Comment by ddeck | Hacker News Reader

Comment by ddeck | Hacker News Reader

He may well be right. If you say it often enough, eventually you will be.

2011:

>You’ve got to be myopic if you’re not at least concerned that there might be a major correction [1]

2013:

>Activist investor Carl Icahn on Monday said there was a chance the stock market could suffer a big decline, saying valuations are rich and earnings at many companies are fueled more by low borrowing costs than management's efforts to boost results [2]

2014:

>Carl Icahn says 'time to be cautious' on U.S. stocks [3]

>Carl Icahn Reiterates "We Are In A Major Asset Bubble" [4]

2015:

>Icahn warns of potential looming catastrophe...Icahn said he's "more hedged now than I've been in years." [4]

[1] https://next.ft.com/content/c9612302-4c09-11e0-82df-00144fea...

[2] http://www.reuters.com/article/us-investment-summit-icahn-id...

[3] http://www.reuters.com/article/us-investing-icahn-exclusive-...

[4] http://www.zerohedge.com/news/2014-08-12/carl-icahn-reiterat...

[5] http://www.cnbc.com/2015/09/27/-of-potential-looming-catastr...

Yeah...the problem with your analysis is that Icahn was never really "short" the market when he said those things. He owned big momentum stocks, as a matter of fact, Apple, Netflix, etc. Now he has a massive short position in the market, his money is now where his mouth was/is.

The first time in your analysis that he actually said he was hedging, the market took a nose dive of 20%. I think his advice is worth warrant, especially when you have people like Bill Gross saying similar.

It's of my opinion that we are in an asset bubble, but we could have a "blow off top" before we really see what happens. Stock declines also generally occur during election years after a 2 term President, so it's a generally good bet for a correction at the very least. But, if I really knew what was going on, I'd be rich.

That last bit sounds a little "Texas Sharpshooter" to me.

Economic and market predictions are practically impossible to get right in timing. We can only really see us trending towards something, but that trend could last long enough to lose some serious money. That's why Buffet ignores the noise, and invests long term. I threw that last sentence out there, because, while I think I am right...I've been wrong enough to lose enough money that it genuinely hurt; I don't want anyone reading my post and affirming a bias and losing money. Even if I see eye to eye with some market experts, in the end, a single event could make the opposite occur.

"It's of my opinion that we are in an asset bubble, but we could have a "blow off top" before we really see what happens. Stock declines also generally occur during election years after a 2 term President, so it's a generally good bet for a correction at the very least. But, if I really knew what was going on, I'd be rich."

What's missing right now is the taxi driver sentiment ...

I don't hear inexperienced investors talking about playing the market or about average folks day trading. Yet.

That's because they're all starting start ups. Day trading is so early 2000s.

There was an ad that recently played on the radio for some service that will help you take your money from a retirement account to fund a family member's start-up.

I haven't heard it recently, so hopefully some people had enough sense to pull it. Investing retirement money in a family member's start-up is one of the worst ideas I've ever heard of.

Timing is difficult even if your fundamental analysis is right. Stocks may be overvalued and still go up several years.

Shiller PE is over 26, stocks are clearly valued very high.

http://www.multpl.com/shiller-pe/

If the implication is that his statements in 2011 and 2013 were predictions that turned out to be false, I don't think these quotes are sufficient evidence.

That an inevitable correction has been delayed by sustained government efforts does not make predictions of a correction any less prescient.

It is hard to call prescient or insightful a model of the economy that doesn't take into account government actions.

No, his remarks have an obvious tone of urgency. If after 5 years nothing has happened (and actually the opposite has), then his credibility is damaged.

His money speaks louder and boosts his credibility more than do your misinterpretations.

So your argument is "he is rich therefore he is always right". That's some astute logic there, professor.

One doesn't need to be an economic historian to understand that the economy and market run in cycles.

There is always an "inevitable correction" somewhere in the future, but in this endeavor, it's timing that matters.

It’s probably not fair to pick on Icahn in particular, who is not really a perma-bear. There are far better examples (e.g. Marc Faber), who despite being demonstrably wrong year after year with their end of world predictions, are always welcome back on Bloomberg and CNBC explaining how the world markets are about to fall apart.

If you actually look at economy's over long time periods they really don't have a cycle. It's much closer to a random walk than you might think. After the fact we simply define periods as good or bad based on what followed them.

EX: People talk about Japan as if it was going though a bad time period vs. that just being the new normal based on it's demographics.

As someone paid to do such looking for the past decade I can assure you that both econometric and market series' are subject to periodic, as well as quasiperiodic, chaotic, and exogenous forcing functions. Everything looks like white noise when your eyes are closed.

If there where real periodic cycles you could predict if the US economy where Up or Down with above random odds for July 4th, 2050. Nobody can, because what you call periodic is something else. Another way of saying it is there where say a X year cycle to the economy it would be a very famous result.

(Ignoring seasonal variation.)

Even the Black-scholes models it as random motion.

> are subject to periodic, as well as quasiperiodic, chaotic, and exogenous forcing functions.

Isn't that what random is?

You're correct, the US economy has a reliable boom/bust cycle that is caused in large part by monetary policy and started in earnest under Greenspan's tenure at the Fed.

That we're in the midst of one of the largest and most artificial of those 'boom' periods is undeniable, owing to the Fed's injection of $4.5 trillion into equity markets.

Icahn is banking on Newton's third law of motion applying to financial markets as well.

The Fed didn't inject $4.5 trillion into equity markets. That would be equivalent to claiming they own 24% of the S&P 500.

They bought treasuries and junk mortgages to bail out home owners, the US Government and the big banks.

Their tampering with equity markets so far has been limited and indirect via the banks.

Their monetary policy is responsible for inflating asset prices, so yes they did effectively inject that money into equity markets. No one thinks they went out and bought stock on the open market with it.

Initially they weren't buying stock but it is pretty clear many central banks have been buying stocks in the last several years. It's a subject of some speculation if the Fed has joined the ranks of central banks who buy stocks directly.

http://business.time.com/2013/04/26/why-are-central-banks-su...

Somebody has to take the other side in every trade. The market needs people that have the capital to lose consistently year after year...

> The market needs people that have the capital to lose consistently year after year...

Not necessarily true. The sellers miss out on gain, but they don't necessarily need to book a loss. Unrealized gains are not equivalent to losses. I believe what you're thinking about are derivatives (which are zero-sum, and for every unit of profit booked by one entity, there is a unit of loss booked by another entity).

Equities are not zero-sum, the companies behind them produce very real value.

Meanwhile, the S&P Increased 65%.

(2011 ending @ ~1257)

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