Carl Icahn: ignore the Fed

This year, markets have been paying even more attention than usual to the Federal Reserve's every word, looking for hints as to the direction of monetary policy. Yet billionaire activist investor Carl Icahn reckons that, whatever the US central bank does, it "doesn't matter".

Yes, a rate rise might hurt. But doing nothing could be even worse, "because the markets are in the middle of a huge bubble". It's impossible to know when it might burst because "it's sort of a guessing game" but the situation is "very dangerous". Right now, investors are walking along a narrow ledge if "you fall off that ledge you're really going to see trouble".

Icahn is concerned the underlying US economy "is not doing well", despite current near-zero interest rates. He blames the "amazingly arrogant" regulatory agencies for discouraging firms from investing in capital goods and machinery, which means that the US "cannot produce, we cannot compete". This industrial stagnation will eventually hit the dollar, he says, because "we're not going to be the reserve currency of the world" for ever. He also predicts that "terrible inflation" could "happen very quickly".

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This is one reason why unlike many of his peers on Wall Street he favours Donald Trump over Hillary Clinton for US president. Clinton "wants to bring in more government and bigger government", whereas Trump is "going to change the regulatory agencies". In short, "if Trump gets elected, this economy will be a lot better than if Hillary Clinton gets elected". However, even Icahn accepts that if Trump does win come the November election, "there's going to be a lot of near-term questions" and uncertainty over issues such as trade.