Carl Icahn: Time to Short Real Estate?

Date: Monday, October 19, 2009
Author: Seeking Alpha.com

Legendary 'corporate raider' and hedge fund manager Carl Icahn recently sat down and divulged his thoughts on the current markets. He basically said that the stock market is 'schizophrenic,' and could swing in either direction in a major way. However, he feels that there is a risk of a double-dip recession and that people could really get burned should this occur.

Specifically, Icahn sees real estate as a prime short candidate, citing an overhang in the office and mall sectors. He spoke about the exchange traded fund (ETF) of IYR, the iShares US Real Estate Index, and wondered why anyone would want to sit and collect a measly 4.5-5% dividend for all the inherent risk it carries with all of that commercial property. He is worried about the underlying REITs being able to liquidate the value of their buildings should things get really bad. He goes on to say,

I think there's overcapacity in the office market and in shopping centers because you have a secular change in the way retailers are behaving and the way consumers are behaving.

For another hedge fund manager's take on some of the real estate market, check out Bill Ackman's latest short position.

Icahn also sees opportunities in bankruptcies, but notes that those obviously aren't for amateurs to tackle. In addition, the hedge fund manager sees opportunities in secular trends like consumer behavior, advertising, the internet, and mobile. Regarding this, he said,

We're quite involved in the secular change in the way advertising is going to be done. Obviously the cell-phone business is a growth business.

Readers will remember that Carl Icahn has a hefty stake in internet darling Yahoo (YHOO). Obviously the legendary investor likes playing secular themes at this juncture. Icahn finished by reiterating his point that should we see a double-dip recession, there will be a bloodbath in the aforementioned areas.