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Is Billionaire Carl Icahn Facing Disaster? Ackman Says Yes.

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Things are going from bad to worse for hedge fund billionaire Carl Icahn. Icahn Enterprises stock is down over 20% today after prominent fund manager Bill Ackman predicted disaster for the firm.

In a lengthy tweet yesterday, Ackman outlines a nightmare scenario for the stock:

Icahn owns 85% of the stock in Icahn Enterprises, per Bloomberg. Most of it is pledged as collateral for margin loans — as much as 65%, per Ackman’s estimate.

Meanwhile, nearly all of Icahn’s net worth is tied up in Icahn Enterprises stock.

The stock is down over 60% since a Hindenburg Research report at the beginning of the month called the company “Ponzi-like.” Now, the Justice Department is investigating Icahn Enterprises.

Icahn’s margin lenders must be getting nervous, as Ackman points out. Wouldn’t you be?

If even one of them calls Icahn’s loan, he could be forced to sell large blocks of stock. Since he owns 85% of the float, that would cause Icahn Enterprises stock to drop like a stone.

Icahn has taken huge losses in the weeks since the Hindenburg report. As I write this on Thursday afternoon, his losses likely approach $20 billion.

Ackman and Icahn have a feud that goes back twenty years. But Ackman’s criticism of Icahn Enterprises is valid.

Issuing stock to pay a fat dividend makes no sense. Dividends are to be paid out of actual profits.

But since Icahn Enterprises doesn’t have any of those, this is how they attract shareholders.

Now that Ackman is piling on, I expect more hedge funds to short IEP stock. This selling pressure could push the stock down enough for Icahn’s margin calls to start.

I don’t see how Icahn comes back from this unless the businesses Icahn Enterprises owns start making some money.

He doesn’t appear to have enough spare capital to buy more IEP stock and push it up further. And with the stock under so much pressure, I doubt anyone else is buying.

We could be looking at one of the biggest flameouts in Wall Street history. Unless the 87 year old Icahn has one more trick up his sleeve…

Do you think Icahn will go bust? Leave a comment and let us know?

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More on markets:

Carl Icahn Losing $900 Million a Day

Druck on the Coming Debt Crisis

The AI Gold Rush

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Deutsche Bank Under Fire

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Is Deutsche Bank the next Credit Suisse? Traders think so today as they dump the stock and rush to protect bond holdings.

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From a new report in Bloomberg:

Deutsche Bank AG became the latest focus of the banking turmoil in Europe as ongoing concern about the industry amid a slowing economy sent its shares slumping the most in three years and the cost of insuring against default rising.

The bank, which has staged a recovery in recent years after a series of crises, was the biggest loser among large European bank stocks Friday after announcing a plan to repurchase debt, a move normally seen as a sign of strength. Analysts struggled to explain the selloff, which prompted German Chancellor Olaf Scholz to publicly back the lender.

The cost of insuring against a bank’s default is a key stat. Called a Credit Default Swap (CDS), this protection often soars in price when a bank is close to failing.


One thing in Deutsche Bank’s favor: a big pile of cash. It’s sitting on $179 billion of cash and deposits at central banks, according to its latest annual report.

That means it could pay back 28% of its deposits almost immediately. But the thing is, Credit Suisse had a ton of cash too.

It failed anyway. In the end, no bank can pay back all its depositors right away.

Even US regulators seem concerned. Treasury Secretary Janet Yellen convened a group of top officials this morning in an unscheduled, closed door meeting.

In the end, Germany won’t let Deutsche Bank fail. Neither will the ECB.

Deutsche Bank is the largest bank in Germany by far. It ranks #8 in the entire EU.

Olaf Scholz is not going to let old Granny Durchdenwald lose her life savings.

But that doesn’t mean Deutsche Bank shareholders are safe. Once mighty Credit Suisse is now a penny stock.

I hate bank stocks. Banks often pick up pennies in front of a steamroller, turning in decent profits until they suddenly get crushed.

Perhaps Deutsche Bank will survive as an independent company. Either way, shareholders won’t be sleeping well tonight.

What do you think will happen to Deutsche Bank? Leave a comment and let us know!

Have a great weekend everyone!

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More on markets:

Don’t Wanna Pay 216%? How About a Naked Short?

Interest Rate Time Bomb May Kill Hedge Funds

Executives Dumped Shares Shortly Before First Republic Rescue

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Don’t Wanna Pay 216%? How About a Naked Short?

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Cost to borrow shares of AMC Entertainment holdings went through the roof today. From a report out just this afternoon on InvestorPlace:

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The cost to borrow (CTB) fee for AMC Entertainment (NYSE:AMC) has skyrocketed to 215.80% today, up by more than 100% from the reading of 101.76% on March 10. Yesterday’s closing CTB fee reading clocked in at 211.41%. Meanwhile, between March 10 and today, AMC stock has fallen more than 10%. What’s going on?

The CTB represents the yearly fee that short sellers must pay to borrow shares. A higher fee could represent increased short seller demand while a lower fee could represent lower demand. A higher fee could also signal a scarcity of available short shares. Still, AMC’s exorbitant CTB fee could actually be seen as a positive for AMC stock shareholders.

Let’s say you want to short AMC. But you don’t want to pay 216% a year interest because…uh…no one does.

But don’t worry! There’s a dandy alternative.

How about a naked short?

With a naked short, you don’t even have to borrow the shares at all! Instead of 216% interest, how about 0%!

Pretty sweet, right?

One small problem. It’s against the law.

There is strong evidence of massive naked shorting in AMC stock. Fails to deliver hit nearly 12 million shares in the latest SEC report.

That’s absolutely staggering, even for AMC. And keep in mind, most stocks have few if any fails to deliver.

Why are tons of trades failing?

To close a short sale, you need to borrow some shares. But it’s kinda hard to do that right now, at 216% interest.

So why not just cut some corners and naked short? It’ll just wind up a fail to deliver and get swept under the rug.

There’s likely a crime here in plain sight. But for it to matter, the SEC needs to act.

But before shorts laugh at the SEC and pop a bottle of Dom, they should think about the risks.

Half of Wall Street is betting that AMC will crash if APE shares convert. This share conversion dilutes AMC stock holders.

But conversion isn’t certain. And even if it happens, AMC shares have jumped after prior dilutions.

In a way, that makes sense.

Yes, you own a smaller piece of the company after dilution. But this heavily indebted company now has far more capital.

That makes the risk of bankruptcy increasingly remote.

I have no idea where AMC or any other stock is going.

But I do know that people don’t like paying 216% interest. And to avoid it, they just might break the law.

After all, what could happen?

Do you think the SEC will act? Leave a comment and let us know!

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More on markets:

AMC Shorts Lose $180 Million So Far This Year

Interest Rate Time Bomb May Kill Hedge Funds

Executives Dumped Shares Shortly Before First Republic Rescue

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Goldman Sachs Under Federal Investigation

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Goldman Sachs is under multiple federal investigations of its consumer business. The Consumer Financial Protection Bureau and the Federal Reserve are probing areas from credit cards to bank accounts.

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From a new report in the trade journal PYMNTS:

…in its annual report — filed Friday (Feb. 24) — Goldman amended its earlier statement to say it was cooperating with the CFPB “and other governmental bodies relating to investigations and/or inquiries concerning GS Bank USA’s credit card account management practices.”

But that’s not all:

The news comes a little more than a month after reports that the Federal Reserve was investigating Marcus, Goldman Sachs’ consumer business. A report by the Wall Street Journal citing unnamed sources said the Fed is examining the bank’s oversight of the consumer business, its management and governance, and how it handles customer problems.

These investigations could result in huge fines or worse. However, no wrongdoing has been proven thus far.

What we do know is that Goldman is losing a fortune on its consumer bank. Losses total over $3 billion at several units since 2020 alone.

Consumer banking was supposed to help Goldman diversify.

Its mainstays of mergers, IPO’s and trading are boom and bust businesses. But consumers tend to keep their bank account and credit cards in the same place for many years.

Instead, Goldman is posting its worst quarterly results in a decade. Add that to numerous scandals and Goldman is looking like the weak man on Wall Street.

Now that multiple federal agencies are poking around inside Goldman Sachs, there’s no telling what they’ll find. I’m willing to bet there’s more chicanery we don’t yet know about.

I was always reluctant to open a Marcus account, despite the great rates. Doing business with a company with such a checkered history scares me.

I guess I’m not alone.

What do you think investigators will find at Goldman?

Leave a comment and let me know!

More on markets:

SEC Refuses to Address Massive Fraud in Markets

Short Sellers Lose $17 Billion in 2023

Major Hedge Fund Down 54% — Survival in Doubt

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Hedge Fund Manager’s Arrest Shows How Market Manipulation Works

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Hedge fund manager Neil Phillips has been arrested in Spain this week.

He is charged with masterminding a market manipulation scheme that reached from the UK to Asia. His strategy shows how hedge funds manipulate markets from currencies to stocks.

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From a new report in Bloomberg:

Phillips was charged with conspiring to manipulate the US dollar-South African rand exchange rate in late 2017. The indictment, which was returned in March but previously sealed, describes at least two co-conspirators, raising the possibility of charges against more people.

Neil Phillips

Phillips faces up to 20 years in prison if convicted. His scheme involved buying an option on the dollar-rand exchange rate, then manipulating the exchange rate to make his option pay off:


With the option set to expire, Phillips began making spot trades in an effort to push the exchange rate lower late on Christmas Day, while directing a Singapore-based employee of an unidentified bank to sell $725 million in exchange for more than 9 billion rand, according to prosecutors. That pushed the exchange rate below the barrier, triggering the $20 million option. Phillips collected more than $15.6 million from the deal and also allocated $4.34 million to an unidentified client.

Phillips’ moves show us how market manipulation works.

He took advantage of thin trading late Christmas Day. Markets are easier to manipulate when trading is light.

He also used trades in an underlying asset to benefit an options position. The same approach is likely common in stocks.

Phillips even went as far as involving a co-conspirator on the other side of the world in the hopes of hiding his illegal trades. But he was foolish enough to discuss the whole thing in chat messages on his Bloomberg terminal.

Bloomberg routinely gives chat records to the government in subpoenas. Phillips might not be facing prison had he used an encrypted app like Signal.

I find the Phillips case fascinating for how it trains us to spot hedge fund manipulation of markets.

If we suspect price manipulation, we should look for big trades at odd times. Major sell order right before the close on the last trading day of the year?

It might be worth a look.

Where do you see signs of market manipulation? Leave a comment at the bottom and let me know!

There will be no post on Monday for the holiday. Have a great Labor Day weekend everyone! 👋🥳

More on markets:

AMC Fails to Deliver Pass 700,000 in New Report

Why Hedge Funds May Pile into APE Shares

Is Melvin’s Gabe Plotkin Headed to Prison?

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Morgan Stanley Investigation Spreads to Multiple Countries

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Morgan Stanley, already under federal investigation in the US, is now facing another probe. This time, it’s in Korea.

From a report that broke last night on Bloomberg:

Morgan Stanley’s stock short selling practices are being inspected by South Korea as part of a broader effort by the nation’s financial watchdog to clamp down on bets against equities, according to a person familiar with the matter.

Goldman was fined in 2018 for naked short selling in the Korean market. Regulators may be looking for similar infractions by Morgan.

This comes as Morgan forces another executive out under mysterious circumstances. Executive Director Charles Leisure was placed on leave last week.

From a report out over the weekend, also on Bloomberg:

Charles Leisure, an executive director who worked on the New York-based bank’s equity syndicate desk, was put on leave this week, people with direct knowledge of the matter said, asking not to be named because the information isn’t public. He was part of a team that handled block trades — deals that have been facing scrutiny from federal prosecutors in the Southern District of New York and the US Securities and Exchange Commission. 


Leisure worked for Pawan Passi. Both handled block trades, or buying and selling of large amounts of stock.

Big investors rely on banks like Morgan to quietly offload huge chunks of stock. Morgan may have tipped hedge funds to the sales beforehand, giving them a chance to front-run the trades.

Banks have an incentive to play footsie with hedge funds because of what’s called prime brokerage. A hedge fund’s prime broker handles the fund’s trades, a very lucrative relationship.

If a bank gives them information about market-moving trades, the bank could be more likely to win that business.

So far, nothing has been proven against Leisure, Passi or Morgan itself. Perhaps all its trades were aboveboard.

But consider the overall picture.

Multiple executives in the same area placed on leave. Investigations spreading from one country to the next.

Even other Wall Street banks are raising concerns about Morgan’s activity, a rare move.

Something tells me that where there’s smoke, there’s fire.

What do you think is going on at Morgan Stanley? Leave a comment at the bottom and let me know!

More on markets:

Wall Street Banks Turn on Each Other as Federal Probe Looms

Is Melvin’s Gabe Plotkin Headed to Prison?

Hedge Fund Giant Tiger Loses Over $18 Billion — Long Fund Down 64%

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AMC’s 9 Million Missing Shares

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Trading in shares of AMC Entertainment Holdings Inc. just gets stranger and stranger.

A new report from the SEC shows fails to deliver dropped to 205,675 shares in the first half of July, the latest reporting period. This is down from a high of nearly 9.7 million just two weeks ago.

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So, were exchanges busy little bees cleaning up over 9 million shares worth of failed trades?

Maybe. Or maybe those shares went somewhere else…

The Depository Trust & Clearing Corporation (DTCC) settles most US securities transactions. It has an “obligation warehouse” where it puts failed trades.

Once those failed trades go to the obligation warehouse, they basically cease to exist.

We don’t know for sure if that’s what happened with these 9 million shares because the SEC and DTCC won’t tell us. But given the complexity of settling that many failed trades, I’m willing to bet the DTCC just wiped the slate clean.

So why does this matter?

Allowing huge numbers of trades to fail enables naked short selling. Naked short selling is selling short shares without borrowing them first.

It’s a powerful way to push down a stock’s price. After all, if you don’t have to find shares to borrow, you can short as many shares as you want!

No wonder Compliance Week calls it “one massive embezzlement scheme that for years has mostly gone ignored.”

Why would the DTCC do this? Perhaps because of how it’s funded.

The DTCC makes money by clearing trades and is owned by its users.

Hedge funds are some of its heaviest users.

No wonder the DTCC just sweeps trades under the rug instead of investigating what happened.

The SEC should investigate the pattern of massive fails to deliver in stocks like AMC. And the DTCC must ensure trades are actually completed.

Until then, we’ll continue to see these shenanigans in markets.

What do you think happened to these 9 million shares? Leave a comment at the bottom and let me know!

More on markets:

AMC Fails to Deliver Hit 9.7 Million

How DTCC Makes Fails to Deliver Disappear

Wall Street Banks Turn on Each Other as Federal Probe Looms

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Investors Pull $28 Billion from Hedge Funds

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Note: This is not financial advice.

It’s not looking good for hedge funds. Investors pulled nearly $28 billion in the second quarter, disillusioned by poor performance.

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From a new Reuters report:

Amid high volatile [sic] across markets, investors redeemed $27.5 billion of hedge funds between April and June, bringing total withdraws in the first half of the year to $7.7 billion. No hedge fund category lured fresh money from investors in the second quarter.

Total assets ended the second quarter at $3.8 trillion, down roughly 5% from March, [data provider HFR] said, also battered by the funds performance. The fund weighted composite index is down 5.78% in the year, HFR said.

This has been a long time coming. Hedge funds have consistently underperformed the S&P 500.

From Axios:


Why, in the name of all that is holy, do people leave a dime in these things? You can get a Vanguard S&P 500 index fund for 0.04% a year.

I own a bunch of shares in that fund myself. It beats paying a hedge fund 2% of assets and 20% of gains for rotten performance!

One of the most astute investors in the market, the California Public Employees Retirement System (CalPERS), pulled every cent from hedge funds 8 years ago.

But the pension money of far too many hard working Americans is still in these putrid investments.

If the smartest guy at the table just got up and left, why is anyone sticking around?

Hedge funds have an aura about them. Geniuses in glass towers pulling the strings of markets.

But the emperor has no clothes. And to quote Gordon Gekko:

What do you think of hedge funds? Leave a comment at the bottom and let me know.

Have a great weekend everyone!

More on markets:

Wall Street Banks Turn on Each Other as Federal Probe Looms

AMC Fails to Deliver Hit 9.7 Million

Bill Ackman Loses $4.8 Billion

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Shorts Having Their Worst Month Since January 2021

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Note: This is not financial advice.

Short sellers are having their worst month since January 2021. From a new Bloomberg report:

Somehow, the stock market’s worst first half in five decades has morphed into a slaughterhouse for short sellers.

More big lumps were felt Tuesday, when the S&P 500 rallied 2.8% and bearish traders suffered losses roughly double that.

About 98% of S&P 500 members advanced, the broadest rally since December 2018. The most-hated stocks jumped 5.5%, eventually delivering pain for bears who were forced to cover their positions to limit losses, going by a Goldman Sachs Group Inc. basket. With the most-shorted basket up 16% in July, the month is shaping up to be the worst for short sellers since the retail-driven squeeze in January 2021.

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Heavily shorted stocks have not run like this since meme stocks skyrocketed last January. Indeed, meme stocks are causing some of the biggest pain for shorts right now.

This tussle between the two sides of the investment world has continued this year, and fresh data from S3 Partners, LLC shows that between January and July 2022, AMC short sellers lost more than $1 billion in mark to market losses.

We’re in a bear market. This is not a great time to bet that stocks will go lower.

But hedge funds have piled in anyhow, betting against volatile stocks with cult followings. And again, they’ve taken major losses.

Perhaps some in the hedge fund world are beginning to learn their lesson. I had dinner with a bunch of hedge fund guys last month, and one said:

“Short selling is a great way to lose money.”

Now, short selling hedge funds may be forced to buy stock. They cannot fall too far behind their benchmarks.

Again from Bloomberg:

“Positioning had gotten very defensive as managers were anticipating additional downside. However, if the market rallies, then they are at risk of underperforming the broader market,” Freeman said. “Shorts are hurting their performance and they don’t have enough long exposure to keep up so they are forced to buy.”

Short sellers being forced to buy stocks to stem losses…this is the definition of a short squeeze.

I certainly don’t know if or when any stock will squeeze. But I do know I wouldn’t want to be on the other side of these trades.

What do you think is next for short sellers? Leave a comment at the bottom and let me know!

More on markets:

AMC Fails to Deliver Hit 9.7 Million

Wall Street Banks Turn on Each Other as Federal Probe Looms

New Law Could Put Big Short Sellers on the Endangered Species List

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AMC Fails to Deliver Hit 9.7 Million

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In over a year reporting on this, I’ve never seen a number this big.

Fails to deliver in shares of AMC Entertainment Holdings Inc. hit nearly 9.7 million in June. The report, released today by the SEC, covers the second half of the month.

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The peak came on June 28, with 9,697,393 shares failing to clear. Fails to deliver settled at a still massive 1,907,897 at the end of the month.

So what are fails to deliver, anyway? A fail to deliver occurs when a trade is made but never completed.

Let’s say I agree to sell you 100 shares of AMC for $15.07 each. You want the shares and you’re happy with the price, so you agree.

Done deal right? Wrong.

I have to actually deliver the shares to you. When I fail to do that, that’s called a fail to deliver.

Fails to deliver often occur when traders engage in naked short selling. This generally illegal practice involves selling short shares without borrowing them first.

It’s a powerful way to push down a share’s price. If you can sell stock short without borrowing any, you can short any amount!

The market is flooded with sell orders and the share price dives. But the trades never get completed.

Instead, they show up on this report.

This is a truly incredible number of failed trades. Let’s zoom in on June 28th, the peak for fails to deliver.

Here’s how many fails to deliver some of the biggest stocks in the market had that day. This can give us an idea of what’s normal, even for far larger companies:

Alphabet Inc. (Google): 814

Apple Inc.: 28,223

Microsoft Corp.: 12,400

The biggest companies on earth have just a few trades not clearing. Meanwhile little old AMC has nearly 10 million.

Keep in mind, just because those fails to deliver dropped near the end of the month doesn’t mean the trades ever settled. The DTCC often puts trades that failed some time ago into an “obligation warehouse.”

After that, these failed trades disappear.

How can we have robust financial markets when the public doesn’t trust them? And how can the public trust markets when trades that affect share prices never actually happen?

It’s time for the SEC to investigate this issue vigorously.

Until then, we’ll just see more bogus trades pile up.

What do you think is causing these failed trades? Leave a comment at the bottom and let me know.

Have a great weekend everyone! 👋

More on markets:

Wall Street Banks Turn on Each Other as Federal Probe Looms

New Law Could Put Big Short Sellers on the Endangered Species List

Bill Ackman Loses $4.8 Billion

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