Being stubborn turned Carl Icahn (Trades, Portfolio) into a man worth $23 billion.
First, he finds something he’s certain of. Right now, he says that’s the near-doubling of Apple Inc.’s (AAPL) stock price.
Then, he waits. And waits. When a stock eventually rises, a currency drops, or a company fires its CEO and is acquired, Icahn’s empire gets a little bigger. As chairman of Icahn Enterprises LP (IEP), the 78-year-old activist investor has stakes in casinos, an auto parts maker, a meat casings company, a home-fashions business and enough railroad cars to stretch from Ohio to Manhattan.
Icahn spoke with Bloomberg.com about the looming risks in junk bonds, the opportunities in falling oil prices and why it’s a particularly dangerous time to be an investor.
Is there a mistake a lot of investors make?
Yeah, they invest.
I’m being facetious but not completely. Investing can be very dangerous and that especially holds true when the market has increased for a number of years, as is the case today.
What’s the biggest source of risk for investors now?
There’s still risk in the financial markets, even though the economy looks pretty good. The one area I think is getting to be a bubble is the high-yield market. These bonds are still at way too low an interest rate. In other words, you can borrow money too cheaply if you’re a risky company.
There are arguments that there’s a lot of cash flow to cover the interest payments on the bonds. But some of that cash flow is ephemeral –Â it’s not likely to last. It’s a bubble that’s going to burst in the next couple of years.
With the price of oil falling, people have been raising concerns about the high-yield bonds of energy companies.
That might be construed as proof of what I’m saying. Six months ago, you would have said those are fine. Now there are a lot of questions about them.
continue reading: http://www.bloomberg.com/news/2014-12-12/carl-icahn-on-a-junk-bond-bubble-opportunities-in-oil-and-why-shareholder-democracy-is-a-myth.html
