Carl Icahn has been betting on a crash in the US for years

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Hedging is always a risky investment strategy, and betting against the US is even riskier, as Icahn has discovered over the past six years. The investor bet the US stock market would collapse, but not only did his bet not pay off, it also cost him nearly $9 billion, according to a report analysis and Interview with Icahn from the Financial Times published Thursday.

“I’ve always told people that there’s nobody who can really pick the market in the short term or the medium term,” Icahn said FT about his deep losses. “Perhaps over the past few years I’ve made the mistake of not taking my own advice.”

Icahn’s misfortune began in 2017 when failed hedging positions netted him $1.7 billion. It lost another $7 billion between 2018 and the first quarter of this year FT found.

The newly uncovered losses are the latest of several blemishes in Icahn’s long and largely successful history in the market. Hindenburg Research, an activist short seller with a penchant for shorting companies’ stocks just before disclosure of their mismanagement issues, targeted Icahn Enterprises claimed earlier this month that the company uses a “Ponzi-like” financial structure and produces an unsustainable dividend yield that misleads investors and greatly inflates the value of the company’s assets.

Icahn dismissed Hidenberg’s claims in one opinion Earlier this month he called the shortseller’s report “self-serving” and “inflammatory”. But both his private fortune and the reputation of his company have suffered. Icahn Enterprises shares are down 37% this month on the Hindenburg affair, while Icahn’s personal fortune down 41%or $10 billion in a single day after the report was published. Icahn’s personal wealth has shrunk from $24.8 billion on May 1 to $7.8 billion now. accordingly Bloomberg.

Now, new revelations about a years-old stance that the US economy was collapsing will likely do little to improve his standing, though he says he’s learning from his mistakes.

“You never get the perfect hedge, but if I’d kept the parameters I’ve always believed in…I would have been fine,” Icahn said FT. “But I didn’t do it.”

A crash that never happened

Icahn began betting on a market crash after the 2008 financial crisis and became increasingly aggressive in later years. According to this, Icahn’s investment portfolio has lost money every year since 2014 FTand above all because of his increasingly pessimistic positions.

At one point, the value of the securities Icahn had bet on through Icahn Enterprises was over $15 billion, the paper said, and Icahn even invested nearly $4 billion of his personal wealth in his company since lost money through short selling.

Icahn’s bet seemed to be confirmed in 2020, as the COVID-19 pandemic roiled markets and plunged the US economy into a deep recession. But the downturn proved to be that shortest time ever recordedwhich lasted only two months after extensive government stimulus programs quickly revived economic activity.

“I obviously believed the market was in for some serious trouble,” Icahn said FT. “[But] The Fed has pumped trillions of dollars into the market to fight COVID and the old adage is true: ‘Don’t fight the Fed.’”

While markets have struggled over the past year due to rising interest rates, the economy itself has recovered well from the recession caused by the coronavirus crisis. The US job market is silent closelyand the share of senior workers– aged 25 to 54 – it took just three years for labor force participation to return to pre-pandemic levels. After the 2008 crisis, it took 12 years for the same population to return to normal. The stock market has also steadily increased in value this year due to the Fed signaled More rate hikes could be on hold as the S&P 500 is up nearly 10% since January.

Many economistsincluding former finance minister Larry Summers, are still warning of an impending recession, although the start of it is still being pushed back. And even if the economy as a whole survives Fed interest rates, the stock market, which in many ways is an indicator of where investors think the economy is going, could take a different path.

Icahn said he remains pessimistic about the economy’s prospects in the near to medium term, but indicated he’s learned the lesson of never betting too much against the US

“I’m still to some degree convinced that the economy isn’t doing well and we’re going to have problems,” he said. “We’re still covered, but not to the extent that we were.”

But Icahn is probably still in a tight spot, even if his bet against the US economy actually pays off. Icahn Enterprises is dealing with one too government investigation This month we examine the company’s governance practices, dividends and due diligence process. It is unclear whether this investigation is related to Hindenburg’s report. Meanwhile, activist investors like Icahn, financiers who buy a large enough stake in distressed companies with intent to influence management decisions, face a challenge increasing number of challenges in today’s high price environment.