Carl Icahn Speaks About Inflation, Jerome Powell, And More At The Forbes Iconoclast Summit

Now, for a closing keynote conversation, "An Activist Icon's View on Markets and the Future," please welcome Carl Icahn, Chairman, Icahn Enterprises, and interviewer Stephen Bertoni, Assistant Managing Editor, Founders, Forbes.

All right. Hey, everybody. Hey, Carl.

How you doing? You see me there?

Yeah, you look like the Wizard of Oz right now, like the big floating head in front of everybody. So you look good.

Yeah. They call me the Wizard of Oz anyway.

Yeah, that works. Well, thanks for joining us. We have a great room. And so, what's on your mind? Let's hear about, you know, the title is "What Does Carl Icahn Think of the Markets?" And let's kick off with that right now.

Yeah, I think we have a real problem with the markets. I've been saying that, Steve. I've been saying that for about a couple of years now, you know, in articles and whatever. I keep things pretty well hedged, but I have a very big hedge on now. I think we have a major problem. And I can go into it more if you want me to—I mean, why we do.

Yeah, please. Of course. Give me a few, like, a few bullets on, like, what the specifics are that really, you know.

I mean, to begin with, we're trapped with this inflation. Inflation is a terrible thing. It's what brings down hegemony. I look at things simplistically. I look at it just very simplistically. That's where, if you can do that and sort of understand the markets that way, you should be successful over a long period of time. And right now, there are real problems because, um, inflation is a terrible thing, and once you have it, it's—it's almost like being drug-dependent, you know? And it's very hard to get rid of it once it starts. I mean, I remember the '70s, but it takes out countries; it takes out a Germany. And I think Powell is very right to do anything he can to stop this inflation that's coming on.

And the real surprising thing is that you haven't had it before because, for the last years, we've been just printing up money and just giving it out. And one of the major problems is, I think—and nobody's blamed them, but it's corporate America. It's the CEOs, rubber-stamp boards. And the money has been very cheap, so they've been able to borrow money very cheaply. But instead of putting it back into production, they've taken that money, borrowed more and more, and bought stocks at very high valuations. And now it's time to pay the price of that. So you'll have more and more debt coming due or interest rates to pay at higher prices. And that is a problem as far as earnings are concerned. And aside from that, household net worth—I would say median household net worth—is really nonexistent in this country.

So half the households have no net worth. And the other half, except for the very top 10%, I think, are very concerned about what's happening. And they're looking at their net worth, which is the market and their homes. And you have to be very concerned about that.

So, in this kind of high-inflation environment—you've been through many decades, ups and downs—how does this environment affect what you do and how you play the game right now?

Well, we're very hedged. And as far as I'm concerned, you know, short the S&P and short different companies. And what I look for are companies that have some hidden jewel. And that's served our purposes. We find a company with hidden jewels that are either not well managed or the boards are rubber-stamping too much debt or whatever. And we get on those boards. And eventually, you know, sometimes you have to replace the CEO, and a lot of these companies are doing well. So you take CVI, our refinery. Our refinery, I mean, it took years, but it's now actually functioning greatly because we have spent quite a bit of capital in it over the years. We had to save it from going belly up. The government, in their great wisdom with ESG,

made refineries uh uh um very difficult very difficult to uh make a profit so a large number of small refineries went out of business and i i will go to the details but but they uh they penalize refineries and they tell them you know they don't want them so Unlike almost in any other industry where if you're doing well, you build more. If you're doing well in the widget business, you build more widget factories. You can't build another refinery. Take CVI, for instance. You know, the refineries we have to replace would be, you know, 10, 12 billion dollars, I believe. I just you can't put a number on it because you really can't build another one in this country. So you can't have that competitive element coming in.

A lot of refineries went out of business. A lot of the large refineries, the big companies, listened to the government telling you how terrible refineries were and stopped building them up. So today, what they call the crack spread has widened tremendously. The diesel crack, for instance, has gone up as high as $75 or $80. And that just means it used to be, you know, $20, $25. So obviously, Our EBITDA for three quarters has gone up to $800 million, I believe, or close to a billion. But then you can't really come in and say, well, these refineries, you know, should pay more taxes or something, because in the bad times, I must have put three, $400 million in to save that refinery or that two refineries when a lot of refineries went out of business.

So now you're backed into an energy problem for gasoline and diesel. And diesel is very important today. Diesel now is used in Europe to generate electricity, which will stop eventually. And from the point of view of ESG, you have something called bunker fuel that is really, really polluting the water as we speak. So diesel is used to replace that terrible fuel they used. And then our refinery, Wynnewood and Coffeyville, two refineries, we're able to produce fertilizer or help to produce fertilizer. So we don't need—with fertilizer you need ammonia, you need gas to make the ammonia, you know, NH3. You need natural gas, except we're the only one in the country, and people don't understand this, that built this many years ago.

We had the foresight to build it. I can't take credit for it, but it's there. And we were able to make it with something called petcoke, petcoke. And so we don't need the natural gas to make the fertilizer. And we ended up owning a fertilizer plant, which is—the factory's right next to our refinery. And it's really fascinating. And nobody even wanted that seven, eight years ago, but we nourished it and we kept it going. We own 36% of it and we own the control of it. And obviously today, fertilizer is the most necessary thing in the world if you think about it, especially if the Ukraine keeps going and they shut off these things. And we are the only one in the country that can make it without natural gas.

So, I mean, we have all these little jewels at CVI. I'm just using one example of what we look for. And they're coming to fruition.

And also, speaking of finding those gems, you just made a play. You bought a big stake of Crown Holdings. You just bought a big stake of an aluminum can company today. Tell me behind, like, really quick summary, what made you do that move?

Well, there, too, you look for a couple of hidden jewels. I mean, it's in an industry that has natural growth because it's in an industry where you're getting rid of—slowly but surely getting rid of—plastic containers. So because of the environment again, and for some reason, the earnings of this company have not come to fruition. Their earnings are down. Well, you know, a lot of companies' earnings are down, but I think one of the problems that corporations do—and there are many good CEOs and many good boards, but a lot of the problems are that they try to diversify or they try to say, 'I'm going to take over a company because I'm, you know, I got this company and you're going to get synergies.'

And synergies are very hard to get. If you look back in history, Jack Welch was good enough to get synergies at GE, but then look what happened. So they went out and bought different companies. We think they should just get rid of it and stick to the can business. I think there's a lot of things that you can do in that company. I mean, they're not badly run, but I think that this whole business of diversifying has hurt their earnings, hurt their multiple, and eventually that company should flourish just by the nature of the business they're in. So stock went down a lot, and we bought a fair amount of it. I talked to the CEO today. We'd like representation on the board, as we always try to get.

We may get it, we may not. We may have a proxy fight, we may not. We haven't decided yet. But that's relatively small. We have a lot of companies that are IEP. Right now, I just mentioned CVI because it sort of typifies what we do over the years to get the record we've had.

Yeah, speaking of record, I want to switch from industry to tech. And I went back nine years, and I remember your first tweet you wrote. And that was back when you were in a proxy battle with a small computer company called Dell. This: 'Twitter is great. I like it almost as much as I like Dell.' And now you come full circle, because I've been hearing some rumors that before the Elon Musk move, people were approaching you to maybe launch a proxy battle with Twitter before Musk came in. Are those rumors true?

Yeah, I was approached. I've been approached on different companies. I was approached. I looked at Twitter, and I loved it. I think it's a great platform. I think Elon Musk is the perfect one for that company. You don't have to be a genius to realize that he was going to finish that deal. You know, he was up against lawsuits that he wouldn't have won in Delaware, in my opinion, the Chancery Court there. And so we bought a lot of stock in it. But I bought stock when it went down after... We were thinking of it, and then he announced what he was doing. The stock went down, and we loaded up with it. I mean, we bought... close to i can't remember exactly 15 million shares which is a fair amount to get what it was in the 30s and i looked at it two ways i i believed that he was going to do the deal and if he did the deal that's great because i do i do believe we go to corporate governance now and one of the major problems in this country and i keep saying it not the only problem because uh

You need discipline as far as inflation goes, and we have that real problem. But one of the major problems is there's no corporate governance. I mean, corporate governance in this country is an oxymoron. Corporate democracy is an oxymoron. And there's an article today about BlackRock talking about it. And I hope Fink, and I know him, really does something because actually these index funds protect bad CEOs or CEOs that are just there, and you don't have any accountability in Corporate America. And in Twitter, I think it's sort of ludicrous that—I mean, I'm not going to get into the politics of whether or not you should have the right to censor somebody or not, although I think you really shouldn't censor anybody unless there's a real reason for it, but what's ludicrous is

We had a couple of people at Twitter who are employees of Twitter. They work for the shareholders, decided in their great wisdom who could go on the platform and who can't. And I think those days are over. That's just ludicrous. So I just looked at it and felt that I got a lot of calls about it. And so I said to myself, "You know, I'm buying stock here. If for some reason Musk doesn't do it, we'll probably launch a proxy fight." But what happened was, Musk came in and I said to myself, I said to my guys, I mean, he's the perfect guy for this. And I would, you know, obviously have supported anything he did. I think he's, you know, I don't know him, but I think he's—some of the things he says and does, I think, are brilliant.

I mean, I'm not in Tesla, but I never owned Tesla because, you know, to me, it's not my kind of stock. It's just too high a multiple. But so we went in and bought all that stock and, you know, we made a lot of money on it. We're happy about that. There's something inside of me that—I wish I was looking forward to doing a fight on that one. Because it's so outrageous. In other words, I'll just repeat again. If you owned a chain of restaurants—if you owned it, Steve, your family gave you a chain of restaurants—and you have a majordomo at the restaurant, would you allow him to say, "I don't like that guy. He can't come into the restaurant. And I'll let that guy come in"? You'd say, "I'm going to fire you."

I mean, so to me, it just was a ludicrous situation. And I'm not deciding here or discussing the political aspects of whether or not you should have censorship. But I do believe that there is freedom of speech, which is extremely important. And yeah, there should be some censorship in certain cases. But it shouldn't be up to the employee of the company, whether he's called CEO or whatever he's called, to decide, "I don't like that guy's politics, I'm not letting him on." So I was, I was ready to get outraged, to get into it, but what the heck, I'm glad we made all the money we made on it. Yeah. How much, how much did you make on that trade? Well, I could tell you, it's public anyway. We made, uh, about a quarter of a billion—250, 200 million, maybe 250. And, but we have a big portfolio in IEP. IEP this year is doing very well because, you know, I've been smart or lucky in

short positions are working out, and the long positions are sort of working out. So the net asset value of IEP has gone up over, so far for the nine months, over a billion. So every year we try to keep ourselves long and short and look for those little jewels, and, um, that's, that's what we do over there, and, and, uh—

I got to ask with Twitter—I mean, you bought a lot of stock and then you kept on buying. And, you know, when Musk was going back and forth—will he buy, will he not?—you know, the media was, you know, there was a lot of people thought it would go through. A lot of people thought it wouldn't go through. It seemed like almost a coin toss, but you were confident the whole way. I'd love to get into your kind of, your thinking there where it's like, "I'm going to buy and keep on buying," and you just, your gut said that it was going to go through. Is it you've been—you've seen this so many times, or?

Yeah, you have to understand something. I think that the company itself is a great platform for this country, a great platform. And you look around at some of these other technology companies in that same area, I don't think they're that well-run. So I look at it, I think Musk, from the little I've seen what he's done, he's a perfect guy to run it, and he's a brilliant guy and all that. So I figured he's going to do it. It's perfect for him. And all this bull that he didn't have the money to do it, it's nonsense. If you look at his net worth and you look at his balance sheet and you look at all the stock he's got, I mean, that was just completely nonsense. So in my mind, anyway. And in my mind, though, throughout this whole thing,

he did pay a little too much for it, but not as bad as people say. I really think that that company, because of what it stands for, you know, is worth in the low 30s, maybe. So maybe he did pay a little more, you know, today, but so maybe he paid a little more. But that's sort of a rounding error for the guy. And so I figured, you know, this is, he's going to do it. But even, but if he didn't, I was definitely going to launch a proxy fight—well, not definitely, but close to. I mean, it wasn't definite, and I would have asked him to be on the board or be—or be chairman or something. Yeah. Who would be your CEO of Twitter if it wasn't—if it wasn't Elon? They didn't call me because it's not my kind of thing, but if he had called me, I would have put a billion in that, you know, with him, because I think he's going to do real well with it. But I would have—I probably would have wanted preferred stock or something.

But nobody ever called me, and I'm glad they didn't. So that's basically that one.

That works. You mentioned you always have longs and shorts, you're always hedged. Could you give us one, give us a new long position and a new short position, or what would you pick right now? What are you looking at?

Well, if you, I told you, like to me, I really, because of our positions here, it's difficult for me to buy any more of it, but we own so much of it. CVI, I think, is going to be—there's things at CVI like the stuff that we're going to be doing in the fertilizer business, for instance. I mean, so that's a good one. There are other ones I can't talk about at all because, you know, the earnings aren't out and whatever, that I think are cheap. I think Crown Company is really cheap in the sense that it's in an industry that is not going to be affected that badly, in my opinion. I mean, short term, nobody could talk about it, but long term, it's not going to be affected that badly in a recession.

And in fact, it's growing. So you have a company that's growing and it's hard to compete with that one too, because, you know, you can't just go and build a can company. You have to be in an area because you, you know, when you ship these cans, you have a problem of paying for shipping because, you know, cans take up a lot of space. So you have to be pretty near a large user of those cans. So it's hard to break in. So it's barriers of entry, natural barriers of entry, which I like. And so you just look for that kernel. And then the other little thing is sort of the thing, I think, that's going to be down the road, I think, but I think they should stick to their business. That's what I think and not be diversifying all over.

Gotcha. Sorry. Unfortunately, we're almost out of time. And this has been a big day. We talked about a lot of scary things on the horizon, things to be worried about, whether it's geopolitical, whether it's inflation, stock market. You've been shaking things up for decades. You've seen it all. You've heard it all. Could you share any wisdom or advice to the room before we go have a cocktail? It could be about life. It could be about investing. It could be about running a company. What do you got?

Well, I would just say that it's really funny. When I was in college as a freshman, I didn't know much about the market at all. I was always a little intrigued by it. I went out—I just was thinking back on this and it really happened. I was basically—I got into Princeton and I was, you know, I came from middle-class background from a sort of bad high school, but I made friends with a couple of the wealthier guys. And as a freshman, and one of them invited me to dinner with his father. His father came up to see him, and his father was a big deal on Wall Street, you know, sort of very well thought of, you know, really very respected. And we were sitting there and he looked at me, he said, 'You know,'

'You have some promise, you know, business,' because I asked him a couple of questions about, you know, Wall Street a little bit. And he says, 'One thing I'm going to give you, one bit of advice. Just remember this. Remember this, kid.' He's a nice guy. 'Remember this, kid. If you ever get into Wall Street and this business, follow one rule.' And I'm not joking. This is what he said: 'Never fight the Fed.' And that's—and I've learned that. So I will tell them my advice is this Fed and Powell. I listen to him and he's a serious guy and he's going to be—there's none of this stuff, you know, all these guys are saying, 'Oh, they're going to pivot and they should pivot,' and this and that. And, you know, these guys that tell you that are the guy—a lot of them are telling you that because they put all these people into these companies that are overpriced.

And there are many, there are many good companies now, but many overpriced ones. And I am happy that Powell really means business, and I really think he does, because you must get rid of this inflation, and that's the worst thing an economy can have. And I think he means business, and I really respected him for coming out and saying it, and I hope I'm right. And I think he's going to be—look, I've said it a few times. I think it's going to get a lot worse before it gets better, perhaps. But all these people that are telling you he should pivot, you know what it is? It's like telling a drug addict—let's say your kid's a drug addict—and telling him, 'Okay, you took enough, you know, you stopped drinking enough now.'

'Okay, go have a good time again.' Well, you can't do that, right? You have to get rid of the goddamn problem you got. And that's what we need to do here. And that, don't fool yourself, there's going to be a lot more headaches, I think, before we get out of this mess we're in, because you can't have the Fed—even if they want to, over the last 20 or 30 years they were able to, the Fed was able to come in and save you and save the market, or they go into this taper tantrum, but they can't do it now because right now, even if they wanted to, you can't keep printing up money because it's going to just throw gasoline on the flames of inflation. So I think this is what you got to understand. However, there's some very good companies out there.

And, you know, if you're willing to buy them and, you know, have the patience, yeah, I think you'll look back at five years or something, less than four years, and see that they were great buys. But right now, I think they're very far and few between.

Well, this is great, Carl. Thank you for the advice. You said don't fight the Fed. I'm going to add another rule to that I think everyone can agree is you also don't want to ever fight Carl Icahn either in a proxy battle. We can add that. But thank you for being here again. For decades, you've—you know, you've changed finance, you've changed business. I think, you know, I have notes since the year 2000 until now, 22 years, you've had an annualized return of 15% every year, which is, you know, blows everything else out of the water. You know, we really appreciate you being here, and I'm honored on behalf of Forbes to give you our first-ever Iconoclast Award right here. Can you see it? We should call it the—not the Iconoclast, the Icahnoclast Award in your honor.

So you said you have a cocktail? You said you're making a martini. Do you have a martini there?

What, here in the house?

I always have a martini around, well, a little later. I usually play tennis for an hour now and then have it an hour. So you do it now and I'll do it in about an hour. Actually, maybe sooner.

That sounds good. Well, thank you very much, Carl. Appreciate it.