These Billionaires Think the Fed Made a Mistake
Carl Icahn has been warning us about the danger ahead
In the third quarter of 2015, Carl Icahn, founder and chair of the ~$9.5 billion Icahn Enterprises, issued a warning about a danger ahead.
Icahn has been talking about declining productivity in the United States and an economy that’s heading toward a financial collapse. According to Icahn, low interest rates lead to “financial engineering at its height.” He says they’ve been instrumental in creating an earnings mirage in the United States on the back of a share buyback and acquisition (MERFX) spree. Icahn sees a major investment bubble in the high-yield (HYG) or junk (JNK) bond market.
What the Fed needs to fix
Icahn has also been highlighting the inefficiencies that have crept into the US system; namely, low interest rates, double taxation, and corporate inversion. The carried interest loophole, the double taxation of repatriated income, and higher tax rates leading to corporate inversions are major problems Icahn believes the Fed should have fixed long ago.
Let’s look at the carried interest loophole. Hedge fund managers in the United States (SPY) (VFINX) who make a load of money don’t pay enough in taxes. Currently, they benefit from a tax loophole that allows them and other professional investors to pay lower taxes on their earnings.
Meanwhile, Fed officials and the Market seem to be divided on their views regarding the probability of future rate hikes in the United States.
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