Carl Icahn predicts 2008 replay, this time with commercial mortgages

by Phil Hall19 Mar 2020

Billionaire investor Carl Icahn is predicting the US commercial real estate market will collapse in a manner reminiscent of the 2008 housing market downfall.

“You’re going to have this blow up, too, and nobody’s even looking at it,” Icahn said in an interview on the CNBC program “Halftime Report.”

Icahn stated he was shorting the commercial mortgage bond market, adding that it is his “biggest position by far.” His strategy is aimed at credit default swaps, the assets backing mortgages on shopping malls and corporate office developments. In the interview, Icahn predicted that the 2008 economic tumult already “happened all over again” because of loans made in 2012 to commercial properties.

“You have a bunch of mortgages,” he explained. “So, the banks went out and loaned money against a lot of shopping malls, office buildings, hotels and retail. It’s all credible institutions doing it again.”

He noted that banks sold mortgages on commercial real estate and “sliced and diced them and put them in something called a ‘CMBX,’ an index.” But Icahn warned the properties at the heart of the mortgages are problematic and will result in a new wave of defaulting loans.

“A lot of these bonds now are in grave danger,” Icahn said. “It’s like selling insurance to someone who’s going to go to the electric chair in a couple of months.”