Carl Icahn: Inflation Will Not Disappear in the Near Future, Recession is Inevitable

Following the news on Thursday that inflation in the U.S. has begun to ease and has fallen to its lowest level since January, renowned investor Carl Icahn stated on CNBC’s ‘Closing Bell: Overtime’ that the recovery has not changed his negative outlook on the market and he believes that a recession is still looming.

‒ I am still very uncertain about what will happen and I still think we are in a bear market ‒ Icahn said, adding that he still keeps his portfolio protected.

According to data from the U.S. Bureau of Labor Statistics, the annual consumer price index fell from 8.2 percent in September to 7.7 percent in October. Following this announcement, the Dow Jones Industrial Average surged by 1200 points, marking its largest single-day increase since May 2020, while the S&P 500 jumped by 5.5 percent in its biggest rise since April 2020.

There is No Magic Wand for Inflation

As Icahn stated, large jumps in a bear market often occur due to significant short-term interest rates arising during a decline, and although the inflation report showed some signs of easing, the founder and chairman of Icahn Enterprises believes that price pressures are greater than most think due to rising wages.

‒ Inflation will not disappear, not in the near future. We will have even greater wage inflation. Many people do not want to work ‒ Icahn stated.

The combination of higher interest rates and an inverted yield curve has led Icahn to believe that recession is inevitable.

Regarding the aggressive interest rate hikes by the Federal Reserve aimed at lowering inflation, which is at its highest levels since the early 1980s, Icahn said they did what they had to do and that they were late in raising rates.

‒ But I do not think inflation is over. I lived through the 70s. It took years and years and years to get through that. You cannot wave a magic wand to solve inflation ‒ he explained.

The U.S. Federal Reserve has raised the benchmark rate from nearly zero in March to a range of 3.75 to 4 percent today, and it has been announced that rates could peak above 5 percent for the first time since 2007.

Made $250 Million on Twitter Shares

High interest rates, rising corporate debt, pressure on household wealth, a likely recession, and the war between Russia and Ukraine are just some of the reasons why the well-known investor is pessimistic about the future. He also pointed out that shares of major tech companies are overvalued.

‒ A lot has to happen for this economy to turn around and for us to pull out of the recession ‒ Icahn concluded, warning that the collapse of the crypto market triggered by the FTX failure could spill over into other asset classes.

Although he studied digital assets, specifically bitcoin, the investor stated that he could not understand their value and thus never bought any cryptocurrency, and he may have even bet against them at times. However, he did invest in Twitter, starting to buy shares before Elon Musk announced his desire to purchase, but he stopped when he felt he might try to enter management. This is why he commented on the current situation of this once-popular social network.

Icahn, as he stated, shares Musk’s view that Twitter moderation is too restrictive and that its users should have greater freedom of speech, and he was very pleased when Musk took over as the head of Twitter.

‒ From the beginning, he was the perfect guy for that ‒ the investor said, adding that he might have joined Musk’s offer for the company, but he was never called.

Although Icahn was not a partner with Musk, he still earned an estimated $250 million on the shares.