and you told me that you were quote, “pretty well hedged.” Now I'm wondering how the market looks to you today whether you're still as hedged or if you've covered some of the short positions that you've had in the overall market.

ICAHN: Well, you know, what I would say to you is that predicting the short term, the short term market is almost, I made it almost the cardinal rule to not try to predict short or medium term and it served me well, at least served me well in 2021. I made the mistake of straying from that rule in 2020, paid the price for it, and therefore I'm not in any way, I’ve come to the conclusion, it’s almost like in the song Some Enchanted Evening and in it, he’s saying, “Who can explain it, who can tell you why. Fools give you reasons, wise men never try.” And I’ve learned that a few times in my life and learning it again, talking about the market on a short term or even medium-term basis, you cannot do. And activism is the best paradigm there is in the market. I've learned to believe that maybe some quant funds can figure out a way to predict the market but the best way to invest, by far, is, is activism and there’s tremendous barriers of interest to the activism today. I think in a way we’re almost the last activists because it's very hard to break into that business because number one, most of these hedge funds that want to be in it don't have permanent capital and without permanent capital, sometimes you have to go into this activism and you have to wait 2, 3, 4 years as we've done in many cases and, you know, if you have money in a hedge fund or an investor in a hedge fund, they’re not going to sit for that so. The other reason we can do it, over the years Scott, is that we have a brand name, a true brand name sort of like Coca Cola. So, when we cover one, the targets or even the advisors who target, know we're never gonna go away if we, if we don't get at least board seats the ability not to micromanage but to give macro advice and that served—

WAPNER: You have the luxury obviously of doing that for the reasons that you said and I and I always listen to you very carefully. I hear somebody who's choosing their words carefully here about what you want to say about the market. But you've been pretty clear with us in the past that you thought the market was vulnerable, you thought it was overvalued, you said you were pretty hedged. Does the market look better to you today or not?

ICAHN: You know something, and I'm not being facetious here, I can't answer that question. I will tell you this. I will tell you this that as far as I'm concerned, the market, one day, and I believe one day in the long run and I don't know how long it is and I think you have to be a fool to try to tell you how long it is in this kind of a market, in the long run, we're certainly going to hit the wall and people may say to me, well, anybody can say that. No, but I really think there will be a crisis the way we're going, the way we're printing money, the way we’re going into inflation, I think if you look around you, you see this inflation all around you and I don't know how you deal with that in the long term. But if you’re asking me even what's going to happen in the next year or next two years or three years, I think it is foolish to try to answer that question. I honestly think that, you know, there's money is working to some extent. They keep printing our money, the money goes out. I up to just recently haven't seen inflation. Now that you see inflation, then you have to worry. The IEP, there’s activism and activism works extremely well. In a market like this, it works very well. In other markets, it sometimes doesn't work as well. But I mean look, the proof of the pudding and I did some numbers, actually talked to you on this program, and if you invested, if you invested in IEP in the year 2000 when we started to do this activism and for real, the total return is sort of what's almost an incredible 1,945% on your money so if you, if you put in money in 2000, just left it in there and reinvested your dividends, you made 1,945% on your money. Now the S&P during that period if you did the same thing, you made only 358%. In the Dow, you made 409%. In the Russell, 499%. Even in Berkshire Hathaway, you only made 655%. We made you 1,945%. How do you even stumbling along that's given us the ability to give dividends since 2005 and the dividend has crept up. We’ve never missed a dividend. We've never decreased the dividend, and that's all because activism and this dividend we give today is up to $8 a share or $8 a unit and $8 a unit brings you to about a 14% return. We're able to do it through the activists, of not predicting the market—

WAPNER: Sure.

ICAHN: If they ask you to predict the market, you know, I believe in that song I just told you—

WAPNER: Well I look at your portfolio at least what I believe to be in your portfolio, Carl, and it feels like what's happening and you mentioned inflation, what's happening in the energy patch, whether it's natural gas or oil or any number of other things, it feels like this is your moment. Do you feel like it is I mean, I have that 18% of your portfolio or thereabouts is in energy Occidental, Cheniere, CVR, Delek, SandRidge, some other names as well, is this your moment because of what we've been witnessing with with—

ICAHN: I think it’s a moment because of the activism is going to become more and more prevalent that because we have companies with many exceptions are badly run. And that's the proof of the pudding, we go in and we don’t try to micromanage them and they are very good CEOs, by the way, companies that we go into have very good CEOs at times. It’s almost an exception when they’re really terrible. So, we don't have to change CEOs. We did it in LNG that’s in Cheniere, worked out great for us by changing the CEO. And actually, but okay, the company that we're now has a terrible CEO, the we're talking about now which is Southwest Energy, but we’ve been able to go in to every one of these companies and work with the board and the results have been sort of phenomenal. I mean, if you look at some of the companies, even in OXY where we went in and we said we don't agree with the CEO’s M&A but even there, we were responsible for getting them. I don't think anybody there will deny it, we fought and fought it came out at 1. I think they’re 15 today or 14 I haven't looked at them recently, we own a lot of them so what I’m just saying is, for instance at CVR, we’re involved with the company who's got a very good CEO trying to get more and more into renewable energy because I really feel there I could talk to you about that. If you really study that, you know, we’ve studied it at OXY, we studied it here, you can’t keep this country, you can't keep this world going the way it's going. You really can't, you know, I’ve talked to some of the brightest guys around and it’s foolish to say, and you know that was one of my disagreements with Trump in a way, you can't keep it with the carbon that you're emitting and right now you have too much carbon there already. So you need to do renewable fuels and the government instead of doing some of the, some of the plans they’re doing, must in one way or another subsidize renewable fuels. And then, so we’re uniquely involved in that at CVI where, you know, we’re in the middle of the country, CVI is in the middle of the country, we put in about, you know CVI is doing alright today but we put in close to $200 million already in it because the refinery you need the refinery really we think because it creates hydrogen to work in making renewable fuels so it sort of works together.

WAPNER: My, my point. My point Carl is though—

ICAHN: I don't want to dwell on it but I’m just giving you an example, right.

WAPNER: A lot of these stocks have had huge gains of late. Energy is the best performing sector of the year and that's why I say, I'm wondering whether this is your moment or not and you see these stocks continue to go up. Are you taking any profits in these names? Do you still own all of the names that I mentioned, the Cheniere, the CVR, OXY, SandRidge, Delek?

ICAHN: I do own, I do own LNG, haven't really sold very much of it. I think it's a great company. I think there's a great need for LNG and now that's coming to fruition. Cheniere is already actually made all the trades that they need to produce it and they are going to do contracts for others trades. So, I do have LNG. I haven't really sold, I actually sold a few of the warrants but not the stock. I do have a hedge against that OXY though in the XLE, XLP, that kind of thing. So I do have this hedge somewhat. The money we really make, it's just going into these different areas. For instance, for the first six months because we’re not really too hedged, we’re hedged but not too hedged, if you look across stocks as I told you or maybe didn't, we, we were up over a billion dollars that asset value was up over a billion in the first six months and we're actually, I'm happy to say, we're coming out with earnings at the end of the month, but I can say that we're sort of going at the same pace for the third quarter. So, we're very happy with the results.

WAPNER: I’m sure.

ICAHN: But you can’t pinpoint it on one thing. You know we have a team, Brett has a limited team of really very, very talented analysts that are working with him that have experienced that, we're all into the same this thing that my son, Brett Icahn, did before and we're in companies like, like Dallas and I think you wait for these things to produce and we're in the Southwest Energy and gas—

WAPNER: Let me talk about Southwest if I could because that's the news of the moment and you mentioned that you're not happy with the CEO. The bottom line is that you don't like the deal that they want to do. You think it's too high of a price, you've announced a proxy fight, a plan to nominate a slate, right, and the company says they'll see when you, when you do it, they'll see it and then, then they'll respond. When are you going to nominate the slate and what do you think your chances are?

ICAHN: Alright so it’s a great question actually. In Southwest in particular, it's the perfect example, the quintessential example of what I, remember what I talked to you and I'm gonna do it real quick because I know you want to keep moving, you know, in many of our companies, you have an anti-Darwinian principle. We, this guy gets into the company, he works his way up, he's not too bright. He knows how to not be a threat to the guy above him. This is the perfect example of John Hester who is the CEO of this company but there's a certain arrogance in this company because any utility you feel that you have the protection of the regulatory agency and that's sort of anti-intuitive and I think we can approve it because the regulatory agencies want to protect their ratepayers. Here's this guy Hester who's out there joining golf clubs. I mean he has the arrogance to join golf clubs to expense that against the rate base meaning that he wants to, you know, give him an allowance to make a certain amount of return on equity. And he—

WAPNER: I mean if you want to get mad at CEOs for being members of golf clubs, we're not going to have any CEOs left in America.

ICAHN: Well yeah but at least you don't charge, you don’t charge the customer for being on the. It’s one thing to charge your shareholders if your shareholders want to allow it, they will allow it. But this guy is charging not only not only his shareholders to live at this high level, but he's also charging the guys that are buying the gas from them. He's charging his ratepayers, he's charging. That’s what the regular, I’m not saying it, the regulatory agencies are saying it. This guy has the arrogance, the nerve to go in and charge, he actually charged for a manicure if you can believe it. He charged for manicures.

WAPNER: I find that hard to believe. I find that hard to believe.

ICAHN: It's written by the regulatory agencies that want to disallow these expenses. This guy and then he goes out and he decides he's just gonna keep acquiring companies, really utilities are getting out of other companies because they just want to stick to being a utility and that's what I think the regulatory agencies would prefer. This guy just bought a company, his company is selling around and only one times, one times rate base because of, because his bad performance. Now, the guy is going out and paying two times that for a pipeline. He's overpaying by 200, 300 million that Buffett was willing to pay so he’s overpaying and he’s doing it in my belief because the more stock he can put out there, the more protection he is going to issue stock to his buddies and that is what he is doing and he’s done it continuously, he’s done a terrible job in running this utility.

WAPNER: Well we—

ICAHN: And by the way, he’s made six and a half million dollars a year for himself for doing an awful job and there is no accountability. Now these are the things that we've done for, you know, 30 years maybe gone after this companies and today, we find that a lot of companies welcome us in. I mean it might sound ironic but we have good board members. We come in and I mean with this guy Hester, I tried to call him and tell him, look don’t do this. You try to call him, he wouldn't answer the phone and his assistant kept saying he’s out to lunch. And then I said after she kept telling me that, I said she’s certainly right, the guy is out to lunch. And now, we finally did talk to him and then he, the arrogance of the guy, he told me, okay, we're not going to talk about, you know, he did his deal already, about what should be done, and we said okay, and with all the guys we’ve gone after, with all the CEOs for 30 years, nobody ever bold faced lied to me, you know, not that I care that much but he's on the phone saying, we will do nothing public until Wednesday. I said, okay, great. The next day, two days after he put a poison pill out. I mean, you know, this guy is completely off the wall as far as I'm concerned and I really think I didn't have a chance even though he thinks he’s going to have the regulatory agencies protect him and he thinks maybe by the way, the index funds he thinks will protect him but I think that day is over. I really think that the index funds have come around to thinking, you know, we should let our investors decide on the—

WAPNER: I was gonna, I was gonna ask you about that because if you look what happened with the index funds I thought of you. When you look what happened with the index funds in Engine No. 1 at Exxon, I thought directly of you because you've been the most critical of index funds whether it's Vanguard, Blackrock or whoever for always voting with management and that was a stake in the ground that says it's not maybe it's not going to be that way anymore so maybe you have—

ICAHN: I honestly believe and I know I was on your show once with Larry Fink. I honestly think they would like to do something about it and I'm not quite sure exactly, you know, the day is coming because we need more productivity in this country. We can't keep going, this inflation is taking hold and it’s taking hold in a bad way. We need and the only way we're gonna get productivity is get the right guys to run these companies or at least, even though the right guys in many cases, I want to make it clear, in many of the countries we’re in, the right guys are running the company. It's just their crown jewels there that should be burnished, it should be spun off and taken out. I mean look I’ll give you an example, we’re in eBay, PayPal, took us three years to get it to finally take PayPal out and look how great it did for the shareholders. Look, if you go back, if you go back into the 90s, Reynolds Tobacco I got them to finally spin off Nabisco and everybody made ten times their money. I mean, so if you look back, that is what has to be done and I think they’re finally waking up. Southwest is going to be a tough case because here you do have a terrible manager. You do. In this country, a lot of very good managers— This is a bad one.

WAPNER: We will continue to follow it. I want to get to two other topics before I before I let you run. Bitcoin as we talk about markets again. Are you in Bitcoin or would you buy—

ICAHN: No, as they say, I’m purely do, we do a lot, a lot of research that we find companies that we could understand and I can't understand it. I admit. We can and not just me but we got a lot of my guys working at Icahn company and it's a tough, it's tough to get a job there. They've put a great team together and we just don't understand it so and I’m not saying it’s bad or good. I’m just saying just we don't understand it. We’re not going to invest in something we don’t get. And I'm not telling you, we'll go double or triple I don't know but well I have thoughts about it but I'm not, look, you don’t need me talking about Bitcoin on this show. Obviously we've studied it a lot. But we’re not in that.

WAPNER: Do you think it has intrinsic value? Do you think it's a store of value? I would like to hear a quick thought of yours on it.

ICAHN: I, I think the jury's out on it. The jury is really out on whether it is or whether it's not. And I think, if you can tell me what the economy is going to do, how inflationary is going to get, yeah look, if inflation gets rampant, I guess it does have value but will inflation get rampant or will the government come in as they did in China and said stop the thing pretty much so there's so many, there's so many variables in it that is a very difficult thing to invest in, from, from my point of view, when we have such a, what I consider to be such a great paradigm that we use with this activism.

WAPNER: As we mark, you know, we're obviously marking 10 years this week and I was looking back to try and think of what your best investment over the last 10 years was. I don't know if it was Apple or Netflix and we're counting down to another Apple event in about 20 minutes or so, was that the best investment that you ever made was Apple I think you made like $2 billion in it or Netflix.

ICAHN: It was. If you look back at the money we made on it, we made a hell of a lot of money on it but sold it. It's always gonna be the two of us we sell too soon because, you know, we did it when it really sort of it got something to be done. We tried to get it done and then we get out so obviously there was an article I could be worth 40 billion more if I had kept Apple and Netflix but I don't really care because I never would have kept it and, you know, we have so our customers have made a fortune in Apple because I think partially, we did something real good there. And I really think we were very instrumental and I don't think Tim Cook would deny it of getting them to do the buybacks in the big way they did it and so we helped there. Yeah, we made a lot of money in Apple. We made $1.8 billion in it, I, you know, it’s public, but all the shareholders from the time I got in to the time I got out, made 234 billion so we certainly serve a purpose. And we got some very good investments. I mean, like like, like one that we got into was that we didn't put much money into is Forest Labs where we actually made more profit. We went in there. It was a great company with a lot of hidden jewels in the pipeline and we actually made close to 2 billion in that one. So there are many to look back on, if I look back on my list and then we made a great deal of money in Netflix.

WAPNER: Yeah, I know you did. Well, your list is long.

ICAHN: We made a couple million there. Look, we made a great deal of money doing this paradigm. When I stray from it, I think when I stray from it, I’m gambling. So you asked me about Bitcoin, then I’m going to gamble. If I’m going to gamble, I might as well go to Vegas right. So I’m not going to, I learned that discipline.

WAPNER: Alright, we’re going to leave it there. Carl, thank you so much for coming on today. I appreciate it.

ICAHN: Hey, thanks for having me. Good luck again, good luck. I hope you have another great 10 years on this show.

Updated on

Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver
Previous article Herb Greenberg: Despite A Hot IPO, Think Twice Before Rushing Into This Growth Story
Next article Bankxiety Is Increasing In Brits – But Britons Urged They Can Overcome It

No posts to display