Those Who Get It And Those Who Don't

Billionaire Returns Funds

Billionaire Carl Icahn will return all the money managed for outside investors in his hedge funds, ending a six-year experiment in which he sought to use their cash to gain influence over companies he targeted for change.

Icahn, who buys stakes in companies he considers to be underperforming and then pushes for change, cited concerns about the economy and unrest in the Middle East, according to a client letter filed today with the U.S. Securities and Exchange Commission. Investors had already withdrawn much of their capital from Icahn’s hedge funds, leaving just $1.76 billion of fee-paying assets in the $7 billion funds.

“While we are not forecasting renewed market dislocation, this possibility cannot be dismissed,” Icahn said in the letter. “Given the rapid market run-up over the past 2 years and our ongoing concerns about the economic outlook, and recent political tensions in the Middle East, I do not wish to be responsible to limited partners through another possible market crisis.”


When a hedge fund using derivatives is worried about the return of capital more than return on capital it is time to sit up and take notice. While no one can be certain of market direction, events do appear lining up that point to potential for massive dislocation.

Carl Icahn gets it and takes the appropriate steps to preserve capital, protect his clients and reputation during Economic Winter.

Walmart Introduces Express Stores

Wal-Mart Stores Inc. (WMT) will next week start building its first Express stores, a format less than a tenth the size of an average supercenter, according to building permits obtained by Bloomberg News.

The world’s largest retailer will begin construction March 16 on a 14,400-square-foot store in Gentry, Arkansas, a town of 3,158 about 20 miles (32 kilometers) southwest of the company’s Bentonville headquarters, according to the permits.

Chief Executive Officer Mike Duke is seeking new avenues for growth in the U.S. as comparable-store sales in Wal-Mart’s namesake stores have fallen for seven straight quarters. The retailer plans to open as many as 40 smaller units this year in rural and urban areas, and executives said last month that the first Express store would open as early as May.


When a retail giant with never ending growth targets hits the wall in a market, it tries to squeeze more out of the same pie. As falling revenues show, the trend is not in their favor as consumers are crushed by falling wages, unemployment, and high gasoline prices (see the gasoline indicator). You can't get blood from a stone, so more small stores are not going to work for Wal-mart as more consumers switch to on-line shopping as a low cost alternative.

Wal-mart doesn't get it, so good luck enduring Economic Winter.