This content is from: Portfolio

Morning Brief: Carl Icahn Warns of a Market Earthquake ‘Worse Than 1929’

The legendary investor says too much speculation and froth in the markets is leading up to a major collapse in the future.

  • By Stephen Taub

The stock markets may have dodged a big blowout…for now. But legendary investor Carl Icahn warns that the sharp decline and dizzying volatility of the past few days are the early warning tremors of an inevitable future earthquake. “This is just the beginning,” said Icahn in an interview Tuesday on CNBC. “One day this thing will implode.”

He says there is too much speculation and froth in the market, most represented by the double- and triple-leveraged exchange traded funds. He also thinks the large sum of money invested in passive investment vehicles is also not good for the markets. He is confident the collapse won’t happen any time soon due to the tax law changes and what he deems are great fundamentals exhibited by many companies. But he is mindful the collapse could happen in months, a year, or a few years from now. He warns: “It will be a problem worse than 1929.” Yikes!

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On a day when most market indices finished up by more than 2 percent after an extremely volatile session, one popular short target suffered a sharp decline. Shares of Athenahealth fell more than 6 percent, to close at $132.76. There was no apparent news about the health care services company on Tuesday. However, on Friday it reported mostly positive quarterly results. However, during an earnings call chief executive Jonathan Bush said the company did not meet its bookings goals for the year. He also said the healthcare industry is “in the midst of a sugar low after years of rapid growth, driven by government stimulus.” On Friday the stock surged more than 13 percent after the company reported its results. As we have frequently reported, Athenahealth has been a long-time short target of David Einhorn’s Greenlight Capital.

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Shares of Snap surged 25 percent in after-hours trading Tuesday after the social media company reported much better results than had been forecasted, including a smaller loss than expected. If the stock holds the gain by the end of trading on Wednesday, it will wind up closing at its highest price since last June. We’ll see what happens.

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Shares of Arconic dropped 4.7 percent on Tuesday, to $25.28, after the Alcoa spinoff issued 2018 forecasts that were below Wall Street expectations. Elliott Management is the largest shareholder, with about 12 percent of the shares. In December the multistrategy firm’s Dave Miller joined Arconic’s board, replacing Patrice Merrin, one of three Elliott nominees who joined the board back in May.

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