A Warning From Carl Icahn

The Warren Buffett of Bonds

For the last 22 years, one self-made billionaire has delivered 19% annualized returns for his investors. Those profits are just shy of Warren Buffett’s enviable track record.
Today, he’s preparing for the biggest buying opportunity since the Great Recession of 2008-2009.
Most investors prefer to buy stocks. And I know that bonds may sounds boring. But they can deliver outstanding returns – if you know how to invest.
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A Warning From Carl Icahn

Carl Icahn issued an important warning last fall.
In a video titled “Danger Ahead,” Icahn warns, “I am concerned about the high-yield market. I think that’s in a major bubble.”
Back in the 1980s, these bonds would have been called “junk bonds.” If you were investing back then, you’ll recall that Michael Milken popularized these high-risk bonds.
Today asset managers simply call them “high-yield bonds,” since that sounds bit safer than “junk bonds.”
So what’s wrong with the high-yield market today?
It’s being led by the collapse of commodity prices – including crude oil.
Everyone knows that falling oil prices have hurt energy stocks. But the bigger risk is in the high-yield market.
Billionaire secretly prepares for bond market crash – click here to learn how.
According to bond rating firm Moody’s, companies in the oil and mining sectors have issued $2 trillion of bonds since 2010. And a large portion of these bonds is considered “junk.”
The real issue is that commodity prices remain low. And that’s making it difficult for companies to make a profit, and service their debt payments.
Consider the energy sector. Most oil companies need crude oil to be trading around $60 per barrel in order to turn a profit. Yet crude prices today are in the low $30s, making oil production an unprofitable business.
I’m expecting that oil prices will remain low in 2016. Even if crude rebounds to $40 or $50 per barrel, many companies will be unprofitable. And that’s going to put considerable pressure on the finances of these companies.
As a result, I’m predicting that junk bond defaults will reach a new high this year.
With interest rates rising and credit markets tightening, many companies will have trouble refinancing their debt. And that could spark a new wave of junk bond defaults.
Concerns about the high-yield market are growing. And as we know, this type of financial destruction can spread to other areas of high-yield debt.
In fact, we’ve already seen this contagion begin.
The iShares iBoxx $ High Yield Corporate Bond ETF (NYSEArca: HYG) is one of the largest junk bond ETFs. In mid-February, it sank to its lowest levels since early 2009.
In the last few weeks, the ETF has rebounded sharply. And that move has coincided with the rise for crude oil and stock prices.
But don’t be fooled by this move. Unless crude oil moves back above $60 per barrel, there will be a world of pain in the energy sector. And as bond defaults increase, the investors in high-yield debt will experience losses.
If you’re invested in junk bonds – either individually or through mutual funds and ETFs – now is a time for caution. Some portions of the high-yield market appear to be quite safe. Others – such as energy, mining and materials – are at risk.
When the junk bond market collapses, many investors will lose big. But a select few investors will turn a big profit.
One billionaire investor in particular stands to reap huge rewards. During the last crash, he delivered 30% returns for his investors.
Right now he’s preparing for the next crash in the bond markets. He’s setting aside billions of dollars in cash … and preparing to buy deeply discounted bonds when the market falls apart.
Right now, you have an opportunity to literally become a partner with this billionaire. And when the next debt crisis occurs, you’ll stand to make windfall profits.
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