More bad news for Icahn Enterprises; Bonds are still attractive; Three broad themes on the 'surprisingly resilient' job market; Powerful testimonial on weight-loss drugs
1) I've repeatedly warned my readers to avoid Icahn Enterprises (IEP)...
It's the investment vehicle of legendary activist Carl Icahn. And I started warning folks to stay away once one of the best-known activist short sellers, Nate Anderson of Hindenburg Research, released a report on May 2 blasting it: Icahn Enterprises: The Corporate Raider Throwing Stones From His Own Glass House.
On that day, the stock crashed 20% to $40.36 per share. Lured also by the big dividend, that price tempted some bargain hunters... But I said to stay away. On May 11, I wrote:
You don't have to believe IEP is a fraud or misvaluing its assets or will be sanctioned by regulators (all unlikely in my view).
When you can invest alongside equally brilliant investors like Third Point's Dan Loeb and Pershing Square's Bill Ackman in their publicly traded vehicles for a 14% and 35% discount, respectively, to their net asset values [("NAVs")], why would you pay twice NAV to invest with Icahn?
On August 9, I added:
IEP shares tumbled 23% on Friday [to $25.09], its worst day ever, as Anderson's bearish thesis on the company was validated by a dreadful earnings report: Carl Icahn's Firm Slashes Dividend in Half After Activist Pressure; Stock Slides...
I continue to recommend avoiding this stock at all costs.
Fast-forward to yesterday, IEP shares fell another 9.4% to close at $19.52 after the company reported more bad news. Here's Yahoo Finance with the story, via Reuters: Icahn Enterprises warns of drop in asset value, names insider Teno CEO. Excerpt:
Icahn Enterprises on Wednesday warned of a sequential decline in its indicative net asset value [("INAV")] in the fourth quarter, sending shares of the investment firm, which named insider Andrew Teno as its CEO, down 11%.
The drop in a key metric that gauges the value of a fund's assets adds more pressure on IEP's stock, which saw a selloff last year after short seller Hindenburg Research bet against the firm...
IEP on Wednesday kept its quarterly dividend of $1 per depositary unit unchanged amid close investor scrutiny after Hindenburg attack. It had slashed the payout by 50% in August.
The company said it expects INAV to fall nearly 8% to $4.76 billion as of Dec. 31 from the prior quarter.
With a $1 quarterly dividend, IEP appears to be yielding more than 20%. But don't be fooled – it's as phony as a $3 bill. As I've explained previously, it's a return of capital, not a return on capital.
I've said it before, and I'll say it again: I continue to recommend avoiding this stock at all costs.
2) I think this recent Wall Street Journal article is exactly right: Even With Fewer Rate Cuts, You Should Still Buy Bonds. Excerpt:
The inflation data has finally brought home the point. Derivatives markets now show a 35% chance that borrowing costs will be 4.5% or higher by year-end – implying four rate cuts or fewer. Yields on one-year Treasury bills have risen to around 5%, which suggests that investors expect rates to be at that level on average during the next 12 months. It looks more reasonable.
Superficially, this makes short-term debt attractive: Savers can buy it and, a year from now, they will probably have gotten a similar return than if they had parked the cash in a money-market fund or a bank deposit – probably even a bit more. Long-term bonds look unappetizing in comparison: 20-year Treasurys yield just 4.5%, and require locking the money away for two decades.
The article also notes that this rate is still high relative to what you could get not that long ago – which is why it makes sense to lock it in:
Once the Fed and other central banks start lowering borrowing costs – even if they do so by less than previously thought – returns on short-term and long-term debt will fall. Investors who then try to switch out of bills into bonds may find that it is too late.
As I've discussed many times previously, I continue to think that bonds are attractive and offer a nice complement to stocks, which are also moderately attractive.
So, for money you might need in the next three to five years, I would weight it more toward bonds... whereas long-term money should always be heavily in equities (stocks or index funds – I'm not a fan of most mutual funds).
Speaking of bonds, I'll also note that one Stansberry Research subscriber used a unique strategy involving the bond market to retire early and worry-free at age 52.
For him, he says that this strategy was "the answer to pretty much every big question about retirement."
Get his full story – and learn how you can use this same strategy yourself – by clicking here.
3) This is a smart article by Ben Casselman in the New York Times about the shockingly strong jobs market: Three Lessons From a Surprisingly Resilient Job Market. Excerpt:
Interviews with dozens of economists – some of whom got the recovery partly right, many of whom got it mostly wrong – provided insights into what they have learned from the past two years, and what they make of the job market right now. They didn't agree on all the details, but three broad themes emerged.
- This time really was different.
- The job market is returning to normal – and normal is pretty good.
- The good times don't have to end (necessarily).
As Casselman concludes:
It is possible that if the pandemic hadn't happened, the job growth of the preceding years would eventually have petered out. But there is little evidence that was an imminent prospect in 2020, and there's no reason it has to happen in 2024...
Some sort of interruption is possible. The Fed, nervous about inflation, could wait too long to start cutting interest rates and cause a recession after all. And recent data may have overstated the job market's strength – economists point to various signs that cracks could be forming beneath the surface.
But pessimists have been citing similar cracks for well over a year. So far, the foundation has held.
4) This is a powerful testimonial in Business Insider about the miraculous new weight-loss drugs that I recently sent to my personal e-mail list on this topic (to join it, simply send a blank e-mail to: weightlossdrugs-subscribe@mailer.kasecapital.com): My brain on Ozempic. Excerpt:
I was skeptical about last year's glowing articles about Ozempic and other GLP-1 medications. Like so many chronically overweight people, I'd seen it all and then some: stimulants, supplements, low-carb, low-fat, intermittent fasting, even laxatives.
But these medications are nothing like what I expected. They're not really "weight-loss drugs" at all. They're something far more powerful and surreal: injectable willpower.
GLP-1s' increasing popularity won't just mean that millions of us who've beat ourselves up for being overweight will be able to win that lifelong battle. It will mean fundamentally reevaluating our conception of free will and human agency – and reckoning with our tortured relationship with shame.
And as the writer goes on to say:
Just like when Prozac dismantled the myth that depression is a choice, or when earlier scientific advancements disproved the idea that illnesses like cancer were moral indictments, GLP-1s and similar medications are changing our shared sense of what is blameworthy and what is biology.
For those fortunate enough to never have struggled – seriously struggled – with weight, you have to understand just how futile most weight-loss strategies are. Though people can "succeed" in a diet for months, maybe even a year, many dieters eventually regain weight.
Most of the dozens of diets and health schemes I've been on over more than 30 years have helped for a time, but they all set me up to fail. For a long time, the only evidence-based strategy for safe, long-term weight management was surgery. But gastric surgery is expensive and painful, and many patients end up regaining weight.
I asked my friend and expert researcher in this area – Dr. Kevin Maki – for his thoughts on this. Here's what he told me:
I agree that long-term weight loss with lifestyle is difficult, and many people struggle. From a public health perspective, the key is prevention. Good dietary habits, regular exercise (aerobic and resistance), adequate sleep, and stress management are very helpful in that regard beginning early in life.
I was obese as a child and have spent my life working very hard to control my weight. With substantial effort, I have maintained my weight within a narrow range for 30 years.
As he says, once obesity is present, it's hard to manage:
Our studies and those of my colleagues (e.g., Susan Roberts) suggest that adequate protein intake (about 30 grams per meal); a diet with sufficient fiber (about 30 g per day); minimization of consumption of refined carbohydrates, added sugars, and alcohol; along with regular exercise are helpful.
I joke that the stock symbol for Pfizer is PFE, and that many would do well by replacing that with the PFE of protein, fiber, and exercise.
The average adult American gains about one pound per year of body weight. Arresting weight gain with lifestyle/behavioral approaches and more intensive interventions for those whose trajectories are above-average are approaches that should be adopted more often than is the case currently.
Dr. Maki also points out that too frequently, people (and the clinicians who care for them) wait until weight has been out of control for years before addressing it. As he went on to tell me:
Many popular diet approaches are not evidence-based and contribute to frustration and cycles of weight loss and regain.
I am optimistic that pharmacotherapy will be helpful, but the old adage that an ounce of prevention is worth a pound of cure is apt. Those with obesity need care, compassion, and support.
Thank you as always, Dr. Maki!
Best regards,
Whitney
P.S. I welcome your feedback – send me an e-mail by clicking here.