Mounting Debt Fears in Europe Spark U.S. Sell Off

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Mounting Debt Fears in Europe Spark U.S. Sell Off

Icahn Associates chairman Carl Icahn on global market volatility, impact on U.S.

This is a rush transcript from "Your World," September 6, 2011. This copy may not be in its final form and may be updated.

NEIL CAVUTO, HOST OF, "YOUR WORLD": Well, Congress, you know, is getting back to work. But that is exactly what worries billionaire investor Carl Icahn.

Now, Carl, your biggest concern has always been that these guys are making a bad situation potentially worse. And you have mentioned again and again that every time they make an attempt to fix something, the fix gets expensive and potentially much more pricey. We saw, by the way, before we get to him, an indication of that, what was happening at the corner of Wall and Broad and this steep sell-off on fears that what’s going on there is a reflection of zero confidence in our leaders here, to say nothing about what our leaders abroad are doing.

And this just might be a collective rebuke to them and now escalating diatribes against capitalism itself. We’re going to be getting on later in this show Jimmy Hoffa Jr.’s comments, the Teamsters union president, who blasted companies for not doing more to hire workers in this country, something Carl Icahn has been saying does more harm than good in improving the mood between investors here and abroad.

Here’s what happened ahead of getting to Carl on that, though. People get nervous and try to park their money in something safe. And this is what was so noteworthy about today. A 10-year Treasury note, among one of the safer instruments you can invest on Earth, has plunged to the lowest level it has ever been, 1.98 percent. It has never been or closed the day under 2 percent.

Roughly speaking, what that could mean is 30-year fixed rate mortgages in three-something neck of the woods and 15-year mortgages in the two- something neck of the woods and all because this economy clearly doesn’t cut it and clearly doesn’t rate.

So, investors are much like you and me. When they get nervous, they just seek out something that looks safe, any port in a storm. And that port for now is not the stock market.

To the aforementioned Carl Icahn, joining us now on the phone.

Carl, we’ve got a bad confluence of events. What do you make of them?

CARL ICAHN, CHAIRMAN, ICAHN ENTERPRISES L.P.: No, I agree with you that I think we have a lots of problems. Our own economy is a problem. I think Europe is a major problem. I think you may have ups and downs, but until you really take the bull by the horns over there, I think it’s going to be – it could be some real bad times.

CAVUTO: You know, Carl, when you have been involved in so many takeover battles with companies and they put out official statements to try to say, we are doing fine, this guy Icahn has nothing on us. I’m trivializing here.

ICAHN: Yes.

CAVUTO: But when I hear European central bank officials or in this case International Monetary Fund officials saying, you know, this issue about whether the banks in Europe are undercapitalized and all, it’s just not nearly as bad as it’s been reported, I begin to wonder whether they’re just trying to get ahead of a crisis or calm people or just outright mislead us.

What do you think?

ICAHN: Yes. Well, I just don’t want to criticize somebody at the IMF.

But I will tell you this, that the banks in Europe, which have over $50 trillion in assets and liabilities, is a problem when you look at our GDP and you look at theirs, and it’s pretty similar. So you have a major problem. But then you have to look at the assets of these banks. So it all relates to the governments. So if they have a lot of assets that are loans from the government, and what you have -- the problem you have is that that has to be paid back.

And the problem is those countries take on austerity. And if they don’t, it’s going to be a problem with the strong -- with Germany loaning them more money. That’s the simplicity of it. But you have a problem. Hopefully, we’ll get through that. But then you have the major problem of our own economy, which is a very difficult problem.

CAVUTO: But then I’m wondering, when I hear noise like Groupon announcing that it might delay, will probably delay its offering, big stock offering that was widely anticipated, supposed to be the newest of Internet boom children.

ICAHN: Yes.

CAVUTO: There are a variety of reasons for that, but not the least of which would be just the market environment. Obviously, they’re getting skittish enough to put this back a little bit. What is that telling you?

ICAHN: Well, you know, I don’t know if that that in itself that important.

I think a better indicator that I’m going to look at is you still have a lot of analysts. And if you read Barron’s this weekend, they are all still bullish.

(CROSSTALK)

ICAHN: And as long as they’re all bullish, I think that’s a bearish sign.

(LAUGHTER)

ICAHN: So, as long as you have 60 percent bullish to 63 percent bullish, I’ve never -- hardly ever see that but fail. So you have that.

But that in itself is not the real problem. The real problem is that you have an economy in this country that has to stimulate business to spend money. And that’s a simple thing.

(CROSSTALK)

CAVUTO: How do you stimulate it then, Carl? What would it take -- obviously, you are not a fan of these huge infrastructure programs and the like that have not worked in the past. What would it take to get business titans to either hire, to expand, to just do things differently than they have largely, not across the board, but largely sitting on their wallets?

ICAHN: Well, what you need to do to stimulate them is to give them confidence that -- up to now Obama, has not done that. You have to tell them, look, we’re going to work with you. We’re going to cut your taxes.

When Reagan came in, he cut corporate taxes 25 percent. And, Neil, what I keep telling you is that what is really propaganda is to keep saying, well, business is making too much money. The businesses are owned by the middle class and by the blue-collar workers. So the whole game here is a red herring to keep talking about it.

We’re not talking about the rich people. They’re -- it’s fine if you tax them. But let’s talk about businesses. They’re owned by the middle class. And they should be stimulated. I mean, it’s ludicrous not to let them take the money back because you’re going to tax them. You should pay them to take the money back. I mean...

CAVUTO: So when Mitt Romney talks about corporations being people in that famous now YouTube diatribe with a protester, was he right?

ICAHN: Well, I really am not familiar with exactly what he said. I think he should...

(CROSSTALK)

CAVUTO: Basically, that companies are people, too; why are companies vilified?

ICAHN: Well, I say the same thing, but I’m saying it even more strongly.

I’m saying that not only should they not be vilified, but they’re owned, they are owned by the middle-class and the blue-collar worker, the pensions plans are, I mean, for the most part.

CAVUTO: Right.

ICAHN: So it’s absurd, because Obama keeps talking about the corporations as if they are some evil entity. The corporations are what you need to give jobs in our country.

And you can’t -- look, I’m no great fan of corporate -- of corporate - - of corporate leadership, as you know. But there are some good leaders and some very poor ones. But that’s not the issue here. That’s another issue, that you should hold them accountable if you want to. Hold these CEOs accountable. But don’t go say, I’m going to frighten business and not stimulate them.

And not matter what you do, if you can’t get around that, I think you’re going to have a very poor economy. And that’s where you’re going now. And it doesn’t really matter what Obama says Thursday night. Unless you can somehow stimulate business and get them spending, you’re going to have a major problem on your hands, which you have already.

CAVUTO: Indeed. It could get worse.

Carl Icahn, always a pleasure, sir. Thank you.

ICAHN: OK, Neil.

CAVUTO: Carl Icahn.

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